Brian Madden’s Top Picks for August 22, 2025

Brian Madden, Chief Investment Officer, First Avenue Investment Counsel

Focus: North American Equities

Top picks: Taiwan Semiconductor, Alamos Gold, TFI International

MARKET OUTLOOK:

Late August often features light trading volumes, light news flow and limited institutional participation with many investment professionals enjoying vacation time before Labour Day. As a result, it can be risky to read too much into trading patterns at this time of the year.

We are intrigued, but as yet unconvinced that a lasting, thematic change in market leadership is underway despite some early stirrings of this over the last few weeks. For instance, growth stocks in both Canada and the U.S. are facing selling pressure, while value stocks and dividend payers are finding renewed buying interest. Even the Magnificent seven tech and communications sector leaders are taking a slight breather after longstanding leadership that took their combined weight in the S&P 500 above 34 per cent earlier this month.

Our team is style agnostic, with both a dividend growth mandate and a momentum mandate, and as such have been finding opportunities in both groups of stocks, with a recent new investment in a large cap technology leader and additions to existing positions in cyclicals and reliable dividend growers. We do acknowledge that the sentiment pendulum has swung wildly from fear to complacency since April, with a commensurate massive rally in leading equity indices, but we are encouraged by the early and tentative signs of market leadership broadening out, and note that while although aggregate market valuations are historically high, there are many seemingly overlooked stocks with compelling growth prospects trading at undemanding valuations. We intend to find and own them.

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TOP PICKS:

Taiwan Semiconductor (TSM NYSE)

TSMC is by far the largest foundry/wafer manufacturer in the world, and one of three companies (along with Samsung and Intel) that is capable of producing sub-seven nanometer semiconductors. Our positive view on TSMC is based on its sustainable competitive advantage driven by its first-mover technological leadership, outstanding manufacturing expertise that enhances yields and ensures reliable delivery, significant economies of scale that reduce unit costs to increase margins, as well as strong collaborative partnerships with many of the largest companies globally.

We expect strong growth for the foundry industry over the next several years driven by robust demand for high performance computing chips used in AI training and inference. We expect TSMC will capitalize on this secular growth as the industry leader, generating compound earnings growth of over 20 per cent over the next three years, with a similar pace of dividend growth given the company’s target 35 per cent payout ratio. TSMC trades at an attractive multiple of 17.5 times expected earnings, in line with its five-year historical average, but below its industry peer group average of 22 times, and as such, we see compelling value and growth prospects in the shares

Alamos Gold (AGI TSX)

Alamos is a US$15 billion gold miner with two operating mine districts in Canada and one in Mexico. The $700m acquisition of Argonaut Gold last year affords the company a compelling opportunity to realize $375m of life-of mine processing and general/admin costs as well as $140m of capital cost synergies by centrally milling ore from the adjacent Island Gold mine alongside ore from the acquired Magino mine in a single mill.

The company has good visibility towards its goal of producing 1mm ounces of gold per year via existing mines by the end of the decade, representing a compound growth rate in production of over 11 per cent - a pace of growth few mid-size or large miners can match. Alamos’ investment appeal, on a standalone basis, or potentially to a growth-starved strategic acquiror is further enhanced by the very low political risk jurisdictions that host its’ mines

TFI International (TFII TSX)

TFI International is a truckload, less-than-truckload and asset-light logistics company with a top-flight management team and a lean operating philosophy that maximizes asset turnover by selling the “right” freight that matches their network and assets and keeps the trucks moving.

Apart from being an efficient and scale sized operator, TFI also has a long history of consolidating the fragmented trucking industry in Canada and the U.S. Three years of ongoing freight recession and a string of three consecutive quarters of disappointing results beginning late last year brought about a 53 per cent drawdown in the stock price from December through April…it’s 4th largest such drawdown in 35 years.

Since the turn of the century, the shares have returned 15,700 per cent - clear evidence that management are very capable – problems, when they occur, get addressed and resolved, and as such pullbacks, especially big ones are to be bought aggressively.

Since their release of strong second quarter results, our confidence has increased that a major inflection point in the company’s profitability is close at hand. We expect the company’s earnings to grow at a compound rate of 24 times over the coming three years, at a time when the shares trades at 17 times expected earnings - 25 per cent discounted versus North American trucking peers.

PAST PICKS: AUGUST 22, 2024

Home Depot (HD NYSE)

Then: US$365.36

Now: US$412.17

Return: 13%

Total Return: 15%

Uber (UBER NYSE)

Then: US$73.31

Now: US$96.08

Return: 31%

Total Return: 31%

Agnico Eagle (AEM TSX)

Then: $110.88

Now: $187.46

Return: 69%

Total Return: 71%

Total Return Average: 39%