Bruce Murray, CEO and CIO, Murray Wealth Group
FOCUS: North American growth stocks
MARKET OUTLOOK:
We remain very constructive on the outlook for 2024 as the possibility of a “Goldilocks” environment is real.
In 2024, we hope to see the final shake-off of the pandemic-related environment, with stronger industrial production leading to stronger earnings on higher volumes, which should in turn allow unit costs to stabilize or even drop. This should lead to an improving consumer sentiment as prices stabilize or even decline. Wage growth should also moderate, allowing central banks to reverse policy and lower interest rates, which in turn should lead to stronger investor confidence. Thus, a bullish environment as interest rates decline is favourable for a higher market price-earnings ratio.
TD’s veteran John Aikens has the S&P/TSX Composite Index currently selling at less than 14 times next year’s earnings and the S&P 500 Index at 19.6 times. It is much lower if the “magnificent seven” stocks are removed from the calculation.
Early cyclical stocks should do well and one of our top picks is in this group.
The dividend yield in our Income Growth Fund is still over 6.1 per cent and we see a strong possibility of a significant capital gain when administered interest rates are lowered.
In summary, 2024 could be a banner year for investors, with the possibility of large returns.
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TOP PICKS:
Amazon (AMZN NASD)
Amazon, led by its AWS division, is the leader in internet cloud services. We expect revenue growth to remain above 10 per cent per annum for the next five years but expect EPS growth much higher closer to 30 per cent as high-margin businesses like cloud and advertising grow. The consensus Street target of $179-4180 is over 27 per cent higher than the current stock price. Its major businesses are all growing well and many are gaining market share. The company has shown an incredible ability to move into new businesses like entertainment fueled by like Prime fueled by its online ability.
Pfizer (PFE.NYSE)
Pfizer is selling at its 10-year low and less than half of what it traded at its peak during the pandemic as COVID-19-related revenues collapsed. This is a world-class drug company with a large research pipeline of new products. Catalysts for a higher stock price include the potential from new products, cost cutting as the COVID-19-related structure is reduced and lower interest rates enhancing its 5.6 per ecnt yield.
Linamar (LNR TSX)
Linamar is an old favourite of mine, stock is cheap selling at about half the market multiple, yet revenues and earnings are forecast to grow 25 per cent over the next two years as this industrial continues to grow market share. Linamar is a quality producer of Industrial lifts (Skyjack), farm machinery and auto parts. The company continues to gain share in all three businesses due to its engineering skills. The company’s revenue suffered from auto customer shutdowns related to COVID-19 and the Ukraine war, as these have now largely dissipated and a huge backlog of new business wins, we expect a strong recovery. I believe the stock should be selling at 12 times EPS which would put it over $100.
PAST PICKS: October 14, 2022
Alphabet (GOOGL NASD)
- Then: US$96.56
- Now: US$136.65
- Return: 41%
- Total Return: 41%
Blackstone (BX NYSE)
- Then: US$84.12
- Now: US$122.66
- Return: 46%
- Total Return: 52%
Northwest Healthcare Properties REIT (NWH.UN TSX)
- Then: $10.14
- Now: $5.18
- Return: -49%
- Total Return: -43%
Total Return Average: 17%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOG NASD | Y | Y | Y |
| BX NYSE | Y | Y | Y |
| NWH.UN TSX | Y | Y | Y |