Mike Vinokur, Portfolio Manager & Senior Wealth Advisor, Propellus Wealth Partners, iA Private Wealth
Focus: North American large caps
Top picks: Russel Metals, Micron, Fiserv
MARKET OUTLOOK:
Someone forgot to tell the markets that job growth is slowing along with GDP, because markets are partying like its 1999. Margin debt in the U.S. has hit its highest levels since 2021 at over US$1 trillion. The level is up 26 per cent year-over-year and close to reaching the previous peak. We believe that markets may have gotten a little ahead of themselves in the very short term but would not be surprised to see a strong finish to end the year and perhaps a continuation of the trend higher into Q1 2026.
Our reason is primarily fiscal dominance. In Canada, the U.S. and Europe, government spending on defence and infrastructure, along with U.S. corporate spending with efforts to bring back domestic production is giving a substantial boost to demand. Everything from data centres, power generation and semiconductor plants to energy infrastructure and beyond all have a few things in common. The entities building them are typically well funded, not extremely price sensitive and employ skilled and semi-skilled labour – AKA: good paying jobs.
The “K” shaped economy is alive and well and the middle and upper class is spending, saving and in the case of margin borrowing, investing. So, we do not want to stand against the tide, but we do want to make sure we have a margin of safety. Given the much broader participation of equities (the other 493), we are cautiously optimistic in our positioning and believe that further upside may be warranted even if we may endure some further volatility in the short term.
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TOP PICKS:
Russel Metals (RUS TSX)
The company operates in three main segments: steel distribution, metal service centres and energy service centres. The business should benefit from the massive amount of infrastructure spend going on both sides of the border. The latest quarterly earnings performance was great and a testament to excellent management. Over time, RUS has increased it footprint in the U.S. and Canada by making timely acquisitions and integrating them well. Their current balance sheet gives them flexibility to pursue accretive acquisitions and organic growth while continuing to pay a growing dividend with a current yield of four per cent. They are also actively repurchasing their stock.
Micron (MU NASD)
Micron is a semiconductor company specializing in memory and storage solutions. We were impressed by the mid-quarter update provided by the company in which earnings guidance for the upcoming quarter increased by more than 10 per cent. Based on the street’s estimates, MU trades for less than 10X next year’s earnings, a much smaller multiple than some of its peers. AI driven demand is boosting DRAM/NAND markets in which MU is a leader and has significant market share. We believe the stock can have a significant re-rating higher based on the coming growth in demand.
Fiserv (FI NYSE)
A leader in payments and financial technology. The company excels in areas including account processing and digital banking solutions, card issuer processing and network services. The stock is down approximately 40 per cent from its peak in 2025 and as value investors, we believe the market has over-reacted to the downside. The company produces robust free cash and should be able to grow earnings by 10 -15 per cent per year. The stock currently trades at less than 12X next year’s estimated earnings. The company spent the last quarter aggressively expanding its capital return to shareholders by accelerating its stock buy back program. We would not be surprised to see this pace of buybacks continuing given the huge disconnect between our estimate of FMV and current price.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| RUS TSX | N | Y | Y |
| MU NASD | Y | N | Y |
| FI NYSE | Y | N | Y |
PAST PICKS: October 29, 2024
CIGNA (CI NYSE)
Then: US$308.23
Now: US$298.13
Return: -3%
Total Return: -2%
Rogers Communication (RCI/B TSX)
Then: $50.52
Now: $49.20
Return: -3%
Total Return: 0.4%
Corebridge Financial (CRBG NYSE)
Then: US$32.00
Now: US$35.06
Return: 10%
Total Return: 12%
Total Return Average: 3%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CI NYSE | N | N | N |
| RCI/B TSX | N | Y | Y |
| CRBG NYSE | N | Y | Y |
