Ross Healy, Chairman, Strategic Analysis Corporation
Focus: North American large caps
Top Picks: Alamos Gold, Western Union, Algoma Steel
MARKET OUTLOOK:
The U.S. market, notably the S&P 500 and Nasdaq 100 (NDX), is historically very expensive, rising to the same levels as the year 2000, the last high-tech bubble. The The Nasdaq 100 is now rolling over under pressure from the AI stocks, which I view as a harbinger of a very large downside move. The explosion of AI server farms, like the fiber optic networks of 26 years ago, is expected to accrue losses in the short term, heavily impacting AI chip stocks, server farm companies, and even the utilities which are induced to over-expand to meet their power needs.
Regarding global events, I consider the war against Iran as a sideshow, but the U.S. risks getting into a Catch-22 situation, potentially leading to a repeat of Iraq. This conflict is anticipated to cause higher inflation rates, flat or higher interest rates, and further depress the quality of the U.S. balance sheet as the costs of the war mount.
The biggest risk to the U.S. is the stunning impact of the “One Big Beautiful Bill Act” on the U.S. deficit, which is bringing the country close to what we measure as sovereign insolvency. If this condition persists, it will deeply affect U.S. inflation and the value of the U.S. dollar.
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TOP PICKS:
Alamos Gold (AGI TSX)
In this environment, one has to hold some gold and/or gold stocks. Alamos is probably the best run gold company extant, with expanding high quality reserves, and a powerful outlook for expanding production, and no political risk.
Western Union (WU NYSE)
The shares are very cheap at five times its forward price-to-earnings (P/E) ratio and 10 per cent dividend yield which is well covered. There is strong upside potential close and its balance sheet has been growing rapidly. The return on equity is forecasted to be 43 per cent so investors should be getting richer just standing still.
Algoma Steel (ASTL TSX)
A speculative bet on my part that all this nonsense from U.S. President Donald Trump will come to an end. The shares are very cheap, selling at a 30 per cent discount to book (as we measure it) and with the Canada-United States-Mexico Agreement (CUSMA) coming up for renewal, I suspect some considerable pressures to resolve the auto, steel, and aluminum issues are being brought to bear. I would only carry a half-weight in my portfolio, however.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AGI TSX | Y | Y | Y |
| WU NYSE | Y | Y | Y |
| ASTL TSX | N | N | Y |
PAST PICKS:
Fortuna Mining (FVI TSX)
Then: $6.41
Now: $11.99
Return: 87%
Total Return: 87%
Power Corp (POW TSX)
Then: $50.44
Now: $63.06
Return: 25%
Total Return: 30%
Oceanagold (OGC TSX)
Then: $4.09
Now: $39.90
Return: 225%
Total Return: 227%
Total Return Average: 115%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| FVI TSX | Y | Y | Y |
| POW TSX | Y | Y | Y |
| OCG TSX | Y | Y | Y |
