Bruce Murray, CEO and CIO of Murray Wealth Group

FOCUS: North American growth stocks

MARKET OUTLOOK:

We have had a wonderful rally of some 25 per cent since late October, pushing the S&P 500 Index to a new high. The rally has been narrowly led by the concentrated rally in the so-called “Magnificent Seven.” I just published a review where we compared today’s technology market to that of 1999-2000, where we believe the current rally is based upon much more durable fundamentals -- such as SAAS software and the future of AI -- than 25 years ago.

We feel these stocks are fairly valued on the current outlook and believe they will continue to lead the market. We expect the market advance should broaden out as much of the market is still pricing a lack of confidence in economic and earnings growth. I believe that the economy will continue to move forward and inflation continue to moderate, allowing lower interest rates and a continued market increase as we move forward. So more economically and interest rate-sensitive stocks should start to participate in the rally.

We see opportunities in health care as medical advances continue. We also see opportunities in materials, industrials, and interest-sensitive. 

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TOP PICKS:

Alphabet (GOOG NASD)

Alphabet is one of the cheaper Magnificent Seven stocks, selling just over 20 times 2024 EPS. The market felt the company was behind on AI, Google Cloud was distant third and the management hadn’t cut costs like Meta did and continues to fund businesses like Waymo and healthcare, where we have yet to see revenue potential. We feel they are competitive and have a huge library from their dominance of the search business to feed AI. The recent announcement of Apple considering their AI for its communication devices shows the opportunity they have if each of the two largest-selling devices technologies use GOOG’s AI. Their advertising market share is almost twice the size of nearest competitor Meta.

AstraZeneca (AZN NASD)

AstraZeneca is a discovery-lead biopharmaceutical firm focused on oncology and rare diseases with more than 175 products in the research and development pipeline. The company did well with its COVID-19 vaccine, but never got the hype of mRNA stocks. Its revenue was US$45 billion last year with 7-10 per cent revenue growth expected and stronger EPS growth of about 10 per cent. The stock is not expensive selling at about 15 times 2024 EPS and a three per cent yield.

Manulife (MFC TSX)

Fifteen years after the global financial crisis – which regulators forced MFC to build a fortress balance – the company has finally grown into that balance sheet and we are seeing respectable earnings and dividend growth. EPS is forecast to be in the 3.70 range and 12 times multiple would give a target of more than $44, or 38 per cent, which goes over 40 per cent when you add in the 4.9 per cent dividend.