John Zechner, Chairman and Founder, J Zechner Associates
Focus: North American large cap stocks,
Top Picks: Sprott Physical Uranium Trust, North American Construction, Salesforce
MARKET OUTLOOK:
We have become more cautious and defensive in our outlook for stocks given the strength over the past few months, the exceptionally ebullient investor sentiment and positioning as well as elevated valuations.
The earnings yield of the stock market overall is the same as the ‘essentially risk free’ return on two-year treasuries, suggesting that investors are receiving no premium for taking on risk from stocks.
The bullish outlook is supported by exceptional profit growth in the first quarter but this has been almost entirely driven by the ongoing capex underlying the buildout of artificial intelligence (AI) capacity.
Another economic support has been the ongoing deficit-financed fiscal spending, which has its limits as government debt levels reach record levels.
The wealth effect from strong capital markets has also sustained consumer spending but contrasts with all-time low readings in consumer confidence, suggesting that the strength is coming from a smaller part of the population and is less sustainable than an expansion driven by business spending and employment gains.
Summing it all up, given we are more focused on protecting gains from the past few years while still participating to some degree to any continuation of this bull market.
This means an investment strategy focused on sectors that have more limited downside due to valuation support or high dividend yields.
This includes energy infrastructure, telecom, power utilities, gold and, in tech, a higher weight in software stocks with AI agentic solutions.
We are underweight financials, tech hardware, consumer stocks and retail.
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TOP PICKS:
Sprott Physical Uranium Trust (U-U TSX)
This is simply a pure play on uranium, which we see as having one of the best longer-term supply demand dynamics of any commodity.
Global production has been well below annual demand for decades, but the market has had to absorb excess inventories from other sources.
First was the end of the Cold War which meant the de-enrichment of all the nuclear inventory in both the United States and the Union of Soviet Socialist Republics.
Just as that was finally depleting we got the Fukishima disaster in 2011, which lead to Japan shuttering all of their nuclear facilities and countries like Germany following suit.
Now we have nuclear capacity growing at a tremendous rate again, lead by China and also Japan re-starting all of their shuttered production.
Inventories have been run down and global mine supply is only about 70 per cent of annual demand, which is forecast to grow over the next decade.
More supply will be needed and US$85 per pound is not high enough to bring out new production economically.
Uranium prices will need to rise.
North American Construction (NOA TSX)
The company is a provider of heavy civil construction and mining services in Australia, Canada, and the United States, providing services to the mining, resource and infrastructure construction markets.
This infrastructure spending is accelerating as countries attempt to domicile global production.
Trading at only about three to four times operating cash flow and under 10 times forward earnings, the stock is at a significant discount to comparable engineering service and construction companies, probably due to the view that it is almost solely focused on the development of heavy oil projects in Canada, where the backlog of new projects has clearly declined.
But that source of revenue has dropped to only 10 per cent of the total with construction projects in Australia being a much larger component now.
A name change for the company to better reflect their business exposures seems to be in order!
Salesforce (CRM NYSE)
Salesforce is a customer relationship management (CRM) technology company. Its AI powered Agentforce 360 Platform offers sales, service, marketing, commerce, collaboration, data management, integration, analytics, and information technology (IT) service solutions.
It enables customers to build and deploy digital labor for employees and customers, leveraging autonomous AI agents across business functions.
Like all software (SaaS) companies, its stock has been crushed this year, falling by 40 per cent on worries that AI will cannibalize their existing business.
But Salesforce has integrated AI into its service offerings with Agentforce doing annualized revenues over US$1.2 billion and the recent acquisition of Fin, which has driven automated responses from 25 per cent in 2023 to over 70 per cent today, demonstrating that they will be effective in monetizing AI with their existing clientele.
Meanwhile, the stock trades at only about 12 times last quarter’s annualized earnings with growth continuing at low double-digit rates.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| U-U TSX | Y | Y | Y |
| NOA TSX | Y | Y | Y |
| CRM NYSE | Y | Y | Y |
PAST PICKS: JULY 24, 2025
Rogers Communications (RCI.B TSX)
Then: $47.06
Now: $53.25
Return: 13%
Total Return: 17%
B2Gold (BTO TSX)
Then: $4.79
Now: $6.43
Return: 34%
Total Return: 37%
Pembina Pipeline (PPL TSX)
Then: $50.60
Now: $65.97
Return: 30%
Total Return: 36%
Total Return Average: 30%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| RCI-B TSX | Y | Y | Y |
| BTO TSX | N | N | N |
| PPL TSX | Y | Y | Y |
