Stan Wong, Portfolio Manager at Scotia Wealth Management

Focus: North American large caps and ETFs

Top picks: Netflix, Visa, Waste Management

MARKET OUTLOOK:

Equity markets carried their strong momentum into August, with the S&P 500, TSX and Nasdaq all sharply higher since their April lows as investors digest encouraging inflation data, solid economic growth, and another better-than-expected earnings season.

Technology remains the key driver of equity strength, supported by ongoing enthusiasm around artificial intelligence, semiconductors, and cloud computing. For the TSX, gains in materials this year have been offset by softer performances in energy and health care.

Inflation has been trending lower, with U.S. headline CPI easing to 2.7 per cent in June and Canada’s reading cooling to 2.4 per cent, which could influence the Bank of Canada’s decision on rates this fall. The U.S. Federal Reserve left rates unchanged in July while signalling openness to easing should price pressures continue to moderate. Second-quarter earnings have largely beaten expectations, with S&P 500 profits tracking nearly nine per cent year over year. Mega-cap technology companies such as Microsoft, Nvidia and Alphabet have continued to set the tone.

The S&P 500 remains in a healthy technical uptrend, trading above major moving averages while market participation broadens across cyclical and other market segments. Volatility remains muted, with the VIX lingering below 20. Looking ahead, markets will be keenly focused on upcoming economic data releases and central-bank policy signals. Seasonal caution is warranted, as the S&P 500 has averaged nearly a two per cent decline in September over the past decade, finishing the month lower in six of those ten years.

At The Stan Wong Group, we remain constructive on equities, favouring high-quality large-cap names in technology, financials, and health care, while preferring government and investment-grade corporate bonds in fixed income. We continue to make thoughtful, tactical portfolio adjustments with client objectives in mind. A diversified, selective, and well-structured approach, anchored by a sound financial plan, remains essential for long-term success.

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TOP PICKS:

Netflix (NFLX NASD)

Netflix remains the global leader in subscription video streaming, boasting an unparalleled content library, advanced delivery infrastructure, rapid international subscriber growth, and a subscriber base currently exceeding 300 million worldwide. Fiscal 2026 revenue is expected to surpass US$50 billion, driven by continued global expansion, the introduction of its advertising-supported tier, and ongoing price optimization across key markets.

Strategic investments in original programming, localized content, and live events have deepened user engagement and helped Netflix stand out in a crowded streaming landscape. The company consistently delivers strong financial results, with accelerating revenue growth, expanding operating margins, and robust free cash flow. In its most recent quarter, Netflix surpassed revenue and earnings estimates, supported by healthy subscriber additions and increased engagement across both premium and ad-supported plans. Management remains committed to reinvesting cash flow into high-quality content production, enhancing the user experience, and sustaining subscriber growth.

Shares currently trade at around 40 times forward earnings, with an expected earnings growth rate of 27 per cent, reflecting Netflix’s dominant market position and significant long-term growth potential. With a scalable global platform, expanding advertising revenue opportunity, and one of the strongest content pipelines in streaming, Netflix is well positioned to maintain its leadership in the evolving direct-to-consumer entertainment space. As global demand for streaming content intensifies, Netflix’s compelling content strategy and innovative business model offer an attractive investment opportunity with significant growth and cash flow potential.

Visa (V NYSE)

Visa remains the global leader in digital payments, supported by powerful long-term trends such as the shift from cash to electronic transactions, growing e-commerce adoption, and the expansion of real-time cross-border payments. Fiscal 2026 revenue is projected to exceed US$44 billion, fuelled by steady transaction growth, pricing power, and the ongoing recovery in travel-related spending.

Visa’s global scale, trusted brand, and deeply integrated network provide a durable competitive moat, enabling high margins, strong free cash flow, and consistent double-digit EPS growth. The company continues to deliver solid performance.

In its most recent quarter, Visa exceeded expectations on both revenue and earnings, driven by resilient consumer spending and strength in cross-border volumes, its most profitable segment. Management remains focused on innovation, reinvesting in fraud prevention, tokenization, and fast-growing services such as B2B payments and Visa Direct, which are expanding the company’s reach beyond traditional card transactions.

Shares have recently pulled back to the 200-day moving average, offering a potentially attractive entry point for long-term investors. Despite strong fundamentals and industry leadership, the stock trades at 27 times forward earnings, making it appealing given Visa’s projected 13 per cent compound annual earnings growth over the next several years.

With powerful network effects, disciplined execution, and multiple long-term growth drivers still in early stages, Visa is exceptionally well positioned at the centre of the global digital payments ecosystem.

WASTE MANAGEMENT (WM NYSE)

Waste Management is the leading environmental services company in North America, well positioned to benefit from key secular trends including population growth, urbanization, and heightened regulatory focus on sustainable waste solutions.

Fiscal 2026 revenue is projected to reach nearly US$27 billion, supported by recurring collection and disposal contracts, disciplined pricing, and expanding contributions from recycling and renewable natural gas (RNG). WM’s vertically integrated network of landfills, transfer stations, recycling facilities, and RNG plants creates significant barriers to entry, strong pricing power, and a durable competitive moat.

The company delivers consistent results with steady volume growth, expanding margins, and robust free cash flow that supports attractive dividend growth and share repurchases. In its latest quarter, WM beat revenue and earnings estimates, driven by strong commercial and industrial waste volumes, cost efficiencies, and strength in its high-margin landfill business. Management continues to execute operational improvements while investing in advanced recycling and renewable energy capabilities, positioning the company to capitalize on the shift toward a circular economy.

Shares currently trade at 29 times forward earnings, reflecting a premium valuation justified by WM’s pricing momentum and an 11 per cent earnings growth forecast over the next few years. The company pays a modest 1.4 per cent dividend yield and is a low-beta, defensive stock, appealing to investors seeking steady income with lower volatility. With unmatched scale, growing sustainability-driven revenue streams, and a long runway for profitable reinvestment, Waste Management remains an attractive compounder and a leader in the environmental services sector.

PAST PICKS: SEPTEMBER 24, 2024

Alphabet (GOOGL NASD)

Then: US$162.29

Now: US$199.29

Return: 23%

Total Return: 23%

Dollarama (DOL TSX)

Then: $136.14

Now: $192.47

Return: 41%

Total Return: 42%

Eli Lilly (LLY NYSE)

Then: US$924.43

Now: US$630.85

Return: -32%

Total Return: -31%

Total Return Average: 11%