Jamie Murray, portfolio manager and head of research at Murray Wealth Group
Focus: North American equities

MARKET OUTLOOK

The most anticipated recession in history is potentially happening in the next six to 24 months. We do not try to time market cycles, preferring to invest in high-quality companies that can grow through expansions and weather downturns better than their competitors. With the bull market eclipsing the 10-year mark and economic data softening, we believe investors are positioned for ongoing economic weakness, as can be seen in the ongoing strong performance from REITs and utilities as well as the sell-off in ultra-high growth technology stocks. Record-low interest rates support high valuation multiples, technology is enhancing productivity, but negative global trade trends and a slowing Chinese economy are major headwinds for the world economy. Stay long equities that can support a high dividend or grow through economically difficult periods.

UPDATES

Apple sold on Aug. 19 at $210 per share. iPhone price and margin pressure possible and high services expectations led us to exit our position.

TOP PICKS

MASTERCARD (MA:UN) 

Mastercard is a secular winner in the ongoing shift to card, mobile and online payments. The two dominant credit card companies have demonstrated an impenetrable moat as more companies enter the payment industry, but are still forced to leverage existing payment networks. Mastercard is layering in additional services for customers, with enhanced security, data analytics and card features. For this reason the shares are expensive, trading at 30 times forward earnings. We believe its multiple will remain elevated, with a durable double-digit growth profile.

IBM (IBM:UN)

IBM is probably the most hated stock on the market. It is the most under-owned mega-cap company and has a reportedly poor culture from a lack of strategic success over the past 20 years. This has led to a stock that is ridiculously cheap compared to its legacy technology peers. However, we believe IBM is in the early stages of a successful turnaround. The company should become more prominent in cloud as its customers (particularly the banking sector) move more data to the cloud. As well, it is reducing its exposure to low-margin contracts which will impact top line revenue growth but improve margins and corporate focus. Finally, speculation that the James Whitehurst, CEO of the recently acquired Red Hat, may soon be tapped to take over the enterprise would improve sentiment. IBM is understandably cheap, but any improvement in results could push multiples closer to peer averages

CORUS ENTERTAINMENT (CJR/B:CT)

Corus shares have sold off greatly after a poorly received secondary share sale by Shaw as it exited its stake in the company. Expectations were low following a dividend cut in 2017, but we see tremendous long-term potential in the company, with improving revenue trends in the TV market. The company is advancing its ad targeting capabilities with better segmentation of viewers that will improve return on investment for ad buyers and allows Corus to charge a premium. The ad market has remained strong through summer and commentary should be bullish next week on the company’s earnings call.

PAST PICKS: DEC. 27, 2018

NIKE (NKE:UN)

• Then: $73.67
• Now: $91.69
• Return: 25%
• Total return: 25%

APPLE (AAPL:UW)

• Then: $156.15
• Now: $225.99
• Return: 45%
• Total return: 47%

BP (BP:UN)

• Then: $37.73
• Now: $37.05
• Return: -2%
• Total return: 3%

Total return average: 25%