Paul Harris, Partner and Portfolio Manager, Harris Douglas Asset Management
FOCUS: North American, global stocks
Top picks: Novo Nordisk, MSCI, Alphabet
MARKET OUTLOOK:
With the weakening of the U.S consumer and the increase in unemployment, it seems likely the U.S. Federal Reserve will reduce rates at its September meeting.
We think that we will see greater volatility in the next three months as we get closer to the U.S. election. The Canadian economy is in much worse shape than the U.S. and we see further rate decreases over the next several months. We think we will see a weaker Canadian dollar as well.
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NVO is a Danish multinational pharmaceutical company. Novo Nordisk is controlled by majority shareholder Novo Holdings A/S which holds approximately 28 per cent of its shares and a majority (77 per cent) of its voting shares. The Diabetes and Obesity Care segment includes diabetes, obesity, cardiovascular and emerging therapy areas. The Rare Disease segment refers to rare blood disorders, rare endocrine disorders, and hormone replacement therapy. The company’s major drugs Ozempic and Wegovy continue to drive revenue and earnings. We believe we are in the early stages of these blockbuster drugs, as research shows they could help reduce heart disease and stroke.
MSCI is a provider of critical decision support tools and solutions for the global investment community. Its operating segments include Index, Analytics, ESG and Climate and Private Assets. Its indexes are used in various areas of the investment process, including indexed product creation, performance benchmarking, portfolio construction and rebalancing, and asset allocation. The Analytics segment offers risk management, performance attribution and portfolio management content, applications and services. The company is basically an oligopoly for data analytics. It has gross margins of 82 per cent and operating margins of 53 per cent.
Alphabet is a top search destination on the web and provides a leading search marketing platform for advertisers and merchants. The company continues to see growth in YouTube and its ability to monetize advertising. The stock trades at 20 times earnings. It will generate 69 billion in free cash flow in 2023 and has no debt. It also has significant secular growth from internet advertising, strong market share in search and other internet advertising segments. Google has 30 per cent share of U.S. digital ad revenue, and global ad revenue is expected to reach well over $400B in 2024. Digital advertising accounts for more than 50 per cent of total ad spend.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| NVO NYSE | Y | Y | Y |
| MSCI NYSE | Y | Y | Y |
| GOOG NASD | Y | Y | Y |
Bank of America (BAC NYSE)
- Then: US$30.94
- Now: US$38.05
- Return:23%
- Total Return: 27%
TD Bank (TD TSX)
- Then: $85.85
- Now: $77.13
- Return:-10%
- Total Return: -5%
Johnson & Johnson (JNJ NYSE)
- Then: US$172.17
- Now: US$159.71
- Return:-7%
- Total Return: -4%
Total Return Average: 6%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BAC NYSE | Y | Y | Y |
| TD TSX | Y | Y | Y |
| JNJ NYSE | Y | Y | Y |
