Dan Rohinton, Portfolio Manager, iA Global Asset Management
Focus: Canadian & Global Large Caps
Top picks: Linde, Amazon.com, Taiwan Semiconductor
MARKET OUTLOOK:
The recent Q3 earnings season has clearly illustrated the stock markets’ two-tiered structure. The “haves” are reporting strong results, driven by significant capital investment in Artificial Intelligence. Notable data points came from the hyperscalers’ forward guidance. Microsoft posted +111 per cent commercial bookings growth, while both Google and Meta announced plans to raise future capex to fund strong demand for AI. This committed, multi-year spending is fueling significant growth for AI infrastructure players and absorbing a large portion of investor capital.
On the other side are the “have-nots,” a broad range of stocks with no direct AI exposure. Their Q3 earnings calls presented a different picture, focusing on cost control, margin preservation, and navigating a cautious consumer. Many of these companies are finding efficiencies by lowering or maintaining capex, a notable divergence from the AI leaders. This has widened the valuation gap between the market’s AI-driven companies and the rest of the pack.
This earnings season suggests the “haves” are currently less correlated with the broader macro environment. The “have-nots,” however, are more reliant on a pivot from central banks. With inflation cooling, expected rate cuts over the next six to 12 months are a key potential catalyst needed to boost consumer-facing businesses and lower capital costs for traditional sectors, which could broaden the rally.
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TOP PICKS:
Linde (LIN NASD)
Linde is a leading global industrial gas giant. It supplies essential gases like oxygen, nitrogen, and hydrogen to a diverse range of critical industries, including manufacturing, healthcare, electronics, and chemicals.
Why we like it: Linde has a highly stable business model built on long-term contracts for essential products, ensuring predictable cash flows and strong pricing power. It’s a defensive, high-margin business that also has a significant long-term growth driver, as its expertise in hydrogen and carbon capture makes it a key enabler of the energy transition.
Amazon.com (AMZN NASD)
Amazon is a global technology leader with two dominant business segments: its well-known e-commerce marketplace and its cloud computing platform, Amazon Web Services (AWS).
Why we like it: We like Amazon’s two-part growth story. Its main profit engine, AWS, is the cloud market leader and a primary beneficiary of the massive capital spending required for AI. Concurrently, its core e-commerce business is seeing margins improve, thanks to logistics efficiencies and the rapid expansion of its high-margin advertising segment.
Taiwan Semiconductor (TSM NYSE)
Taiwan Semiconductor, or TSMC, is the world’s largest and most advanced semiconductor foundry. As a “pure-play” manufacturer, it builds the most complex chips for the world’s leading technology companies, including Apple, Nvidia, and AMD.
| Disclosure: | Personal | Family | Portfolio/Fund |
|---|---|---|---|
| LIN NASD | N | N | Y |
| AMZN NASD | N | N | Y |
| TSM NYSE | N | N | Y |
PAST PICKS: SEPTEMBER 30, 2024
LVMH Louis Vuitton (MC EPA)
Then: €688.50
Now: €615.90
Return: -11%
Total Return: -9%
Visa (V NYSE)
Then: US$274.95
Now: US$338.65
Return: 23%
Total Return: 24%
TransDigm Group (TDG NYSE)
Then: US$1427.13
Now: US$1298.27
Return: -9%
Total Return: 3%
Total Return Average: 6%
| Disclosure: | Personal | Family | Portfolio/Fund |
|---|---|---|---|
| MC EPA | N | N | Y |
| V NYSE | N | N | Y |
| TDG NYSE | N | N | Y |
