Paul Harris’ Top Picks for Sept. 28, 2026

Paul Harris, Portfolio Manager, Harris Douglas Asset Management, Inc.

Focus: North American and Global Large Caps

Top Picks: Meta, Microsoft, EssilorLuxottica

MARKET OUTLOOK:

Bonds are the main source of stress. The U.S. 10-year moved above five per cent earlier this month, its highest level since July 2007.

Canada’s 10-year is near a three-year high as energy-driven inflation concerns persist. The Canadian five-year closed last week around 3.60 per cent, which matters for mortgage renewals.

Before the August CPI release, the Canadian two-year had risen more than 40 basis points (bps) in a month as markets priced in BoC hikes this year. Stocks have held up well despite rising yields. On Monday the Nasdaq set a record close of 27,122, its first since June, led by artificial intelligence (AI) names; AMD reached US$1 trillion in market cap. Since then the rally has slowed as bond-market pressure has increased, and the S&P 500 closed Thursday at 7,704. U.S. indexes are on track for a fourth straight annual gain, with energy the best-performing sector year to date.

For the Toronto Stock Exchange (TSX), the index closed flat at 35,706 Thursday. It is down 3.39 per cent over the past month but still about 20 per cent higher than a year ago. Rising yields are pushing gold miners lower while energy stocks gain.

Key variables: Oil and Middle East escalation, the direction of Canada–U.S. trade talks, and whether long yields stabilize. A five per cent plus U.S. 10-year is the main threat to equity valuations, especially for rate-sensitive sectors like utilities and Reits. The contrarian Canadian angle is the policy divergence. The Fed is tightening while the Bank of Canada (BoC) holds, which weighs on the Loonie and keeps pressure on Canadian yields. That makes the Oct. 28 meeting a real coin-flip, which is unusual.

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TOP PICKS:

Meta (META:NASDAQ)

The disconnect is that Meta grew fiscal year 2025 (FY2025) earnings per share (EPS) by 22 per cent and consensus expects roughly US$30 per share in fiscal year 2026 (FY2026), yet the stock fell approximately 17 per cent over the past year, leaving it at a forward price-to-earnings (P/E) around 17.3 to 17.6 times cheap for approximately 20 per cent earnings growth. Profitability is elite: gross margin approximately 82 per cent, operating margin approximately 41 per cent, and net margin approximately 33 per cent. Analysts simply apply a more normal approximately 25 to 28 times multiple to growing forward EPS, which mechanically produces a large target. There new open source AI product has gotten wide acceptance which helps them slowly catch up to other frontier models.

Microsoft (MSFT:NASDAQ)

Earnings keep compounding — Third quarter (Q3) FY26 EPS was US$4.28 (up from US$3.47), revenue plus 18 per cent, with revenue forecast to grow approximately 14 per cent annually over three years and margins are very high at approximately 68 per cent gross, approximately 47 per cent operating, and approximately 39 per cent net, on a forward P/E near 21 times. The shares pulled back from a approximately US$484 January high largely because management guided to US$190 billions of 2026 capex, up 61 per cent, with gross margin slipping to its narrowest since 2022; analysts view that as AI investment that pays off via Azure (still growing approximately 37 to 40 per cent), so targets stayed high while the price fell.

EssilorLuxottica (EL:EPA)

The stock fell roughly 46 per cent versus its index over six months, dropping from a approximately €376 high to a approximately €191 low. Fundamentals are far more modest than the tech names: gross margin approximately 58 per cent and an adjusted operating margin targeted at 19 to 20 per cent for 2026, with consensus EPS around €7.29 for the next year and roughly mid-single-digit organic revenue growth. It still trades richly on trailing earnings (P/E approximately 33 to 35 times), but a depressed price against largely unchanged targets supported by the Ray-Ban Meta smart-glasses ramp is what creates the outsized gap.

PAST PICKS: NOV. 24, 2025

FirstService (FSV:TSX)

Then: $213.90

Now: $179.664

Return: -16%

Total Return: -15%

Zoetis (ZTS:NYSE)

Then: US$122.87

Now: US$70.18

Return: -42%

Total Return: -41%

Adobe (ADBE:NASDAQ)

Then: US$318.73

Now: US$225.63

Return: -29%

Total Return: -29%

Total Return Average: -85%