Martin Cobb’s Top Picks for May 22, 2026

Martin Cobb, Senior Vice-President, Equities, Lorne Steinberg Wealth Management

Focus: Global and North American equities

Top Picks: McDonald’s, Universal Music Group, Brookfield Corp

MARKET OUTLOOK:

How can we ignore interest rates today? A few years back, there was an often cited acronym of “TINA”, i.e. There Is No Alternative (to equities) given largely the paucity of yields on fixed interest. With 30-year U.S. treasuries now offering over five per cent, that does provide some ‘competition’ for equities.

In addition, higher, medium to longer-term interest rates do affect both corporate and household borrowing costs and therefore have the potential for a greater impact on the economy. In addition to the affordability ‘crisis’ prevailing today, accentuated obviously by the effects of the Middle East war, the pressures on consumers globally continue to be felt (wages had been outpacing inflation until recently but that seems to be going into reverse).

So, might the economy weaken from here? Perhaps, but the U.S. economy spends no more than five to 10 per cent of its time in recession. Moreover, the stock market is a discounting mechanism and is much better at telling you where the economy is heading than the other way around (consider 2000, the best year of U.S. gross domestic product growth this century outside the pandemic bounce back, versus 2009, the worst).

And earnings continue to grow at quite the clip, with first quarter marking the sixth quarter of double-digit annual earnings growth reported by the S&P 500 index, even if it wasn’t terribly broadly based.

My advice might be old fashioned and thus not very popular: make sure your portfolio is adequately diversified.

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TOP PICKS:

McDonald’s (MCD NYSE)

• Founded in 1940, McDonald’s today is the world’s largest restaurant chain with more than 40,000 outlets globally in over 100 countries (business split roughly half U.S. and half international).
• Depends obviously on your definition of fast food, but they are the commanding leader globally and even more so in their home market (and a staggering one in eight American adults have worked at some point at a McDonald’s restaurant).
• More of a landlord than a restauranteur, with well over 90 per cent of its outlets owned by franchisees and not affiliates, from which it extracts rent and a licensing fee.
• Thus, it enjoys 40 per cent plus operating margins and exceedingly high returns on capital.
• Anticipate mid single-digit revenues growth, not much change in margins and ongoing share buybacks combining to drive perhaps seven to eight per cent earnings per share growth.
• Will pay out at least half of that in dividends and spend about half as much in buybacks.
• Valuation today down to close to 20 times next 12 million earnings is attractive in both an absolute and historical context (at the low end of a typical 20 to 27 times range over the past 10 years).

Universal Music Group (UMG AS)

• Universal Music Group is the worldwide leader in music, both recorded and publishing, with more than 50 labels covering all genres, and home to some of the greatest artists of all time (we can debate those) as well as the vast majority of the biggest ones currently.
• Globally it’s an oligopoly and UMG is 50 per cent bigger than Sony and two times the size of Warner.
• Arguably as close to an annuity as you can get in equity land, with a capital-light cozy oligopoly of companies enjoying the fruits of the ongoing global consumer adoption of subscription and streaming services.
• Enjoys heavily negative working capital, i.e. they get paid well in advance of them subsequently paying out.
• On a standalone basis, anticipate annual sales growth somewhere in the upper single-digits and some further margin progression, resulting in an earnings per share compound annual growth rate of close to 10 per cent.
• But that’s all overshadowed by Bill Ackman and Pershing Square’s plans to acquire the business (or, more accurately, merge it with his special-purpose acquisition company) and redomicile it in the U.S.
• Not entirely clear how that will play out but evidence of the value on offer.

Brookfield Corp (BN TSX)

• A diversified global alternative asset management company, Brookfield Corp. is recognized around the world as the preeminent partner and financier of large and complex construction projects in its chosen fields of real estate, power generation, infrastructure, etc.
• It acts as the holding company for a collection of subsidiaries, the key ones of which are its 75 per cent owned New York Stock Exchange (NYSE) listed Brookfield Asset Management and now fully owned Oaktree.
• Their relative dominance in the alternative investment space, coupled with a global reach, diversified portfolio, and huge firepower allows them to capitalize on varying opportunities (like data centres or nuclear energy today and who knows what tomorrow)
• It’s a tricky one to evaluate given the sheer complexity of the thing and that the financials are all over the place from year to year.
• But one can anticipate a double-digit compounding in net asset value (NAV) over time.
• We picked it up initially when fears over commercial real estate were paramount and the shares traded at a very sizeable discount to any realistic measure of NAV
• Today, investors’ concerns have shifted to private equity and private credit (their largest asset category).
• And while the stock has bounced a little of late, it’s largely treaded water since the beginning of 2025 (against a very strong market backdrop) and is now back into attractive risk versus reward valuation territory.

PAST PICKS: MAY 27, 2025

Techtronic Industries (669 HK)

Then: HKD88.85

Now: HKD118.80

Return: 34%

Total Return: 37%

Alphabet (GOOGL NASD)

Then: US$172.90

Now: US$385.61

Return: 123%

Total Return: 123%

Canadian Natural Resources (CNQ TSX)

Then: $43.05

Now: $67.76

Return: 57%

Total Return: 63%

Total Return Average: 74%