Michael Hakes, senior portfolio manager at The Murray Wealth Group

Focus: U.S. and global stocks

MARKET OUTLOOK:

Global markets are having a strong first half of the year, with most markets up double digits, or close to it. All North American markets are above pre-COVID levels while European markets are at or above pre-COVID levels, with the exception of the U.K., which remains below the peaks of Jan 2020. Most markets are up 40-80 per cent from the bottom in March 2020. 

Going into the second half, the debates remain focused around Inflation, transient or not? Commodity prices, sustainable or not (is this a new super cycle)? Will the nine million job openings in the U.S get filled? How strong is the consumer and will their new habits continue? 

This most recent quarter in the U.S. saw strong EPS revisions upward for 2021 and 2022 with 2021 up 17 per cent to US$200 and 2022 up 14 per cent to 210. The S&P over the period is up six per cent so we have seen multiples compress. 

The markets will remain volatile over the next quarter or so, as supply chains sort themselves out and the debates above continue. The new economy stocks of the market will continue to gain share of GPD and their higher profitability will continue to make them attractive investments for much of the next decade. The consumer is in fantastic shape, they just need a reason to get off the couch. As government support programs lapse, it will be back to work.     

We believe the inflationary pressures are transitory in nature and this will lead to inflation normalizing as we move to 2022. This will be supportive for the equity markets and we continue to see attractive returns through our stock picking process. 

TOP PICKS:

Dollar Tree (DLTR NASD)

Dollar Tree has over 14,000 stores and two ‘dollar store’ brands, Dollar Tree and Family Dollar. New management has a multi-pronged strategy of remodelling family dollar stores, introducing multi-price formats at Dollar Tree and new combo stores. If successful, this three arrowed strategy gives the stock plenty of upside. 

Comcast (CMCSA NASD)

This media behemoth has assets that include, Xfinity, NBC Universal, SKY and Comcast Cable. We expect recent and maturing investments to start driving EBITDA growth. This includes mobile achieving breakeven and the Peacock (NBC ‘over the top’ streaming) reaching 50m subscribers and becoming less of a drag on EBITDA.  

Mastercard (MA NYSE) 

Your second favorite credit card is our top pick. Mastercard is ready to benefit from the return of cross boarder travel and they continue to benefit from accelerated cash to card conversion, B2B penetration and new value added services. Mastercard is a secular driven story with strong revenue growth and opportunities for margin expansion.  

PAST PICKS: March 24, 2021

Airbus (AIR EPA)

• Then: $95.97
• Now: $113.24
• Return: 18%
• Total Return: 18%

Uber Technologies (UBER NASD)

• Then: $52.57
• Now: $48.50
• Return: -8%
• Total Return: -8%

BMW (BMW EPA)

• Then: $82.59
• Now: $92.60
• Return: 12%
• Total Return: 15%

Total Return Average: 8%

Website: https://murraywealthgroup.com/