Bruce Murray, CEO & Chief Investment Officer, The Murray Wealth Group & David Newman, head of research, The Murray Wealth Group

FOCUS: North American Equities

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MARKET OUTLOOK:

Global markets have been relatively weak year-to-date, punctuated by periodic meltdowns, given the growing “Wall of Worry.” The first meltdown in Q1 on the back of unfounded fears that China’s collapse was imminent was followed by a sharp recovery, before the bears were on the hunt again for the next brick in the wall. The bears were awarded for their efforts when Brexit sent the world markets back into a tailspin, with one of the largest single day losses in years.  However, a great primordial depression did not ensue. Four days later, the S&P 500 closed higher than it did on June 16 prior to the Brexit meltdown. So much for the long-term destructive effect of Brexit on the world economy. We believe that the U.K. will emerge from its Brangover with continuing strong ties to Europe.

The indices of large high-quality U.S. growth stocks were down over 6 per cent year-to-date in the wake of Brexit vote, before recovering around 4 per cent to close out the first six months. When combined with a Canadian dollar recovery of 6.4 per cent, the result for Canadian-domiciled global equity growth investors has been losses in the range of high single-digits to low double-digits, in general, prior to dividends. Clearly, the first half of 2016 was not kind to large cap growth stocks as investors shifted towards value stocks and commodities, which was compounded by the rise of the Canadian dollar. Higher beta technology and health care stocks have suffered amidst concerns that global growth was slowing and ongoing political rhetoric during the U.S. election campaign. However, we believe investors should hold firm for the long term against the short-term gyrations of the market, especially given the looming presidential election, with a focus on global equity growth stocks, particularly U.S. stocks.  For Canadian investors, a portfolio of U.S.-centric names should be further supported by second half strength in the U.S. dollar, given a solid U.S. economy that trumps continued global uncertainty. 

Top Picks:

Facebook (FB.O)

Facebook has strong revenue growth as advertisers capitalize on FB’s ability to deliver target audiences, especially millennials.

Linamar (LNR.TO)

It’s extremely cheap 7.X P/E due to fears the auto cycle is over for this very well run company, LNR has contracts in place which should drive 50-to-60 per cent revenue growth over the next 5 years, content averaging over $140 on 9 and 10 speed transmissions now entering the market versus $45-to-50 on the 6 speed transmissions now in the market.

Royal Caribbean Cruises (RCL.N)

Spending on cruising is growing faster than average for tourist dollars. Growth is strong as Asians are starting to take up cruising. RCL was over $100 in December 2014 and we see no reason it won’t get back there.

Past Picks:  May 13, 2016

Alphabet (GOOGL.O)

• Then: $724.83
• Now: $733.75
• Return: +1.23%
• TR: +1.23%

MasterCard (MA.N)

• Then: $95.36
• Now: $90.07
• Return: -5.55%
• TR: -5.34%

Medtronic (MDT.N)

• Then: $81.89
• Now: $88.85
• Return: +8.50%
• TR: +9.03%

Total Return Average: +1.64%

Website: WWW.MURRAYWEALTHGROUP.COM