Chris Blumas, Portfolio Manager, Raymond James Investment Counsel
Focus: North American large caps
Top Picks: KKR, Abbott Labs, Constellation Software
MARKET OUTLOOK:
There is no shortage of uncertainty in financial markets these days. The war in Iran has caused a spike in energy prices that has reverberated around the world. Fears about artificial intelligence (AI) and its long-term impacts are also top of mind for investors. Given these uncertainties, I thought it would be useful to take a step back and focus on investor behaviour during periods of turmoil.
Warren Buffett officially retired at the CEO of Berkshire Hathaway at the end of last year. After 60 years of leading the company, a quick look in the rearview mirror can lead to some powerful insights. While the compound annual growth rate in Berkshire’s share price over these 60 years was roughly double the S&P 500, the overall absolute gain in dollars was more than one hundred times greater. This is a monumental difference that should be understood by investors on their quest for financial independence.
Despite being well known to the investment community for a very long time, the shares of Berkshire Hathaway have declined by 50 per cent or more, three times during Warren Buffett’s tenure. Overall, for an investor that was lucky enough to own Berkshire shares for this entire 60-year period, for around five per cent of this holding period they would have suffered a significant quotational loss. Overall, if investors look to the market to validate their portfolio, there are periods of time when they could be misled by the short-term gyrations in stock prices.
Over the last year, there are some exceptional companies that have seen their share prices decline significantly as a “guilty until proven innocent” mindset has gripped the markets and created some unique opportunities for long-term investors. While it’s important to understand the fears in the markets, it is also important to recognize the opportunities and position yourself to benefit from the powerful long-term impacts of compounding.
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TOP PICKS:
KKR (KKR NYSE)
Most recent purchase at US$90.52 on March 18, 2026
KKR is an alternative asset manager with a unique business model and a global presence. The company earns a variety of fees (management, transaction, monitoring, and performance) from managing third party capital. KKR has almost $750 billion in assets under management (AUM) and around half of this AUM is perpetual in nature.
Overall, KKR’s business is scaling very well, and the company is expected to continue raising large amounts of capital over the medium term as institutional investors continue to shift more of their assets into higher yielding asset classes with less apparent volatility.
Over the last six months, KKR’s share price is down by around 25 per cent as concerns about private credit have negatively impacted the entire industry. While KKR’s sponsored entity, KKR FS Income Trust, only meet around 80 per cent of its recent redemption requests, this is well within its contract rights and redemption requests for the fund, which were around 6.5 per cent of assets under management, are among the lowest in the industry.
The shares currently trade at around 14 times forward estimates of adjusted net income per share and have a dividend yield of around one per cent.
Abbott Labs (ABT NYSE)
Most recent purchase at US$110.36 on Feb. 6, 2026
Abbott is a medical equipment company with a strong international presence. The company’s two main profit centers are its medical devices business and diagnostic testing business. Last year, these businesses accounted for more than two-thirds of Abbott’s operating profit.
Abbott recently completed the acquisition of Exact Sciences, a leader in cancer screening, precision oncology, and genetic testing. While this acquisition enhances Abbott’s growth profile and strengthens its diagnostics platform, the transaction will be dilutive to adjusted earnings until 2028.
In addition, Abbott’s nutrition business has been working through some challenges. The loss of a large contract and higher manufacturing costs have hampered sales growth and compressed profit margins. However, there are early indications that this business is turning the corner and has started to regain market share.
Over the last year, Abbott’s share price is down by around 20 per cent as these issues and negative market sentiment have negatively impacted the company’s valuation. The shares currently trade around 18 times forward earnings (versus a five-year average of around 23 times) and have a trailing free cash flow yield of around 4.2 per cent.
Constellation Software (CSU TSX)
Most recent purchase at US$2418.04 on April 8, 2026
Constellation Software is an enterprise software consolidator with a global presence. Last year, the company generated almost 90 per cent of its revenues outside of Canada. Constellation has six operating subsidiaries that function as independent businesses with a common capital allocation framework. This decentralized operating model has allowed the company to complete more than a thousand acquisitions since its IPO in 2006. Constellation typically targets smaller companies that are too small to attract the interest of other IT conglomerates or private equity firms.
Over the last year, the shares of Constellation Software are down by around 50 per cent as fears around AI have negatively impacted the company. The company has historically focused on smaller acquisitions in industries that are more mature and slower to adapt to change. The size and diversification associated with Constellation’s product markets is a significant defence because many of its customers are too small and may have no financial incentive to consider an alternative product if one exists. In addition, many of the company’s customers lack the scale and/or financial resources to build and maintain software internally and depend on Constellation to enhance the products they use.
On the positive side, it is now more cost effective for Constellation to further customize its software and adopt AI features for customers and prevent them from transitioning to more advanced systems.
Over the years, the company has expanded its operating infrastructure so that it can continue targeting smaller acquisitions and continue compounding cash flows at an above average rate. Over the last five years, the compound annual growth rate for cash flow per share is 18 per cent. The shares currently trade around 13 times trailing cash flow and have a trailing free cash flow yield of around 4.6 per cent.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| KKR NYSE | Y | N | Y |
| ABT NYSE | N | N | Y |
| CSU TSX | Y | Y | Y |
PAST PICKS: JUNE 19, 2025
Descartes Systems (DSG TSX)
Then: $137.00
Now: $92.88
Return: -32%
Total Return: -32%
Alphabet (GOOGL NASD)
Then: US$173.32
Now: US$327.15
Return: 89%
Total Return: 89%
Brookfield Infrastructure Partners (BIP-UN TSX)
Then: $45.23
Now: $50.94
Return: 13%
Total Return: 17%
Total Return Average: 25%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| DSG TSX | N | N | Y |
| GOOGL NASD | Y | Y | Y |
| BIP-U TSX | N | N | Y |
