Top Picks from Tim Regan, Managing Director, Kingwest & Company
Focus: North American Large Caps
Top Picks: Brookfield Corp., Allegion plc, Thomson Reuters Corp.
MARKET OUTLOOK:
It is an uncomfortable time to follow the news, and a poor time to mistake the news for the market.
The Ukraine war grinds on and the Middle East is in flames. Oil pushed past US$110 earlier this year.
U.S. President Donald Trump tariff brinkmanship continues unabated. This is precisely the weather in which prices detach from what businesses are worth. Step back and the picture is steadier than the headlines suggest.
There has not been a real recession in either Canada or the U.S since 2008 to 2009. Covid’s brief, V-shaped slump was not a traditional cyclical downturn. It was met with unprecedented government support that produced the highest inflation in forty years, driving interest rates back toward what we regard as more normal levels.
Money is no longer nearly free. The broad U.S. equity market rally this year was driven by earnings, not speculation. In the first quarter, S&P 500 companies grew earnings per share by 18 per cent. Excluding the largest technology companies, the median company still grew earnings 14 per cent, well above long-term averages. We did not own the semiconductor stocks that led the market, which explains much of our relatively soft quarter in the U.S.
Canadian economic growth remains modest. Trade and tariff uncertainty are restraining hiring and limiting capital spending largely to maintenance. Even so, our Canadian holdings produced a strong second quarter, bringing our year-to-date return broadly into line with the index. We do not speculate in the stock market. We own businesses. When you own a business, you own its prospective yield: the cash it will earn in the years ahead. But the future is unknowable. It is an expectation shaped by confidence as much as by arithmetic. John Maynard Keynes called these shifting waves of optimism and pessimism “animal spirits.”
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TOP PICKS:
Brookfield Corp (BN TSX)
There are three main reasons we bought Brookfield Corp rather than simply buying its listed affiliates.
The public affiliate assets approximate the stock price
- Brookfield Corp owns about 73 per cent of Brookfield Asset Management (BAM), a global alternative asset manager with $603 billion of fee-bearing assets. Fee-related earnings are roughly $3 billion across infrastructure, energy, private equity, real estate and credit. BAM is the crown jewel of the group.
- In addition, Brookfield owns 45 per cent of Brookfield Renewable Partners ($16B), 26 per cent of Brookfield Infrastructure Partners ($8B), and 43 per cent of Brookfield Business Partners ($1.5B).
The privately owned assets add more value
- Brookfield has historically invested its own balance sheet alongside client capital. This creates a powerful compounding engine because of its unquestioned strength as a capital allocator.
- Wealth Solutions. Insurance operations focused primarily on annuities. These are not insurance in the conventional sense. They insure retirement and make a spread. It has roughly $180 billion of insurance float invested.
- Real Estate spanning 88 million square feet across 113 properties in gateway cities The core real estate portfolio runs above 95 per cent occupancy, with leasing demand strong.
The leaders are exceptional and the team is deep
- Bruce Flatt has run Brookfield for over 20 years and is the star. Flatt’s own stake runs to more than 107 million shares, worth close to $7 billion. At 58 years old, Bruce continues to have a runway to compound value at Brookfield.
- Brookfield today is driven by a deep bench of executives and investment professionals, including leaders such as Connor Teskey, Nick Goodman, and the leadership teams across the various entities
Management puts intrinsic value at $92 a share today, rising to $190 by 2030. The stock trades near $64, about 0.7 times what it is worth. The gap between price and value should close as Wealth
Solutions scales, the infrastructure pipeline turns to cash, and real-estate earnings recover. Across most of the past decade BN has traded at roughly a 10 per cent to 30 per cent discount to NAV in “normal” periods, widening to 30 per cent to 60 per cent+ in stressed periods.
Management has laid out the path to $190 a share by 2030. The market is paying $64. We do not need everything to go right, only for the plan to be roughly correct.
