Bruce Murray, chief executive officer and chief investment officer, The Murray Wealth Group

FOCUS: Global and North American equities

MARKET OUTLOOK:

The bear market continues to feed off the fear of higher interest rates which may feed a more significant recession in 2023.

The U.S. Federal Reserve’s aggressive rate increases have led to a very strong U.S. dollar which eats into profit margins and normally decreases competitiveness, as foreign competitors have lowered costs in competitive markets. Northern Europe will have a very tough winter with the price of energy which will likely eliminate any competitive advantage they may have had; North American competitors should see market gains at the expense of Europe.

We agree with economic commentators who feel the Fed’s policy response has been harsh and that inflationary forces are dissipating rapidly. There is now a chance of a Fed-induced recession next year in spite of significant reopening opportunities still to be overcome. We are staying with our portfolio of high-quality growth names knowing they will recover nicely when economic confidence recovers. It was reassuring to see yesterday’s rally following what was deemed to be awful news on the inflation front.

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TOP PICKS:

Alphabet (GOOGL NASD)

Alphabet still dominates the internet through its Google search, Android, YouTube, maps and many more. It is challenging MSFT and Amazon as the third player in cloud services. It still has huge bets in autonomous driving, health care, drone delivery and others. Google is still forecast to grow revenue at 12 per cent P.A. through 2023 and 2024. EPS is targeted to grow from 17 per cent to 6.90 per cent by 2024. It is currently selling at 19x this year’s eps and just over 14x 2024. It’s dirt cheap for a quality player growing at 17 per cent and places little value on its other business opportunities, which are not being paid for. At least a 50 per cent upside when the market recovers.

Blackstone (BX NYSE)

Blackstone is a leading private equity firm with a very strong track record. The stock is down 42 per cent from its high of late last year with fear of higher rates and declining opportunities. The company is brilliantly run and we believe opportunities will continue to arise for BX. The yield on the stock is currently over six per cent, but is variable depending on success. We believe BX will continue to have success and the stock recover toward $100.

Northwest Healthcare Properties REIT (NWH.UN TSX)

Owning healthcare properties is a pretty recessionary-resistant business. This one is the largest and most diversified in Canada, with assets also in ANZAC, Brazil and Europe. The stock has fallen 30 per cent since spring and yields eight per cent. We think it’s a safe play with some decent upside.

PAST PICKS: November 23, 2021

Raytheon Technologies (RTX NYSE)

• Then: $87.31
• Now: $83.63
• Return: -4%
• Total Return: -3%

Bayerische Motoren Werke (BMWYY OTC)

• Then: $35.57
• Now: $24.53
• Return: -31%
• Total Return: -26%

Mastercard (MA NYSE)

• Then: $329.00
• Now: $294.76
• Return: -10%
• Total Return: -10%

Total Return Average: -13%