Martin Cobb’s Top Picks for Sept. 17, 2026

Martin Cobb, Senior Vice-President, Equities, Lorne Steinberg Wealth Management

Focus: Global and Canadian equities

Top Picks: Zoetis, EssilorLuxottica, Smith & Nephew

MARKET OUTLOOK:

A ‘disorderly’ rise in bond yields is probably the greatest risk to equity markets today.

“I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” Thus said James Carville, a political strategist for U.S. President Bill Clinton, in the early 1990s. Scott Bessent seems not to have read that memo.

The average interest rate on outstanding US treasuries is around 3.5 per cent today, i.e. lower than any part of the curve. Some US$10 trillion of U.S. government debt is maturing over the next year. On top of that they will need to finance another US$2 trillion or so in annual budget deficit (i.e. US$5-6 billion a day). And interest payments already consume around 20 per cent of tax revenues.

So, while oil prices get most of the blame (and short-term correlations between crude prices and bond yields are admittedly high), there is a much bigger issue at play, namely that structural demand for US treasuries, particularly among foreigners, is materially weaker at the very same time that supply (of all types of bonds, not just government) remains elevated.

And then there’s artificial intelligence (AI).

I view my top picks as those stocks where I would likely look to deploy marginal capital into today. It turns out that the three I’ve chosen, while very different from one another, are all from the healthcare sector. Perhaps that’s telling...

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TOP PICKS:

Zoetis (ZTS NYSE)

• Spun out of Pfizer in 2013, Zoetis is the world’s leading animal pharmaceutical business
• Products cater to both commercial livestock production (cattle, swine, poultry, fish) and companion animals (dogs, cats, horses)
• Animal health industry offers secular multiyear tailwinds owing to pet humanization, increasing veterinary diagnostic spend, rising global protein demand etc.
• Compared to human drugs, suffers from much less generic competition and a much more straightforward (out of pocket) payments regime
• Their approximately 300 strong product portfolio is highly diversified and has been very durable, with the average market life of its top products spanning approximately 30 years
• New therapeutic areas emerging such as cardiology, obesity and anxiety (over 70 per cent of dogs face anxiety challenges, believe it or not!)
• Historically always too expensive for my liking (10-year average forward price-to-earnings ratio of 30 times)
• Today on about a third of that and with excess cash flow likely to be used to hoover up shares (much more powerful at today’s valuation) eps growth is likely to be in the high single digits

EssilorLuxottica (EL EPA)

• Born out of the 2018 merger of French lens giant Essilor and Italian frame maker Luxottica, EL control everything from the factory floor to the retail counter
• Own brands such as Ray-Ban and Oakley, manage optical empires like Lens Crafters and Sunglass Hut (some 14,000 stores globally with another 4,000 franchised or licensed) and run vision insurance plans
• About 75 per cent of their business would be optical or health-related and 25 per cent sun and fashion
• The eyewear market enjoys long-term structural tailwinds, most obviously the ageing global population but also an increased preponderance of screen-related myopia and other conditions, and expected loss (EL) is the undisputed, vertically integrated gorilla here
• Increasingly involved in everything to do with eyecare health, they are also the frontrunner in wearable consumer tech through their Ray-Ban partnership with Meta
• Faced some short-term issues (tariffs, exchange rates, lower margins on smart glasses) which has seen the shares retreat
• Now trading on a high-teens multiple of next 12m earnings for anticipated double-digit eps growth

Smith & Nephew (SNN NYSE)

• In 1856 Mr. Smith opened a chemist shop and was later joined by his nephew
• Today company is a leading provider of medical products such as hip and knee implants, soft tissue repair systems, sports medicine and advanced wound care treatments
• Competes with the likes of Stryker and Zimmer Biomet as well the DePuy division within Johnson & Johnson and holds a top four market position in each of its areas of operation
• Folks around the world are both living longer and getting heavier, leading to increased healthcare demand generally but even more so in the area of hip and knee replacements, advanced wound care, sports injuries etc.
• Underlying market growth is expected to be of the order of four to five per cent annually and one would anticipate they can at least hold their own therein, if not more so
• With a bit of room for margin progression, should be able to compound earnings per share at close to the 10 per cent level
• The whole industry has been derated in recent years, stock now trading on 11 to 12 times next 12m earnings, a big discount to both its history and market leader Stryker
• In addition, a private equity firm is in talks to buy DePuy and an activist investor now has a 14 per cent stake in S&N

PAST PICKS: SEPT. 11, 2025

Automatic Data Processing (ADP NASD)

Then: US$298.03

Now: US$271.70

Return: -9%

Total Return: -6%

Linde (LIN NASD)

Then: US$483.59

Now: US$459.43

Return: -5%

Total Return: -4%

Open Text (OTEX TSX)

Then: $48.77

Now: $32.84

Return: -33%

Total Return: -30%

Total Return Average: -13%