Brian Madden’s Top Picks for May 7, 2026

Brian Madden, Chief Investment Officer, First Avenue Investment Counsel

Focus: North American equities

Top Picks: Agnico Eagle, McKesson Corp, Costco

MARKET OUTLOOK:

As noted last month on the show, sentiment and valuation are contrarian indicators. Contrarians were afforded an excellent dip buying opportunity in March.

That opportunity proved short and fleeting though, as the combination of hopes for peace in the Middle East, a red-hot slate of first quarter earnings for Canadian and U.S. companies, coupled with refreshed interest in companies advantaged by artificial intelligence (AI) pushed the S&P 500 to all time highs.

The S&P/TSX Composite index is not far behind in recovering either. With earnings growing at a 25 to 30 per cent pace in both countries, good fundamental support exists for higher share prices. Over long periods, stocks move nearly hand-in-hand with profits.

This is the meaty, substantive part of investing…the “steak”… whereas trading around swings in valuation and sentiment is merely the “sizzle”.

It captures a lot of attention, but is notoriously difficult to do, except perhaps in small increments around the margins of a thoughtfully constructed portfolio.

Humility – acknowledging that the vast universe of things we don’t know will always outnumber those things we do know - and behavioral self-control - avoiding impulsive or emotional decision making - is the real currency in the investment business.

Our edge is not making big bets on binary outcomes but rather is in selecting excellent businesses and letting them compound over long periods.

Accordingly, while 2026 has been “newsy”, it has been mostly business as usual for our team with no more and no less trading or activity than at any other time.

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TOP PICKS:

Agnico Eagle (AEM TSX)

Agnico-Eagle is Canada’s largest gold miner, since completing its transformational merger with Kirkland Lake Gold in 2022.

The shares are almost a pure play on gold, unlike some of the other polymetallic producers, with 2026 planned production of 3.5 million ounces and revenues comprised 99 per cent of gold and one per cent silver.

The company has paid a dividend every year since 1983 and has increased their dividend by 19 per cent per annum on average over the past decade. With 10 producing mines in Canada, Finland, Mexico and Australia, single mine concentration risk is low, and political risk is negligible in these mining friendly jurisdictions.

The company has a well-deserved reputation among investors for credibility and execution against strategy, as their history of exceeding production guidance in nine of the last ten years and their record of exceeding consensus earnings forecasts in 29 of the last 30 quarters demonstrates.

The recent pullback of 31 per cent off the early March high creates a very timely entry point for investors, particularly after the brilliantly strategic, prospective and synergistic trio of acquisitions in Finnish Lapland the company announced last week.

McKesson Corp (MCK NYSE)

McKesson is the largest pharmaceutical drug distributor in the United States.

Pharmacy distribution is an oligopoly in the U.S. with the top three players holding a combined 90 per cent market share.

Distributors negotiate bulk purchases of drugs from manufacturers on behalf of pharmacy, hospital, long term care and other end market clients and physically move drugs to their warehouses and then onto retail stores and other primary care endpoints.

McKesson earns a very high return on invested capital in this non-cyclical business with very sticky customer relationships - no major retailer has changed their drug distributor in over a decade.

Its smaller medical/surgical equipment distribution and pharmacy technology solutions & consulting businesses are higher margin and faster growing businesses. A pending plan to spin off the Medical-Surgical unit via IPO promises to surface hidden value within this unit.

Dividends have grown every year for the last 25 years and over the latest five years have grown at a compound rate of 14 per cent.

The 26 per cent pullback in the shares from their early March peak affords new investors an excellent entry point into this market leader that is secularly advantaged by demographics and morbidity trends in the United States.

Costco (COST NASDAQ)

Costco is the third largest retailer in the world with its pioneering presence and its undisputed leadership in warehouse club retailing.

With 925 stores globally, serving 82 million loyal paying members, Costco enjoys high traffic and repeat business alongside the recurring membership fees – with 92 per cent member retention despite periodic fee increases. Stores stock a narrow assortment of 4,000 branded and Kirkland (private label) items and rely on an efficient supply chain, procurement clout and rapid inventory turns to price sharply while maintaining healthy gross margins of 11 per cent and robust returns on equity above 30 per cent.

Steady store expansion, superior same store sales growth and a growing e-commerce capability have led to an 10 per cent compound growth rate in sales over the past decade while earnings have compounded at 14 per cent over that time frame.

The shares themselves – which almost always trade at a premium to peers - have nevertheless generated a compound annual return of 17.52 since the initial public offering in 1985 via price appreciation, regular and occasional special dividends.

PAST PICKS: MAY 23, 2025

Constellation Software (CSU TSX)

Then: $4841.07

Now: $2400.40

Return: -50%

Total Return: -50%

Lennox International (LII NYSE)

Then: $567.16

Now: $541.37

Return: -4%

Total Return: -3%

Bank of Montreal (BMO TSX)

Then: $142.67

Now: $211.44

Return: 48%

Total Return: 53%

Total Return Average: 0%