May 4, 2018
Jamie Murray's Top Picks: May 4, 2018
Jamie Murray, head of research at Murray Wealth Group
Focus: North American equities
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MARKET OUTLOOK
After a strong two years, markets are digesting the positive effects of U.S. tax cuts and strong earnings growth, with higher interest rates and political and trade risks creating near-term volatility. We believe markets can grind higher in this environment, as equity valuations have reset and are more in-line with historical levels. Rates still remain low on an absolute basis and inflation remains subdued, with wage growth stagnant and internet productivity impacting traditional retail sales inflation.
TOP PICKS
TELEFLEX (TFX.N)
Last purchase: US$266.01.
Teleflex is a global provider of medical products. The company has a strong track record of acquisitions that boost organic growth and is improving margins by consolidating its manufacturing in lower-cost jurisdiction. The shares trade at 25 times earnings with mid-teens earnings per share (EPS) growth expected over the next two years.
ROYAL CARIBBEAN CRUISES (RCL.N)
Last purchase: US$108.88.
Royal is one of the big three providers of cruise services. The cruise market has experienced strong growth with 10,000 boomers retiring every day and new offerings aimed at millennials that appreciate the value of cruising versus traditional hotel destinations. Market concerns about capacity growth and oil prices are unfounded in our view as pre-booking rates and demand visibility remain very strong. Royal trades at just over 11 times on a price-to-earnings (P/E) basis and should grow EPS at a rate in the mid-teens.
BROADCOM (AVGO.O)
Last purchase: US$228.25.
Broadcom is a provider of semiconductors to both wireless and wired clients. The shares have sold off in sympathy with other semiconductors following concerns of weakness in the wireless segment and general trade worries with China. Broadcom shares should recover as its free cash flow generation picks up and the company starts to execute on its recently announced $12-billion buyback program. Indications point to technology spending for data centers and AI computing power remaining strong, so AVGO should continue to generate a high level of free cash flow in the midterm, which we expect will be used for further buybacks or accretive acquisitions. The shares trade at a free cash flow per share multiple of 12 times, an attractive level for a company like Broadcom.
FUND PROFILE
MWG Global Equity Growth Fund
Performance as of: April 30, 2018
- 1 Month: 0.61%
- 1 Year: 9.06%
- Since inception: 11.53%
* We do not benchmark versus an index.
TOP HOLDINGS AND WEIGHTINGS
- Alphabet (GOOG.O): 5.6%
- Facebook (FB.O): 5.3%
- Celgene (CELG.O):4.9%
- TD Bank (TD.TO): 4.4%
- Newell Brands (NWL.N): 4.3%
WEBSITE: tmwg.ca
