Paul Harris, Portfolio Manager, Harris Douglas Asset Management
Focus: North American and global large caps
Top Picks: First Service Corp., Microsoft, Adobe
MARKET OUTLOOK:
I think in chaos there is opportunity. I am not sure how long this war will go on, but I think it will cause further price falls and will allow smart investors to buy some great businesses cheaply.
I think the Chicago Board Options Exchange’s CBOE Volatility Index will need to fall substantially further before we see capitulation. It needs to get closer to 40 it is only at 26.
The unemployment number was very bad. I am not sure why a lot of people are saying it is stabilizing. December to January was also revised and losses sector wise was in banks, transport, manufacturing, construction, leisure and hospitality.
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TOP PICKS:
First Service Corp. (FSV TSX)
The company focuses on residential property management and services (California Closets). It has room to grow market share in the U.S. in what remains a very fragmented business. The company has grown through acquisitions and organic growth. It trades at 24 times next year’s earnings and yields 0.73 per cent.
Microsoft (MSFT NASDAQ)
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide.
The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. It has a gross margin of 68.6 per cent and an operating margin of 46.7 per cent.
Free cash flow of US$71 billion and a return on invested capital (ROIC) of 23.9 per cent. Microsoft will be a leader in AI and benefit from strong institution relationships.
Adobe (ADBE NASDAQ)
Wall Street thinks AI is going to kill Adobe.
But the numbers tell a very different story. Adobe’s revenue has grown every single quarter for the last four years, from $3.4 billion in 2020 to nearly $6 billion today.
Adobe has quietly reduced its share count by nearly 10 per cent, buying back stock quarter after quarter. Fewer shares plus steady growth equals compounding machine.
The growth hasn’t slowed much at all, either. Adobe is still compounding revenue at 10 to 12 per cent year-over-year. The stock is trading at half its usual valuation at a forward price-to-earnings (P/E) of 14 times.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| FSV TSX | Y | Y | Y |
| MSFT NASDAQ | Y | Y | Y |
| ADBE NASDAQ | Y | Y | Y |
PAST PICKS: FEB. 24, 2025
Alphabet (GOOG NASDAQ)
Then: US$181.19
Now: US$297.08
Return: 64%
Total Return: 64%
Novo Nordisk (NVO NYSE)
Then: US$90.59
Now: US$38.28
Return: -58%
Total Return: -56%
MSCI Inc. (MSCI NYSE)
Then: US$573.55
Now: US$553.91
Return: -3%
Total Return: -2%
Total Return Average: 2%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOG NASDAQ | Y | Y | Y |
| NVO NYSE | Y | Y | Y |
| MSCI NYSE | Y | Y | Y |
