David Burrows’ Top Picks for Aug. 27, 2026

David Burrows, Chairman and CEO, Barometer Capital Management

Focus: North American large caps

Top Picks: BHP Group, DPM Metals, Imperial Oil

MARKET OUTLOOK:

Global equity markets continue to demonstrate robust internal health, driven by a decisive expansion in market breadth. The average stock is now outperforming the largest, most crowded mega-cap names—a broadening of participation that remains remarkably resilient despite typical late-summer and seasonal fall headwinds.

Under the surface, capital is rotating toward inflation-hedging and real-economy assets:

• Established Leaders: Financials and industrials maintain firm relative-strength leadership.
• Commodities and energy: The recent cyclical pullback appears complete, setting up attractive entry points.
• Global inflections: International and emerging market equities are displaying early signs of structural bottoming and improving participation.

The Macro backdrop: Bond headwinds vs. cash flow generators

The secular bear market in longer-dated sovereign fixed income remains firmly entrenched. Facing massive sovereign debt issuance, structural fiscal deficits, and central banks inclined toward accommodative policy, bond investors continue to demand higher yields. Bonds hedge against deflation; equities and tangible asset producers hedge against persistent inflation.

In this environment, profitability and pricing power are paramount:

• Free cash flow over capital consumers: Businesses self-funding their growth and passing on rising costs are significantly outperforming cash-burning peers.
• Dividend growth vs. bond proxies: High-yield, low-growth equities behave like fixed income and fail to protect purchasing power. Dividend growers with strong balance sheets offer superior real returns and capital preservation.

Bottom line: Focus capital where breadth is expanding—prioritizing disciplined risk management, real assets, and pricing power over long-duration debt.

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TOP PICKS:

BHP Group (BHP NYSE)

Copper is now BHP’s largest earnings contributor. In fiscal year 2026 (FY26) it delivered 54 per cent of group underlying earnings before interest, taxes, depreciation, and amortization (EBITDA), about US$18 billion, at a 70 per cent divisional margin. That is the first time copper has accounted for more than half of group earnings in BHP’s history, and it comes off production of roughly two million tonnes for a second straight year, with volumes up about 30 per cent over four years.

Iron ore still matters, but as cash flow rather than as the reason we own the stock. WAIO is Western Australia Iron Ore, BHP’s integrated Pilbara business. It runs a set of mining hubs connected by its own rail network to port facilities at Port Hedland, and ships mainly to steel mills in China and elsewhere in Asia. Owning the mines, the rail and the port together is why WAIO sits at the low end of the global cost curve. In FY26 it produced and shipped record volumes and held unit cost growth to one per cent despite inflation. Earnings were broadly flat as higher volumes offset softer prices. WAIO’s job is to fund copper growth without needing a strong iron ore price.

The group numbers support the case. Underlying EBITDA of US$32.9 billion was up 27 per cent at a 59 per cent margin, free cash flow rose 83 per cent to US$9.8 billion, and net debt fell to US$8.7 billion from US$12.9 billion. Return on capital employed reached 26 per cent and the dividend was the largest in four years.

The demand case is structural. BHP models a copper deficit of up to 10 million tonnes a year next decade, with demand from decarbonization, digitalization and data centres growing around 6.5 per cent annually through 2035. BHP is the largest copper producer by volume and targets three to four per cent annual production growth to 2035. Nickel is suspended, Jansen potash adds growth not tied to Chinese steel, and the customer base sits in Asia’s fastest growing economies.

DPM Metals (DPM TSX)

DPM Metals screens as one of the standout balance sheets and growth stories in mid-cap gold. The company is debt-free with $761 million in cash and $1.2 billion in total liquidity, giving it the firepower to fund growth and buybacks without dilution. With that cushion secure, focus could now turn to management’s capacity to begin raising the dividend again.

Profitability is running at record levels in a strong gold tape: Second quarter (Q2) 2026 free cash flow hit $227 million, with strong margins as a realized gold price near $4,635 per ounce (oz) sat far above all-in sustaining costs of roughly $1,470/oz. That quarter also delivered a 17 per cent earnings per share (EPS) beat and 94 per cent year-over-year revenue growth, the company’s fourth straight beat. Near-term, the new Vareš mine in Bosnia is ramping quickly toward full capacity, offsetting the Ada Tepe wind-down and supporting production growth. Longer-term optionality comes from Serbia, where the Čoka Rakita PFS outlined a $735 million net present value (NPV), backed by ongoing district-scale exploration that could extend the resource well beyond current estimates. Execution has been consistent, too: DPM has hit production guidance for twelve years running; a track record now paired with active share buybacks that signal real management discipline and confidence. Add a stock up roughly 158 per cent over the past year yet still trading at a modest premium to NAV (1.1 times at spot vs mid-cap gold equities at one time), a free cash flow yield of 7.4 per cent vs intermediate average of 6.8 per cent, and geographic diversification across Bulgaria, Bosnia, Serbia, and Ecuador, and DPM Metals looks well positioned to keep compounding.

Imperial Oil (IMO TSX)

Imperial Oil is the cleanest expression of long-life, low-decline oil sands exposure in Canada. Kearl, Cold Lake and Syncrude carry reserve lives measured in decades with effectively no base decline — sustaining capital holds volumes flat rather than fighting a treadmill, which is why the free cash flow profile looks nothing like a shale producer’s. Upstream averaged 414,000 barrels of oil equivalent per day (boe/d) in Q2.

The cost story is where the thesis tightens. Kearl unit cash costs came in at US$21.48 a barrel with management guiding to US$18 by 2027, Cold Lake at US$15.40, alongside a $150 million annual opex reduction target by 2028. That’s a break-even built to survive a downcycle, and we’ve already seen the stress test: roughly $1.4 billion of free cash flow in Q4 with WTI averaging under US$60. The integrated model does real work here — downstream earned $787 million and chemicals $65 million in the quarter — cushioning the WCS differential and refining margin swings that whipsaw the pure-play producers.

Capital return discipline is best-in-class. Thirty-one consecutive years of dividend growth, a 21 per cent hike to $0.87 — the largest nominal increase in company history — and $4.6 billion returned in 2025. The renewed five per cent NCIB is being accelerated to complete before year-end. Total yield lands near five per cent. With a clean balance sheet and the amount of FCF the company is generating, a substantial issuer bid is also a potential catalyst.

PAST PICKS: OCT. 16, 2025

Agnico Eagle (AEM TSX)

Then: $261.11

Now: $297.75

Return: 14%

Total Return: 15%

Caterpillar (CAT NYSE)

Then: US$540.96

Now: US$814.25

Return: 51%

Total Return: 52%

Cameco (CCO TSX)

Then: $128.05

Now: $147.37

Return: 15%

Total Return: 15%

Total Return Average: 27%