Brian Madden’s Top Picks for June 5, 2026

Brian Madden, Chief Investment Officer, First Avenue Investment Counsel

Focus: North American equities

Top Picks: Eli Lilly, Netflix, Constellation Software

MARKET OUTLOOK:

Investors are displaying what can only be described as “rabidly enthusiastic demand” for stocks in recent months, pushing market indices like the S&P 500 and the S&P TSX Composite to fresh all time highs. Price, at any moment – whether for a single stock or for an aggregate market index is the level that calibrates and balances supply of and demand for a stock, or group of stocks.

“Rabidly enthusiastic demand” will soon collide with “unprecedented supply”, with the SpaceX IPO, which targets a US$75 billion offering – far and away the largest IPO in history - just a week away. OpenAI is not far behind in the mega-mega IPO launch queue, and amidst all this, Alphabet – the world’s second largest company, is endeavouring to raise US$80 billion via secondary equity offerings. History shows that large, high profile initial public offerings garner a lot of attention (and, win, lose or draw, generate epic investment banking fees) but for a variety of reasons, oftentimes struggle to perform in their rookie season.

It remains to be seen whether this cycle’s crop of blockbuster IPOs will be well taken up by investors and season well in the early going. More importantly, investors everywhere – ourselves included – will be watching with interest to see whether their issuance prompts a “halo effect”, further fuelling investor demand for the thematically similar businesses that have driven much of U.S. equity markets’ returns in recent years, or whether they will compete with and thus siphon investment dollars away from these companies.

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TOP PICKS:

Eli Lilly (LLY NYSE)

Best known nowadays for its leading GLP-1 drugs (Zepbound and Mounjaro) Eli Lilly has a 150 year history of healthcare innovation as the first commercial marketer of insulin, penicillin, polio vaccines, Prozac and Cialis among other distinctions. Obesity and diabetes markets are enormous in the U.S., and the addressable market overseas multiplies the opportunity further still over their drugs’ remaining decade of patent protection. Beyond their leading weight loss/diabetes franchises, Eli Lilly markets oncology, immunology, neuroscience and other drugs. With one of the longest weighted average remaining patent lives among U.S. pharmaceuticals and furthermore with nearly 80 per cent of its marketed drugs being biologics, Lilly has materially less patent cliff exposure versus its peers. Free cash flow is prolific and growing rapidly, and this year is funding an mergers and acquisitions (M&A) bonanza (more than US$18 billions on 13 biotech deals) to infill the drug development pipeline alongside a robust internal research and development (R&D) program. Cash flow also funds a dividend that has grown at a 15 per cent compound rate the last five years. Upcoming commercial and policy catalysts include the early sales results from their recently launched Foundayo oral formulation GLP-1 drug and enhanced Medicare/Medicaid coverage for their initial GLP-1 molecules (i.e. capping co-pays at US$50 per month) which we expect will drive significant growth in volume demand.

Netflix (NFLX NASDAQ)

Netflix is the clear global leader in streaming high quality video content as evidenced by its 325 million and growing subscriber base. Despite its competitive landscape, Netflix commands strong pricing power while maintaining best-in-class customer retention. We expect Netflix will continue to grow revenues at a healthy double-digit pace led by aggressive investment into original content – including live events and podcasts, capitalizing on digital advertising via its new ad-supported plan and price hikes across its global footprint. With scale and strong expense management, we expect margins to expand materially and enable rapid free cash flow growth, the vast majority of which is earmarked for share repurchases. Netflix offers a compelling combination of absolute growth, with earnings expected to grow at a compound rate of 22 per cent over the coming three years and relative value with the shares trading at 22 times earnings – more than 30 per cent below their five year average multiple of 33 times.

Constellation Software (CSU TSX)

Constellation Software is a software holding company that acquires mission-critical vertical market software companies and helps them to grow. With its unique operating philosophy, Constellation equips unit operating managers with best practices, procurement and shared services efficiencies but empowers them to make decentralized decisions at the grass roots level. Earnings per share have grown at a 16 per cent compound rate over the last decade, despite operating primarily in sluggish organic growth markets. The share price has generated a total return of over 21,500 per cent since the 2006 initial public offering – in spite of the - very overdone in our view - “AI victim witch hunt” that pushed the shares 60 per cent lower between last summer and February 2026. Recent signs of re-acceleration in capital deployment via their traditional private market acquisitions pathway, as well as via a new pathway the company is calling “permanently engaged minority shareholder” – taking sizable and strategic stakes in publicly traded software businesses, essentially - are finding resonance with investors and the shares accordingly have been perking up in recent months.

PAST PICKS: June 25, 2025

Tourmaline Oil (TOU TSX)

Then: $64.24

Now: $64.07

Return: -0.2%

Total Return: 3%

JPMorgan Chase (JPM NYSE)

Then: US$284.06

Now: US$311.10

Return: 10%

Total Return: 12%

Costco Wholesale (COST NASDAQ)

Then: US$986.54

Now: US$992.14

Return: 0.6%

Total Return: 1%

Total Return Average: 5%