Bruce Murray’s Top Picks for August 7, 2025

Bruce Murray, CEO and CIO, Murray Wealth Group

Focus: Global equities

Top picks: Amazon.com, Hammond Power, Tourmaline Oil

MARKET OUTLOOK:

Global equity markets are being fuelled by the promise of artificial intelligence (AI). BP, for example, announced a major discovery in Brazil recently and in an interview, the EVP of technology mentioned that AI is helping with exploration efficiency. AI will flow through most businesses and institutions, creating a path forward for productivity to flow through by creating incredible wealth across most of society.

The industrial economy has also shaken off most of lagging issues from the pandemic where the loss of skilled workers took time to readjust. Parts shortages remain to this day in the aerospace industry. So, we are bullish on the outlook for the next several years. We are bullish on Canada as resource activity is enabling us to move past the shock of the tariffs which have hit sentiment harder than reality as 90 per cent of Canada/U.S. trade is under USMCA although some important industries like steel and aluminum have been set back by tariffs. Hopefully this will be sorted out relatively soon.

We also believe that many income stocks offer very attractive returns especially if the Bank of Canada cuts rates later this year as we believe.

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TOP PICKS:

Amazon.com (AMZN NASD)

Amazon is our pick among the Mag 7. The stock has lagged the last while as they were not at the top of Nvidia’s customer list creating negative rumors that they are not keeping up with the leaders in AI. However, we believe the 31 per cent operating income growth reported in the last quarter indicates things are going well financially.

Amazon’s retail businesses are growing above industry rates with sales growing over 10 per cent per annum (p.a.) with Amazon Web Services (AWS) growing high mid teens and advertising growing north of 20 per cent p.a. AWS is the biggest outsourced provider of digital storage and web services and will continue to benefit as AI is implemented into its customer base. There is a good chance Amazon sales hit US$1 trillion by the end of the decade.

Due to the rapid growth and massive capital expenditures required to grow in their businesses, earnings before interest, taxes, depreciation, and amortization (EBITDA) growth will be the key measure the investment community will judge Amazon by.

With Amazon’s non-retail businesses growing faster and having much higher margins, Amazon will become more profitable per dollar of sales over time. Higher profitability usually leads to higher multiples for most stocks. Currently, Enterprise Value to EBITDA (EV/EBITDA) is about 14.5 times and is forecast to grow high teens over the next fives years. We expect the stock price to grow similarly.

Hammond Power (HPS/A TSX)

Hammond Power is a leading manufacturer of dry-type transformers in North America, with a strong reputation built over more than a century. Dry transformers are used to step down (reducing voltage) or filter (clean) induction. HPS offers a wide array of standard and custom transformers, catering to various industries including oil and gas, mining, steel, waste and water treatment, and renewable energy.

With the expectations for artificial intelligence growing and more transportation expected to be EV powered, the need for substantially more electrical power is intuitively obvious. Power component makers like Eaton and GE are selling at lofty multiples due to there expected growth.

Hammond is one of the few Canadian public companies that give investors access to this massive spend. HPS sells about 20 times trailing earnings. However, this number included the expenses of a new plant that has recently come on stream and some recent cost increases. I believe this is a stock that could approach $200 a share as earning move through $10 per share sometime well before the end of the decade.

Tourmaline Oil (TOU TSX)

Founded in 2008 by Mike Rose, one of Canada’s most astute energy entrepreneurs, it has rapidly grown into Canada’s largest producer of natural gas and a leading owner of midstream gas processing facilities as well as a growing producer of natural gas liquids (NGLs).

The company is in a prime position to benefit from growing demand for both resources. In the next decade, much of the surge in power needed to support the rapid expansion of electrical infrastructure for artificial intelligence will be provided by natural gas fired power plants.

On top of this, both Canada and the U.S. are building new LNG export facilities which will increase demand significantly. Tourmaline, as the lowest cost producer with the largest reserves and the best net emissions, will be a long-term beneficiary of the growth in demand for natural gas. TOU plans to continuously grow its production by about 10 per cent from its 2024 level by the end of 2026 to fill the expected rising demand and another 20 per cent plus by 2030.

With significant gas reserves in North America being the low-cost producer as Tourmaline is, it allows them to fill the growing demand. TOU has a dividend policy whereby extra dividends are paid when selling prices rise. Currently the dividend is running at $0.50 per quarter, with an extra dividend of $0.35. With current prices towards the low end, this rate of $3.40 is likely sustainable, providing a decent 5.5 per cent yield. We think the improving outlook could lead to a potential move in the stock to the mid $70s range for additional decent capital gain.

PAST PICKS: AUGUST 15, 2024

Power Corp (POW TSX)

Then: $38.70

Now: $56.95

Return: 47%

Total Return: 53%

Bayerische Motoren Werke (BMWYY NASD)

Then: US$29.10

Now: US$33.51

Return: 15%

Total Return: 21%

Linamar (LNR TSX)

Then: $62.09

Now: $68.50

Return: 10%

Total Return: 12%

Total Return Average: 29%