Gordon Reid, president and CEO, Goodreid Investment Counsel

FOCUS: U.S. equities 

MARKET OUTLOOK:

April was a shaky month for U.S. equity markets, with a five per cent correction for the S&P 500 Index, but many higher beta stocks endured a much rougher period. The AI halo and the momentum from 2023's growth have come crashing back to earth for many stocks. Many very good companies got caught in this process and in some cases the corrections have been overdone. That’s the market for you. Solution: see through the volatility and hold good companies for the long term.

The struggle between the market’s need to be coddled by dovish monetary and fiscal action and the reality that current interest rates are right-sized, not only on a competitive basis but on a historical one, is ongoing. In the market’s defense, the digestion process is happening, and May’s recovery is encouraging. We continue to root for a broadening of market influence and believe that there are many hidden gems within the broad market. For that reason, we continue to hold the mega-cap tech stocks to a weighting of about half of their index influence.

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TOP PICKS:

Apple (AAPL NASD)

With its recent earnings report, AAPL appears to have completed a bottoming process within the IPhone cycle. Sales in China have turned positive, they are embarking on a refresh cycle and AI buzz is in the air. We have always admired AAPL as a cash flow machine, but the announced $110 billion buyback authorization is breathtaking.

Euronet Worldwide (EEFT NASD)

Euronet Worldwide provides payment and transaction processing, with almost 50 thousand ATMs and 700 thousand point-of-sale machines. The outlook is promising as operating and net margins expand and transactions balloon. At a meaningful discount to the market’s P/E multiple, EEFT’s shares have an opportunity to outperform.

Uber (UBER NYSE)

This company has entered the era of profitability and as it scales, valuations will fall rapidly. Of its four divisions mobility and food delivery contribute the lion’s share but advertising and freight have promise. Expect 20 per cent plus annual growth of earnings with impressive cash flow generation.

PAST PICKS: MAY 16, 2023

Amazon (AMZN NASD)

• Then: US$113.40
• Now: US$185.16
• Return: 63%
• Total Return: 63%

Dycom Industries (DY NYSE)

• Then: US$96.82
• Now: US$150.19
• Return: 55%
• Total Return: 55%

Morgan Stanley (MS NYSE)

• Then: US$81.86
• Now: US$99.83
• Return: 22%
• Total Return: 27%

Total Return Average: 48%