Zach Curry, director and portfolio manager, Greenrock Capital Partners
FOCUS: North American large caps
Top Picks: Canadian Natural Resources, American Tower, Amazon
MARKET OUTLOOK:
Stock markets in Canada and the U.S. have had a couple of volatile months after strong performances since the start of 2024. It has been said that “markets climb a wall of worry” and the size and timing of interest rate cuts, producer and consumer inflation as well as unemployment data are just a few of the items on investors’ minds.
Our view at Greenrock is that inflation will continue to moderate towards central banks’ desired two per cent level and that interest rates will decline from the record high levels reached in March 2023 at a measured pace. While unemployment rates have risen from record lows, these rates still remain low historically, and economic growth continues to be positive even if it is slowing from higher levels. We believe the risk is to the downside for central banks if they lower interest rates too fast – inflation not coming down is more of a threat than unemployment rising – so they will continue to watch the data and take their time. We believe it would be easier to lower rates than raise them, so central banks will want to make sure they get it right.
The downward trend in interest rates should benefit the overall economy, businesses, and consumers over time. We believe investors should focus on high-quality, well-managed companies that can take advantage of their leading positions in their industries and adapt to changes in any economic environment while growing their earnings. Investments in these types of companies will reward shareholders over the longer term.
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TOP PICKS:
Canadian Natural Resources (CNQ TSX)
It is a senior Canadian oil and natural gas company that acquires, explores for, develops, produces, markets, and sells crude oil, natural gas as well as natural gas liquids (NGLs) primarily in the Western Canadian provinces. It has offshore operations in the United Kingdom sector of the North Sea, and Africa. CNQ has the largest undeveloped base in the Western Canadian Sedimentary Basin. CNQ is the largest independent producer of natural gas in Western Canada and the largest producer of heavy crude oil in Canada, with one of the lowest breakeven oil prices and best free cash flow profiles amongst its peers.
American Tower (AMT NYSE)
It is an American real estate investment trust and an owner and operator of wireless and broadcast communications infrastructure in several countries worldwide. The rollout of 5G (primarily in the U.S. and Europe) should result in continued ARPU growth and the need for additional services to fill in any coverage gaps. AMT recently closed the sale of its India tower business and is increasingly shifting investments from emerging to developed markets and data centres. Management remains focused on organic growth and reducing leverage in 2024.
Amazon.com (AMZN NASD)
It is the largest global internet retailer in the world in operating business segments spanning online retail and physical retail along with generating meaningful revenue from Prime subscription memberships, Cloud services and advertising. The company has nearly 1.5 million employees. The company also manufactures and sells electronic devices, including Kindle, Echo and other devices and develops and produces media content. AMZN provides computing, storage, database, analytics, machine learning, and other services through its Amazon Web Services (AWS) platform. AWS grew 19 per cent year-over-year in the last quarter, with advertising growing at 20 per cent year-over-year. AMZN’s artificial intelligence (AI) offerings could help AWS’ cloud growth continue well into the future.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CNQ TSX | Y | Y | Y |
| AMT NYSE | N | Y | Y |
| AMZN NASD | Y | Y | Y |
PAST PICKS: AUGUST 9, 2023
Tourmaline Oil (TOU TSX)
- Then: $70.45
- Now: $58.59
- Return: -17%
- Total Return: -10%
Constellation Software (CSU TSX)
- Then: $2725.41
- Now: $4292.21
- Return:57%
- Total Return: 58%
Bank of America (BAC NYSE)
- Then: US$30.86
- Now: US$39.49
- Return:28%
- Total Return: 33%
Total Return Average: 27%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TOU TSX | Y | Y | Y |
| CSE TSX | N | Y | Y |
| BAC NASD | Y | Y | Y |