Brendan Caldwell’s Top Picks for September 22, 2025

Brendan Caldwell, President, CEO, Caldwell Investment Management

Focus: North American equities

Top picks: UL Solutions, Motorola Solutions, TKO Holdings

MARKET OUTLOOK:

Equity markets have continued their momentum in 2025 following the tariff shock in April, supported by resilient consumption, strong productivity growth, and solid corporate fundamentals.

The S&P 500 remains near record highs, with the U.S Federal Reserve recent rate cut providing further support for equities, while Canadian markets have also delivered strong gains despite trade-related uncertainties.

Confidence in the expansion has been underpinned by steady consumer demand, robust earnings, and healthy corporate balance sheets, which together suggest the economy retains capacity to grow despite tighter trade conditions.

Valuations are elevated, however, creating a higher hurdle for further returns, but resilient demand, supportive policy expectations, and strong productivity gains provide a foundation for continued earnings strength.

These factors suggest equities can extend gains, though at a more moderate pace than the exceptional years prior. Looking ahead, risks tied to sticky inflation, slowing growth, global trade uncertainty, and geopolitical tensions are likely to limit upside.

In this environment, we remain focused on high-quality companies with strong earnings power, disciplined capital allocation, and proven ability to navigate volatility, which we believe are best positioned to deliver sustainable returns.

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TOP PICKS:

UL Solutions (ULS NYSE)

• The largest provider of independent testing, inspection, and certification (TIC) services in North America
• Business is driven by development of new products/materials or build factories/assembly lines, where ULS ensures everything meets regulatory requirements
• Essential nature of services drives stable, predictable revenue streams that are resilient across economic cycles

Why do we like them?

• Increased regulation, new technologies (electrification/digitization of everything, IoT) and accelerated product development cycles are secular tailwinds
• Underlying outsourced TIC market growing five to six per cent over the LT. Growth durability supported by:

Continued shift from in-sourced to out-sourced testing as customers look to lower expenses, focus on core competencies

Growing adoption of international standards (many of which are developed by ULS’ parent company) in emerging markets

• ULS leaning into energy transition, batteries/battery storage and EV proliferation where they see strong LT growth, especially in markets like China
• Higher margin business mixes relative to peers - strong position in certain industrial/consumer end markets vs. low-margin, cyclical commodity markets
• Fragmented industry: ULS historically generated one to two per cent per year of inorganic growth; one times net leverage vs. two to 2.5 times LT target highlights ample balance sheet capacity for mergers and acquisitions (M&A)
• Cross-selling opportunities from non-certification testing and other services as ULS gains insight into customers’ supply chains (should be a beneficiary of supply chain relocations)
• Strong volumes and relocation of two labs in the consumer segment to lower-cost locations are helping drive strong op leverage/EBITDA margins
• Shorter selling cycles with frequent opportunity to reprice

Motorola Solutions (MSI NYSE)

• Provider of hand-held and body worn communications equipment for first responder and law enforcement personnel as well as video security and access control solutions for public and private facilities

Why do we like them?

• On mobile radio side, strong budgets at the state and local level and now the OBBBA provide multi year demand support
• First responders/law enforcement continue their equipment refresh cycle. Next gen radios come with enhanced functionality and carry better margins than legacy equipment
• With recent acquisition of Silvus, MSI gains access to new customers in the U.S. Department of Defense/Customs and enterprise customers as well as international markets
• On video/software side, world is trending towards more surveillance from both a safety and asset protection standpoint
• Seeing very strong demand for their services, highlighted by growing software backlog
• Software also comes with higher margins and the positive mix shift over time has driven margins up and will continue to play out over the MT/LT
• Minimal exposure to China from a tariff standpoint; radio and video security business protected from Chinese competitive entrants

TKO Holdings (TKO NYSE)

• Owner of UFC and WWE, IMG; content distribution across 170 countries
• Global fan base of ~650mm+ fans and estimates they can reach 900mm TVs globally

Why do we like them?

• Loyal UFC fan base but also gaining broader demographic reach with >300mm annual viewers
• Strong demand for live sports IP/rights:

- Particularly among streamers, who find sports drive subscriber acquisition and reduce churn

- This driver has strong pricing power for TKO in license/renewal deals

- Recently announced UFC rights deal at two times prior deal value highlights increasing value/relevancy of UFC content across a broader demographic market

- UFC international rights still up for grabs

• Monetization expansion:

- Sponsorship a high margin, under penetrated revenue stream exhibiting strong momentum in recent quarters, tied into boarder demographic viewership

- TKO growing partnerships in different verticals

• Margin upside from:

- Sponsorship growth (high incremental margins), live event attendance/dynamic pricing and incremental cost synergies from IMG acquisition

PAST PICKS: OCTOBER 11,2024

ResMed (RMD NYSE)

Then: US$240.51

Now: US$272.76

Return: 13%

Total Return: 14%

Carrier Global Corp (CARR NYSE)

Then: US$81.61

Now: US$59.80

Return: -27%

Total Return: -26%

Equifax (EFX NYSE)

Then: US$285.20

Now: US$253.87

Return: -11%

Total Return: -10%

Total Return Average: -7%