Gordon Reid, president and CEO, Goodreid Investment Counsel
FOCUS: U.S. equities
Top Picks: Alphabet, Meta, Visa
MARKET OUTLOOK:
Markets are off to a good start in the fourth quarter, led by earnings strength in financials. Earnings will have to be strong across the board for the market to move meaningfully higher, given the already stretched valuations. It’s another life lesson demonstrated through market action; “everything has a cost.” The cost of back-to-back outstanding performance years in 2023 and 2024 is that valuations become more expensive, even though earnings growth has been solid. Probably the most constructive wish is for the pace of the market to moderate to allow time and future earnings to cool the historically high valuations. However, rarely do we get what we wish for; momentum markets almost always overshoot, so higher markets are likely. All that said, stock pickers know that it’s a market of stocks, not a stock market, so careful selection can yield undervalued opportunities.
Falling rates are generally constructive for the small cap space and valuations there are much more reasonable. In addition, the set up for the aforementioned financials is a good one, so Goodreid is overweight there. Finally, the power of mega cap technology can not be denied and unlike the lead up to Y2K, valuations in that space versus growth rates look compelling.
- Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
- Listen to the Market Call podcast on iHeart, or wherever you get your podcasts
TOP PICKS:
Alphabet (GOOGL NASD)
Alphabet is in terrific shape as it gears up for the AI race, essentially a defence of its dominant position in search. AI expands the pie, so GOOG could (will) lose some market share but still be a winner. GOOG has many other cards to play, including its dominance in streaming through YouTube (2 billion viewers), and its self driving car technology, Waymo. At 21 times 2025 EPS (earnings per share) estimates GOOG is excellent value.
Meta Platforms (META NASD)
Meta has its game back, after a diversion into the Metaverse, a space that was a mystery to most investors. A leader in social media, META has its issues, but making money isn’t one of them. Any hiccups going forward are likely to involve regulatory issues or management missteps, but when your active daily users capture one in two people on earth, there’s a lot that can go right.
Visa (V NYSE)
This fintech juggernaut demonstrates a consistency that is enviable. At just over 25 times 2025 EPS estimates the premium to the market is narrow when you consider a mid teens percentage growth rate of earnings and a very high score for predictability of earnings. Growth is most robust in Latin America and Europe and lags in Asia, which is a prime opportunity for this payment network.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOGL NASD | Y | N | Y |
| META NASD | Y | N | Y |
| V NYSE | Y | N | Y |
PAST PICKS: OCTOBER 17, 2023
Booking Holdings (BKNG NASD)
- Then: US$ 2756.64
- Now: US$ 43.64
- Return:59%
- Total Return: 59%
Chubb (CB NYSE)
- Then: US$ 207.99
- Now: US$ 296.28
- Return:42%
- Total Return: 45%
Dana (DAN NYSE)
- Then: US$ 12.66
- Now: US$ 10.31
- Return:-18%
- Total Return: -15%
Total Return Average: 30%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BKNG NASD | Y | N | Y |
| CB NYSE | Y | N | Y |
| DAN NYSE | N | Y | N |