Gordon Reid, President & CEO, Goodreid Investment Counsel

Focus: U.S. Equities

Top picks: Booking Holdings, Microsoft, Piper Sandler

MARKET OUTLOOK:

Equity markets continue to march higher but cracks in the bull case are appearing. Nothing that is likely to be fatal to this secular advance, but perhaps enough to allow the markets a breather. The consumer is putting on the brakes and when one drills down in the numbers, an ever-smaller group of wealthy consumers is holding it together. This is supported by a weakening in labour numbers and an inflation backdrop that illustrates moderate but sticky advances in prices.

The Federal Reserve is under intense pressure to reduce rates and the animus from the White House is intense. According to script it is likely that we will see a September interest rate cut which on the back of weak economic numbers will be labelled “too little too late”. The second act however will be the appointment of a new Fed chair who will undoubtedly cut rates vigorously. The results will be an interesting analysis. Will that dovish rate policy align with a recovery of economic sentiment, heating up inflationary trends? Will the U.S. dollar tank, perhaps secretly giving the White House exactly what they want? How will all this dovetail with the impending mid term elections, slated for the fall of 2026?

At Goodreid, we have constructed the best quality portfolios we can to provide long term investment success. The moving economic and political levers will be pulled and influence price movements of some of our companies favourably, some negatively. Over time, however, we expect our portfolios to outperform on the back of strong franchises, financial strength, and long-term competitive advantages.

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TOP PICKS:

Booking Holdings (BKNG NASD)

Booking’s earnings will likely push through $200 per share in 2025. There is amazing growth for a company that 15 years ago made less than $10/share in a good year. The valuation on this growth company has expanded to the mid 20s price to earnings, and in our opinion deserved by their relentless drive to excellence. Generative AI is now being adopted and should improve margins.

Microsoft (MSFT NASD)

Microsoft has been performing very well as AI and Cloud initiatives continue to surprise and impress. Given that AI is in the early stages of development and adoption, this leg of the technology revolution is likely to be powerful. Revenue growth is impressive at 15 per cent annually over the past five years. Coupled with expanding operating margins, this software company deserves the rich valuations it is currently assigned.

Piper Sandler (PIPR NYSE)

Piper will benefit from a merger and acquisition (M&A) recovery that is now underway. As a mid market dealer, Piper has witnessed a deferral of some deals as the economic and political environment sorts out. However, pent up demand and a favourable financing environment will push companies over the top.

PAST PICKS: AUGUST 23, 2024

Despegar.com (DESP NYSE)

Then: US$11.65

Now: US$19.50

Return: 67%

Total Return: 67%

Freeport McMoran (FCX NYSE)

Then: US$44.66

Now: US$41.89

Return: -6%

Total Return: -5%

General Motors (GM NYSE)

Then: US$48.57

Now: US$57.23

Return: 18%

Total Return: 19%

Total Return Average: 27%