Jamie Murray, portfolio manager and head of research, Murray Wealth Group
FOCUS: Global equities
Top Picks: Starbucks, Amazon, Kering
MARKET OUTLOOK:
Tariffs are front and center of investors mind. Underneath the data, we see more challenging employment data with housing supply on the rise. This could set up conditions for a market pullback but also lower inflation and interest rates. Over the medium term, we think the bull market will push higher in 2026 with declining interest rates and potential benefits from deregulation improving business and investment conditions. A healthier Europe and China should benefit companies with global exposure.
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TOP PICKS:
Starbucks (SBUX NASD)
Starbucks is undergoing a major transformation under CEO Brian Niccol, who is addressing operational inefficiencies and customer dissatisfaction to reignite growth. His strategy focuses on enhancing efficiency, optimizing digital systems, and refining the in-store experience. Early initiatives like digital menu board, pruning the menu and mobile order algorithms should help with throughput and improve sales growth. More qualitative initiatives such as the coffee condiment bar, baristas writing on cups, no upcharges for non-dairy alternatives and free refills for rewards members have the potential to improve customer sentiment. Starbucks thinks it can double its company operated store format in the U.S. and with headroom internationally, there is long term growth for Starbucks. We hold shares in our MWG Global Equity Growth Fund.
Amazon (AMZN NASD)
Amazon profit is inflecting positively in its retail unit with advertising and subscription services as well as third party fulfillment driving higher margins. The company continues to invest in faster delivery speeds and improve Prime services which consumer satisfaction. AWS continues to lead the cloud market and is still best in class in serving digital led businesses. We believe generative AI will drive strong cloud demand through 2030. The shares trade an undemanding valuation of 10 times EV/EBITDA on 2027 numbers, a level that can sustain while profit more than doubles. We hold shares in our MWG Global Equity Growth Fund.
Kering (PPRUY U.S.)
This is a deep value income play on the luxury market. The company’s sales have declined by 15 per cent the past two years on weakness in its Gucci brand and luxury market malaise. The opportunity lies initially on the margin side. EBITDA margins have declined from the mid-30 per cent range to the high-20s. We believe Kering can right-size its inventory and capital base to improve margins back into the 30 per cent range. On the sales front, we believe the market is bottoming. With Gucci, the departure of fashion director Sabato De Sarno is the right move as move towards a classic leather-forward style failed to resonate with consumers. We have seen this brand rise from the dead twice before. Longer term, growth in houses Yves St. Laurent and Bottega Vaneta as well as its eyewear and fragrances business should reduce its dependence on Gucci and create a more diversified business. Luxury is a high cash flow business when its working and Kering has 60 per cent upside in a normalized market. We hold shares in our MWG Income Growth Fund.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| SBUX NASD | Y | Y | Y |
| AMZN NASD | Y | Y | Y |
| PPRUY US | Y | Y | Y |
PAST PICKS: February 16, 2024
3i Group ADR (TGOPY OTCMKTS U.S.)
- Then: US$15.63
- Now: US$25.71
- Return: 64%
- Total Return: 68%
AstraZeneca (AZN NASD)
- Then: US$64.27
- Now: US$76.14
- Return: 18%
- Total Return: 23%
Manulife (MFC TSX)
- Then: $33.30
- Now: $43.28
- Return: 30%
- Total Return: 36%
Total Return Average: 42%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TGOPY US | Y | Y | Y |
| AZN NASD | Y | Y | Y |
| MFC TSX | N | N | N |
