Chris Thom’s Top Picks for Feb. 11, 2025

Chris Thom, CEO and portfolio manager, Moat Financial

FOCUS: North American large caps and options

Top Picks: Suncor, GM, Cleveland Cliffs

MARKET OUTLOOK:

We aren’t making a big call on the market overall. When we look at markets like the S&P 500 Index as an example, so much of it is concentrated into such a small number of companies that have been going up over the last few years. We like the Canadian energy sector, so many of these companies are undervalued and have very strong earnings. We also like some of the automakers which have been under pressure for a myriad of reasons but continue to make money and buy back shares. Many parts of the market that have strong earnings have been left behind in share performance because they are viewed as less exciting than technology names.

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TOP PICKS:

Suncor (SU TSX)

Suncor is a great company that trades at a shockingly low valuation. It is vertically integrated and has a piece of the process from exploration to production to refining all the way to pumping gas and selling you snacks. In the last three years it has repurchased an average of 65 million shares which is about five per cent of the outstanding each year. With a high likelihood of a new federal government that is more favourable to energy producers coinciding with Canadians in general wanting a bit more independence from the U.S. after all the tariff threats, companies like this should do very well.

General Motors (GM NYSE)

GM is another very profitable company. It made $10.60 in the last year and are expecting to make between $11-12 in the next 12 months. Our view is that this is an American company that employs many American auto workers, it manufactures the majority of its cars in the U.S. that are sold in the U.S. GM has all its U.S. manufacturing in Republican states, with a large amount coming from Michigan which was a key state for the election when they flipped from the Democrats. There is no doubt that U.S. President Trump wants to see more manufacturing come back to the U.S. and I think that will happen to some degree, but I don’t think it will come at a huge expense. GM is buying back its own stock at an amazing rate. The current share repurchase program has authorization to buy $6 billion in stock and it has said it will keep rolling that year after year.

Cleveland Cliffs (CLF NSYE)

Cleveland Cliffs is a steel producer with locations in Canada and the U.S. It is vertically integrated with a number of iron ore mines, coke-making facilities and steel mills. It acquired Stelco last year which is its Canadian steel producer with over 100 years of history on this side of the border. A lot of Cliff’s steel is used in automotive industry which we feel will remain strong. Steel is becoming a bit of a protected industry with huge tariffs on Chinese steel, the U.S. blocking the Nippon Steel acquisition of U.S. Steel, suggested tariffs by Canada on steel coming from America. Just a mess of uncertainty but we feel like it will be in a strong position to navigate through. Its big knock is it doesn’t have a lot of cash on hand, but they are projecting and analyst as suggesting that will be alleviated over the next year and this should boost the stock.