David Burrows, president and chief investment strategist, Barometer Capital Management
FOCUS: North American large caps
Top Picks: BWX Technologies, Teck Resources, Uber Technologies
MARKET OUTLOOK:
Barometer has been positive on U.S., Canadian and global equities throughout 2024. While we are in a seasonally tricky period until mid-October, equity markets have been broadening since early June with over 70 per cent of SPX constituents ahead of the index on the year. This not only points to a healthy environment for intermediate returns but suggests that equities are likely to be more resilient to bad news or uneven economic data in the near term.
Global liquidity, (rate cuts) and easier financial conditions are supportive of asset prices while earnings estimates for 2025 and credit conditions suggest a soft landing in the general economy. In addition to positive conditions in a broad range of sectors and themes in U.S. markets, MSCI all world ex. U.S. and Canada have begun to outperform for the first time in a decade. This opens an even broader range of investment and diversification opportunities for investors positioning for the next economic cycle.
From a sector perspective, financials, industrials, materials and dividend growth-oriented securities are leading with solid support from higher dividend-paying groups like pipes and utilities as rates have stabilized. Barometer has been overweight in these groups through the year and would continue to add.
Barometer has also added global exposure at the beginning of 2024 including Japan, India, Latin America and recently China.
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TOP PICKS:
BWX Technologies (BWXT NYSE)
In a world that needs to expand the supply of baseload power, Nuclear is the most likely source. BWX has been operating and supporting small nuclear reactors for the U.S. Navy since 1958 and has developed safe, reliable technology that can extend to commercial markets. As one of the most important suppliers to Ontario Power Generation, it has proven to be a candidate for use as commercial deployments accelerate while being supported by long-term government contracts in their core business.
Teck Resources (TECK.B TSX)
The world is short new sources of supply of copper needed for the defence industry, data centers and EVs. Teck.B has the newest large-scale copper mine in the world and has now been ramping up operations for over a year. The company is likely to derive a rising stream of cashflow as production ramps and copper prices are likely to be firm through the next business cycle. Given the beginning of a rate-cutting cycle, the sector is likely to have a tailwind as materials tend to perform well in looser financial conditions.
Uber Technologies (UBER NYSE)
For investors looking for secular growth, UBER has been profitable and is expected to ramp earnings and cash flow significantly over the next two years. In the long term, autonomous vehicles and alternate delivery solutions are likely to be significant drivers of efficiencies.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| BWXT NYSE | Y | Y | Y |
| TECK.B TSX | Y | Y | Y |
| UBER NYSE | Y | Y | Y |
PAST PICKS: FEBRUARY 27, 2023
JPMorgan Chase (JPM NYSE)
- Then: US$142.16
- Now: US$208.11
- Return:46%
- Total Return: 52%
Stantec (STN TSX)
- Then: $79.40
- Now: $108.81
- Return:37%
- Total Return: 39%
ATS Corp. (ATS TSX)
- Then: $54.92
- Now: $39.66
- Return:-28%
- Total Return: -28%
Total Return Average: 21%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| JPM NYSE | Y | Y | Y |
| STN TSX | Y | Y | Y |
| ATS TSX | N | N | N |