David Driscoll, Founder, President, CEO & Chief Investment Officer, Liberty International Investment Management Inc.
Focus: Global equities
Top Picks: Canadian Natural Resources, Bird Construction, Diploma PLC
MARKET OUTLOOK:
Currently, it’s a tale of two beliefs. The bull belief is that if rate cuts come to the U.S. economy, stocks can continue to move higher, similar to the last three years. This is why the S&P 500 broke 7,000 this past Wednesday. The bear belief is that inflation returns a la 2022, causing either a pause in rate cuts or the beginning of a new round of rate increases (Australia was the first to move).
Simply put, if rates fall, stocks and bonds go higher and if inflation rises, interest rates often go up and stocks and bonds drop. If that’s the case in 2026, interest-sensitive stocks such as financials, utilities, telecoms and real estate may falter. Those that usually hold their own during periods of inflation and rising rates are commodity and consumer staples companies.
Also, note that if the U.S. Federal Reserve cuts interest rates, there will be downward pressure on the U.S. dollar, meaning commodities (priced in U.S. dollars) can rise further, continuing their bull-market trend.
For investors, if they own high-flying “flavour of the day” stocks that have risen two-to five-fold in the last year, it would be prudent to sell half and re-balance.
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TOP PICKS:
Canadian Natural Resources (CNQ-CN)
Produces natural gas, crude oil and other products.
The world is structurally short of a reliable, geographically safe oil supply. CNQ is running at maintenance-level capex, generating massive free cash flow, and returning it through dividends, buybacks, and debt reduction.
It’s the closest thing to a “forever asset” in Canadian energy. CNQ’s 20.75 billion Barrel of Oil Equivalent (BOE) of reserves represent over 36 years of production at current rates. The Return on Invested Capital (ROIC) math is compelling at any reasonable oil price. At US$60 West Texas Intermediate (WTI) (pre-war), CNQ’s ROIC was approximately 13 per cent against a 9.1 per cent Weighted Average Cost of Capital (WACC) — a healthy 3.9 per cent plus spread creating roughly about $2 billion in annual economic value above the cost of capital. At US$100 WTI, ROIC jumps to the mid-20s with a spread north of 15 per cent plus. Even if oil drops back to $70 post-conflict, ROIC would still be in the 15 to 16 per cent range — well above its cost of capital to generate significant excess returns.
Bird Construction (BDT-CN)
Transitioning from a cyclical contractor to a diversified infrastructure platform.
It is shifting toward collaborative contracts and long-term public projects which result in higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins (on a path toward eight per cent). Currently, over 75 per cent of its combined backlog is in a collaborative model. Visibility plus margin expansion equals a potential re-rating opportunity. Disciplined and focused revenue growth in infrastructure – transportation, airports, marine terminals, mining, buildings – to construction in healthcare, data centres and manufacturing has procured a recently announced record US$10 billion in combined backlog which provides multi-year revenue visibility. It’s also a small-cap that hasn’t been found by a million analysts’ eyeballs.
Diploma PLC (DPLM LN)
A “serial acquirer” in the aerospace, seals and controls industries.
It is a rare industrial business that consistently converts structural growth and disciplined mergers and acquisitions (M&A) into high 20 per cent margins with compounding earnings per share (EPS), a playbook that remains under penetrated and scalable. Structural organic growth in niche markets shows that their end markets are not commoditized.
These are mission-critical, low-cost components with pricing power. Small-cap British stocks are also in demand as takeover candidates. Last year, Liberty names Spectris plc was taken over and currently, Intertek plc, is considered in play to be acquired.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CNQ/CN | Y | Y | Y |
| BDT/CN | Y | Y | Y |
| DPLM/LN | Y | Y | Y |
PAST PICKS: MARCH 25, 2025
Chubb (CB NYSE)
Then: US$291.40
Now: US$328.37
Return: 13%
Total Return: 14%
TC Energy (TRP TSX)
Then: $69.79
Now: $81.15
Return: 16%
Total Return: 22%
Lagercrantz Group AB (LAGRB SS)
Then: kr227.00
Now: kr247.40
Return: 9%
Total Return: 10%
Total Return Average: 15%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CB/US | Y | Y | Y |
| TRP/CN | Y | Y | Y |
| LAGRB/SS | Y | Y | Y |
