Bruce Murray, CEO and CIO, Murray Wealth Group
FOCUS: Global equities
Top Picks: Meta, Eli Lilly, Linamar
MARKET OUTLOOK:
I believe, the worst is behind us and investors should start to reinvest in equities cautiously and gradually as fear subsides. Many stocks are cheap, as we will point out when we review some picks and take some calls, the correction in the so called “magnificent seven” stocks have been substantial. Additionally, everything we study shows artificial intelligence (AI) is going to drive massive change and prosperity over the coming decade.
There will undoubtedly be further episodes of volatility as we get through the rest of U.S. President Donald Trump’s agenda, but he continues to back down when confronted by reality, or is it just the art of the deal? Either way more reality is certainly coming. There are concerns of recession in the U.S. but fundamentals for it are not there for it and Trump’s positive announcements can change economist’s morning predictions in the afternoon. We believe that the volatility will slope downwards the next few months as Trump makes deals and his pronouncements lose affect. I believe cautious buying of stocks in strong and growing companies will be rewarded.
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TOP PICKS:
Meta (META NASD)
Meta is a $160 billion advertising machine selling at a price-earnings ratio of just over 20 times earnings per share (EPS), with a mid -teens growth rate through the rest of this decade. The stock has dropped over $200 a share or 30 per cent in just the last two months on concerns of anti-trust action, rising capex spend on artificial intelligence and fears that a Trump induced recession could damage its advertising business. You must hand it to Zuckerberg, he has cut costs and made very favourable acquisitions like Instagram and WhatsApp. Facebook and Instagram saw increases in time spent on them per average user of over five per cent last year. WhatsApp is the communication freeway of the whole developing world and is being monetized by enabling it for billions of users directed low cost advertisements. It is also entering the physical world of human interaction with robotics possibly having robots in the home to do our bidding. Its wearables which enable people to be hands free in communications, photography and internet access have enthusiastic users. The average Wall Street target price is still over $725 per share share.
Eli Lilly (LLY NYSE)
Buying the highest-class drug stock in a depressed market. Most investors know Lilly for its weight loss drug. Zepbound which came to the market later but has better statistical results than Ozempic. But LLY also has promising drugs in the pipeline for Alzheimer’s, some cancers (gastric cancer, non-small cell lung cancer, advanced metastatic breast cancer and certain types of blood cancers) and immunology (genetically inherited heart disease and some forms of severe eczema). Let’s hope they all work and reduce the consequences of these horrible diseases. Lilly’s sales were $45 billion in 2024 and are forecast to double in the next three years while net income could triple, and EPS grow three to four fold growing towards $35-40 per share in 2027. This would have it selling at plus or minus 20 times EPS which is a favorable price for a high-class growth company with patent protection on its products . Lilly’s promise led to a stock price of over $950 late last summer, it’s now down 20 per cent with the market correction and likely a favorable time to carefully accumulate the stock. The average street target is over $1,000 and some like Morgan Stanley are over $1,100.
Linamar (LNR TSX)
A Canadian world class manufacturing company supplying machined and engineered automotive components as well as a range of specialty farm machinery designed for precision planting, fertilizing, tillage and harvesting as well as access equipment for industrial and construction markets. The company’s leading products have allowed it to continuously gain market share. The stock has languished over the past decade as investors feared the automotive business would suffer under the pressure of the move to electrification and has plunged to levels not seen since the selloff associated with the COVID-19 in 2020. However, the company’s revenue and earnings have doubled over this period as the company became a supplier of V components and expanded through acquisition into specialty agricultural equipment. Linamar is currently running EPS in the $10-12 range and selling below five times earnings. The company’s products are all clear of tariffs as they all qualify under the United States-Mexico-Canada Agreement (USMCA). The company has reduced its share count by about six per cent through buybacks the last three years. We believe Linamar could sell through its 2021 high of $88 when we enter the next industrial cycle likely to come when the market clears the economic and phycological ramifications of trumps Tariffs. This is a classic value situation with little downside and potential to reach its book value per share which is about $90 per share.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| META NASD | Y | Y | Y |
| LLY NYSE | Y | Y | Y |
| LNR TSX | Y | Y | Y |
PAST PICKS: March 19, 2024
Alphabet (GOOG NASD)
- Then: US$147.92
- Now: US$152.43
- Return: 3%
- Total Return: 4%
AstraZeneca (AZN NASD)
- Then: US$65.86
- Now: US$67.54
- Return: 3%
- Total Return: 5%
Manulife (MFC TSX)
- Then: $32.83
- Now: $40.03
- Return: 22%
- Total Return: 27%
Total Return Average: 12%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOG NASD | Y | Y | Y |
| AZN NASD | Y | Y | Y |
| MFC TSX | N | N | N |
