Bruce Murray, CEO and CIO, Murray Wealth Group
FOCUS: North American growth stocks
Top Picks: Power Corp of Canada, Bayerische Motoren Werke, Linamar Corp.
MARKET OUTLOOK:
We are pleased our Global Equity fund ranks in the first percentile of the RBC pooled fund survey with a compound return of 19.7 per cent for the four years ending June 30.
The recent market turbulence reminds me of the crash of 1987 or the 1994 selloff. Both were based upon the fear of fear itself, where extraneous events triggered leveraged traders to panic and deleverage quickly resulting in a selloff not justified by market fundamentals.
The first week of August was quite a whirlwind. To kick off the month, global markets had their worst three-day run since 2022. The Japanese market alone closed 12 per cent lower on Monday, Aug. 5 surprised by an unforeseen central bank rate hike. Panic appeared to be taking hold before the modest rebound that followed.
The culprits were a weak jobs market due to low government hiring sparking recessionary talk and concerns that the U.S. Federal Reserve is too far behind the curve on rate cuts, combined with a surprise Japanese interest rate hike that led to a panic unwinding of the yen carry trade. This resulted in a massive deleveraging including significant equity sales.
We still believe we are in a soft landing and that the Fed will join other central banks in lowering interest rates relieving the over-levered consumers. Corporate profits are strong and we at TMWG believe many stocks are extremely cheap and the continuous lowering of rates will lead to more than adequate market returns.
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Power Corp of Canada (POW TSX)
An underappreciated Canadian financial holding company with controlling interests in IGM Financial (IGM/TSX), Great West life (GWL/TSX) and GBL a European investment operation. The company sells at a significant discount to its underlying assets. GWL has been regarded as one of the best-run Canadian Lifeco’s for some time and IM has significantly modernized and improved its operations over the last decade. Its holding of GWL is worth more than its current share price and its total asset value exceeds $50. We like the stock for its six per cent yield which should grow six to eight per cent annually as well as its discount from net asset value and the leverage to lower interest rates. Analyst target prices range as high as $47.
Bayerische Motoren Werke (BMWYY NASD)
A high-end auto producer that has suffered from the economic conditions facing the industry since the pandemic, the Ukrainian invasion and the more recent economic issues in China. I like the stock for an early cyclical play as interest rates drop and the consumer recovers and starts to spend. Historically this has been the part of the cycle auto companies receive their best valuations. BMW is down 30 per cent since its late April high. BWM sells at five times earnings per share (EPS) with a dividend yield of over seven per cent and analysts see it recovering over the next 12-18 months.
Linamar Corp. (LNR TSX)
Another deeply discounted industrial company selling at six times this year’s EPS estimate of $10.25. EPS is forecast to rise to $10.80 in 2025 and $12.48 in 2026. An industrial company of this quality have historically sold into the low teens price-to-earnings (P/E) indicating the potential for a stock price of well over $100 in a more optimistic environment. This company is well-managed and forecasting mid teens growth for the next two years. I suspect another major share buyback will be announced if the stock stays depressed. The current book value is $91.07 per share.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| POW TSX | Y | Y | Y |
| BMWYY NASD | Y | Y | Y |
| LNR TSX | Y | Y | Y |
Thermo Fisher Scientific (TMO NYSE)
- Then: $538.27
- Now: $602.78
- Return:12%
- Total Return: 12%
Qualcomm (QCOM NASD)
- Then: $120.72
- Now: $172.45
- Return:43%
- Total Return: 46%
Major Drilling (MDI TSX)
- Then: $9.24
- Now: $9.52
- Return:3%
- Total Return: 3%
Total Return Average: 20%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TMO NYSE | Y | Y | Y |
| QCOM NASD | Y | Y | Y |
| MDI TSX | Y | Y | Y |
