Martin Cobb’s Top Picks for June 26, 2026

Martin Cobb, Senior Vice-President, Equities, Lorne Steinberg Wealth Management

Focus: US and Canadian Equities

MARKET OUTLOOK:

I’ve been trying to grow grass lately. I increasingly see parallels between predicting stock markets and weather forecasting. Meteorologists really have no clue beyond a day or two, but they still forecast out two weeks. It’s the same with stock market year end targets. They’re useless but we simply can’t help ourselves. As JK Galbraith once said, “We have two classes of forecasters. Those who don’t know, and those who don’t know they don’t know.”

Investors seem to have shrugged off Middle East concerns. History shows that one should buy any stock market sell-off when the bullets start flying and bombs start falling. One notable exception was Russia’s second invasion of Ukraine in 2022. The difference then was that stocks were expensive to start with. Today, we have a U.S. equity risk premium of zero, historically a harbinger of lacklustre future returns.

What is one to do? I like to think of the “all-weather” portfolio. You are in a car race, and you have the choice between a Ferrari and a Subaru Impreza. If the surface is clear asphalt, the choice of the properly diversified “Subaru” portfolio would be left far behind by the racy “Ferrari” fund with concentrated investments in all the hot stocks. For a time, you feel both a bit stupid and rather envious, but the path inevitably will change. The road start to twist and turn and the ground become rocky. That is when you wished you chose the all-terrain vehicle or the all-weather portfolio.

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TOP PICKS:

Adobe (ADBE NASD)

If you ask what Adobe does, you’ll get a variety of answers. Folks like me would mention PDFs (i.e. Acrobat) whereas creatives like my wife and daughter would highlight Photoshop and design software. The point is it does a lot of things including data analytics and CRM software. It has transitioned successfully to a subscription-based model, now boasting close to 40 million Creative Cloud subscribers (adding about 10,000 new a day) and thus strong recurring revenue. It actively integrating generative AI capabilities into its platforms, leveraging ‘Firefly’ to enhance productivity for creators and businesses. It typically enjoyed annual revenue growth well north of 10 per cent and very heathy 35 to 40 per cent operating margins. Moreover, every dollar of sales leads to 40 cents of free cashflow. As a result, it typically commanded a premium multiple but recent fears over AI competition and lack of monetization have driven stock down to historically low valuation levels. Over the past 10 years, you would have paid on average 32x forward multiple of earnings. Despite the anticipated continued strong growth, today the stock trades on about half of that.

Diageo (DEO NYSE)

Tracing its roots back to 1886, Diageo is the world’s number one spirits producer with one fourth market share with leading brands including Smirnoff vodka, Johnnie Walker whisky and Guinness. Scotch is 25 per cent of sales, beer 16 per cent and vodka 12 per cent. Roughly half of profits come from North America, Europe 20 per cent, Asia Pacific 15 per cent, Latin America & Caribbean a little over 10 per cent, and Africa chipping in close to five per cent. It also owns 34 per cent of Moët Hennessy, LVMH’s wine and spirits business (mainly cognac and champagne) and a majority share in United Spirits of India. Spirits brands have remarkably longevity. Despite changing consumer tastes and fads that come and go, last I heard, 19 of the top 20 selling liquor brands of today were in existence 100 years ago. Industry sales growth may not be stellar but almost always positive and Diageo itself has unparalleled distribution. It is pursuing a premiumization strategy in developed markets (over half of such portfolio today versus just a third a decade ago) alongside more of a volume growth / market share strategy in emerging ones. It enjoyed on average low to mid single-digit organic sales growth and stable 30 per cent-ish operating margins. The COVID-19 pandemic saw elevated sales growth for a couple of years and now experiencing a bit of a hangover but nothing that alters the long-term attractions of this business and which is traded on something like 15x next 12 million earnings (historically commanded a multiple in the low 20s)

Visa (V NYSE)

Visa is a dominant global payments network, facilitating US$250 billion transactions annually across 200+ countries and with the capacity to do close to 10x that amount (or some 65,000 per second) and with the core processing of each taking just a few hundred milliseconds. Despite being classified as a financial, it’s nothing of the sort but is rather a very fancy telecoms network. they lend no money, take no credit risk and have no relationship really with either the merchant or the consumer (contrast that with American Express which does all of that. Rather, they earn a toll on volume, with some 27bps or around one tenth of the typical 2.5 per cent interchange fee finding its way to them. As a result, command operating margins regularly above 60 per cent and with FCF conversion thereof of over 90 per cent, almost unparalleled in the S&P 500. It continues to benefit from ongoing shift away from cash as well and expanding into B2B, cross-border remittances, and real-time payments, there is a long runway for growth, for example. Visa looks dirt cheap, but one can buy the stock today at around a 27x multiple of anticipated earnings for likely sustained low earnings per share compound annual growth rate (EPS CAGR).

PAST PICKS: Feb. 5 2025

Saputo (SAP TSX)

Then: $24.03

Now: $27.17

Return: 13%

Total Return: 15%

Smith & Nephew (SNN NYSE)

Then: US$26.12

Now: US$30.20

Return: 16%

Total Return: 17%

Electronic Arts (EA NASD)

Then: US$130.47

Now: US$157.51

Return: 21%

Total Return: 21%

Total Return Average: 18%