Lyle Stein, president, Forvest Global Wealth Management FOCUS: North American and global stocks
Top Picks: Cameco, AltaGas, Generac
MARKET OUTLOOK:
In Canada (as well as Europe), markets continue to take comfort from the fact that inflation has fallen. We are less sanguine; our concern is that there is no magic stop sign at the two per cent inflation target level set by central banks. Looking around the world, that two per cent target could easily become zero per cent, or even negative. The only solution to a deflationary trend is money printing, but governments around the world seem to have hit the wall with respect to the market accepting all the paper they will issue. We are avoiding long bonds, preferring the two-to-three-year space.
We believe Canada is facing a rude awakening that we aren’t as globally competitive as we should be. The tariffs from U.S. President Donald Trump were a reset-button-push. While we own Canadian-listed stocks, our exposure to domestic-facing banks and utilities is virtually nil.
We expect 2025 to be a year of volatility as high market expectations reset. That said, it is hard to be overly bearish with U.S. economic activity strong and continued infusions of central bank liquidity. We maintain our high conviction in the natural gas theme and we especially like the high dividends the securities pay us. Our hard asset plays continue to provide an insurance-like role in this uncertain market environment. Diversification, with an emphasis on cash returns, defines our strategy as we begin 2005.
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TOP PICKS:
Cameco (CCO TSX)
A darling of the AI nuclear theme, recent weakness from the DeepSeek announcement is a buying opportunity.
Contract uranium prices ($79) are now above spot price ($71). Decline in spot from $100 level now baked into stock.
Westinghouse (49 per cent owned with Brookfield) is hidden gem. It is dominant player when it comes to reactor construction in the Western world with EBITDA growth six to 10 per cent over next five years.
Impeccable balance sheet, with debt falling rapidly and dividend growth signaled.
AltaGas (ALA TSX)
Unique collection of utility and mid-stream assets with unique opportunities on both oceans.
In Canada, operates LPG export business selling liquids to the Asian market.
In U.S., its Washington Gas Light gas distribution operation provides gas service to the data-center hub of Loudon Virginia. Gas is perfect back-up fuel. Stock not hit by the DeepSeek sell-off.
Significant financial flexibility with valuable infrastructure assets growing yield, health balance sheet.
Generac (GNRC NYSE)
Leader in North American back-up generator business. Incredible leverage to market growth resulting from customers realizing the grid is increasingly fragile. As outages grow, so do sales.
Simple math. Home standby market penetration is six per cent. One per cent increase is $3.5 billion in sales. GNRC total revenues are $4 billion. Ultimate “insurance policy” for home as a sanctuary.
GNRC brings energy tech to the home. Above market growth – below market multiple.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CCO | Y | Y | Y |
| ALA | Y | Y | Y |
| GNRC | Y | Y | Y |
PAST PICKS: May 15, 2019
Disney (DIS NYSE)
- Then: US$134.68
- Now: US$111.82
- Return: -17%
- Total Return: -14%
Suncor Energy (SU TSX)
- Then: $43.15
- Now: $55.54
- Return: 29%
- Total Return: 53%
Teck Resources (TECK/B TSX)
- Then: $28.35
- Now: $62.50
- Return: 120%
- Total Return: 134%
Total Return Average: 58%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| DIS | N | N | N |
| SU | N | N | N |
| TECK | Y | Y | Y |
