Paul Harris, partner and portfolio manager, Harris Douglas Asset Management

FOCUS: North American and Global Stocks

MARKET OUTLOOK:

Equities are forward-looking and should move in advance of hard data releases such as GDP. However, even with the rebound in earnings expectations, the rally in equity markets has been substantial, however higher prices alone may not trigger a correction in equities. However, when combined with prospects for higher bond yields, either from sticky inflation pressures or central bank tapering, it could certainly amplify investor anxiety. Too much of a good thing can eventually come at a cost. A stronger economy and rising inflation prospects as well as an earnings recovery would make it difficult to justify negative real rates and the current positioning of many of the major central banks.

Even so, such an outcome does not necessarily imply an end to the economic recovery or to longer-term bull run, but It could mean that returns are more muted in the near term. One thing we do know is that great companies will persist. If you owned a mediocre business heading into this pandemic, it is unlikely that the company will be a better business after COVID-19. We continue to believe that technology, Healthcare and healthcare technology, Consumer staples and discretionary- Amazon Costco and Walmart will continue to do well.

 

TOP PICKS:

Paul Harris' Top Picks

Paul Harris, partner and portfolio manager, Harris Douglas Asset Management, discusses his top picks: Check Point Software, Facebook and CN Rail.

Check Point Software Technologies (CHKP NASD)

Check Point Software Technologies is an Israeli software company that trades in New York. Check point specialize in security, especially cyber security. The company trades at 18.8x earnings, has no debt and free cash flow growth. Cybersecurity is a growing area especially as we have become more digitized over the last year and cyber-attacks at the corporate and government have become more common.

Facebook (FB NASD)

Facebook has more than 3.0 billion users and still growing user base. The large amount of data collected from this user base is a unique and valuable asset for ad and content targeting. Facebook has may growth levers with WhatsApp and Instagram. The company has high margins with EBITDA margins in the mid 50 per cent, trades at 24 times earnings, and is projected to generate 25 billion in free cash this year.

Canadian National Railway (CNR TSX)

The rail industry has positive fundamentals that we expect will drive long-term growth in free cash flow: limited and rational competition, high barriers to entry, sustainable growth in demand. These fundamentals help drive rate increases and margin expansion which drive free cash flow growth. The stock trades at 20 times 2022 earnings and has a yield of 1.7 per cent.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CHKP NASD  Y    Y  Y 
 FB NASD Y   Y Y 
 CNR TSX Y    Y  Y 

 

PAST PICKS: June 26, 2020

Paul Harris' Past Picks

Paul Harris, partner and portfolio manager, Harris Douglas Asset Management, discusses his past picks: Stryker, Amadeus IT Group, Zoetis.

Zoetis (ZTS NYSE)

  • Then: $132.66
  • Now: $184.79
  • Return: 39%
  • Total Return: 40%

Stryker Corporation (SYK NYSE)

  • Then: $173.76
  • Now: $257.37
  • Return: 48%
  • Total Return: 50%

Amadeus IT Group SA (AMADY OTC) 

  • Then: $52.34
  • Now: $76.00
  • Return: 45%
  • Total Return: 45%

Total Return Average: 45%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ZTS NYSE  Y  Y  Y 
 SYK NYSE Y  Y  Y 
 AMADY OTC Y  Y  Y 

 

Website: www.harrisdouglas.com