Gordon Reid, president & CEO, Goodreid Investment Counsel

FOCUS: U.S. equities

MARKET OUTLOOK:

Now it gets interesting. The U.S. economy is showing some signs of fatigue – expected given the persistence of the U.S. Federal Reserve, but surprising to some because of the long tail of growth as seen in employment statistics and corporate earnings. But the economic “landing” is happening, and it remains to be seen whether the Fed can accomplish a “soft” landing (not driving the economy into a recession). History is against them because they usually overshoot.

Does the Fed deploy the parachutes in the form of interest rate cuts, or do they remain stubborn because the inflation target of two per cent is not quite accomplished? Markets will be watching closely. The Bank of Canada and the ECB have spoken with initial rate cuts, giving the Fed cover in the decision. There are many moving parts in the U.S., from a developing bifurcation between the employment statistics and the actions of lower-end consumers to the approaching presidential elections.

From an investment standpoint, Goodreid has lightened up on consumer discretionary and is adding positions that have catalysts independent of monetary policy. We have added a number of industrials and have selectively added to technology.

• Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
• Listen to the Market Call podcast on iHeart, or wherever you get your podcasts

TOP PICKS:

Amgen (AMGN NASD)

• Latest purchase: June, 2024 @ $303

AMGN is again being recognized as a growth stock within the Healthcare sector. Their purchase of Horizon Therapeutics for US$28 billion comes with a host of new drugs and potential within its pipeline. Of great interest to investors was the company reporting on early trial weight loss drugs that could become a massive contributor in future years.

First Solar (FSLR NASD)

• Latest purchase: May, 2024 @ $279

First Solar is in the enviable position of being the only meaningful domestic producer of solar energy. Tariffs and tax incentives are a big piece of their success but are entrenched. With demand from AI data centres expected to be enormous, climate friendly solutions that offer cost benefits are going to be winners. Expect revenue and EPS ramp ups to be steep.

CrowdStrike (CRWD NASD)

• Latest purchase: June, 2024 @ $356

Revenue growth (the street assumes 24 per cent annually for the next decade), margin expansion (50 per cent increase in the next couple of years) and FCF expansion (now at 33 per cent of revenue) in an asset-light environment make this company very attractive. As the cloud and AI grows, so does the demand for cyber security products. Recurring revenue is high and increasing with subscription revenue making up 94 per cent of total revenue. Their Falcon AI product has surpassed a run rate of US$1B/year; one quarter of their total revenue.