ALLEGION PLC (ALLE NYSE)
Allegion owns the leading franchise in commercial door hardware. Schlage has made locks for more than a century, and its products are written into building codes and specified by architects. A modest earnings miss cut the share price 8 per cent in a day two quarters ago. Yet the business is steadily becoming an electronic access-control company. Electronics and software have grown from 21 per cent of revenue to 33 per cent in five years, creating a growing stream of upgrade demand from an installed base measured in decades. The market saw an earnings hiccup. We valued durable security infrastructure.
| 15x | 20 per cent | 50 per cent |
|---|---|---|
| PRICE TO CASH EARNINGS | RETURN ON CAPITAL | REVENUE FROM AFTERMARKET |
We do not forecast stock prices. We own businesses where the economics do the work: essential products, recurring cash generation, disciplined management and multiple opportunities to reinvest at attractive returns.
Allegion has all four, which is why we have owned it since the day it became a public company.
Five years from now, the installed base will be larger. More doors will be electronic. Revenue per opening will be higher. Recurring software revenue will represent a greater share of the business, and switching costs will be stronger than they are today. Every upgrade strengthens the franchise.
If Allegion continues to reinvest roughly three-quarters of its earnings at around a 20 per cent return, continues the current dividend policy and holds its debt ratio steady, cash earnings should roughly double over the next five years.
Over that time, the business mix should continue shifting toward higher-value recurring revenue that deserves a higher valuation multiple. If the multiple merely returns to a more normal 20x cash earnings, the shares should more than double over that period.
Thomson Reuters (TRI TSX)
Bought recently at $127. It was down 55 per cent from its’ 52 week high. We paid an average price for an above average business. High-recurring, high-retention growth business with an AI tailwind and capital returns.
Investors are pricing the existing business too cheaply and assigning essentially zero value to its future growth. We think the AI fears that drove the selloff have it backwards.
The business: Thomson Reuters is a content-enabled technology company serving legal, tax, audit, accounting, compliance, and risk professionals. Three core segments, Legal Professionals, Corporates, and Tax, Audit & Accounting, together the “Big 3,” which make up roughly 82 per cent of revenue. These are sticky franchises with over 80 per cent recurring revenue, over 90 per cent customer retention based on multi-year contracts. The company generates US$2B of free cash flow on US$7.5B of revenue, supported by a fixed cost base which generates strong incremental margins.
Why we bought it: AI is a tailwind, not a threat. Around 22 per cent of recurring revenue already comes from AI-enhanced products, and TRI’s moat of proprietary content plus thousands of in-house attorneys and tax experts is something LLM startups cannot replicate. Represents a US$275m cash flow opportunity.
International is underpenetrated and growing fast. Organic growth is running at 16 per cent and management expects it to accelerate in 2026 across Latin America, Southeast Asia, Brazil, and Canada. US$200m cash flow opportunity.
Operating leverage. With staff at 60 per cent of costs and revenue recurring, the company is targeting roughly 100bps of margin expansion every year through 2028. US$185m cash flow opportunity.
Value: Cash earnings grow to US$2.7B in three years from US$2B in 2025, about 11.5 per cent annualized. With net leverage at just 0.6x EBITDA against a 2.5x target, TRI has roughly US$6B of capacity for buybacks and acquisitions through 2027 and has committed to returning at least 75 per cent of free cash flow to shareholders. Steady buybacks shrink the share count and lift cash earnings per share from US$4.30 to $6.40, a 14 per cent annual growth rate.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BN TSX | Y | Y | Y |
| ALLE NYSE | Y | Y | Y |
| TRI TSX | Y | Y | Y |
Past Picks: February 3, 2026
Amrize (AMRZ NYSE)
Then: US$54.00
Now: US$49.85
Return: -8%
Total Return: -7%
EQB (EQB TSX)
Then: $110.18
Now: $142.84
Return: 30%
Total Return: 31%
GFL Environmental (GFL NYSE)
Then: US$42.67
Now: US$39.43
Return: -8%
Total Return: -8%
Total Return Average: 5%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AMRZ NYSE | Y | Y | Y |
| EQB TSX | Y | Y | Y |
| GFL NYSE | Y | Y | Y |
