Paul Harris, portfolio manager, Harris Douglas Asset Management

FOCUS: North American and global stocks

Top Picks: Alphabet, Novo Nordisk, MSCI

MARKET OUTLOOK:

We believe we will see higher volatility in capital markets. There are several reasons we hold this view:

• The policies of the administration in the United States have put the U.S. Federal Reserve on hold and rates may not come down as previously expected.
• With 10-year U.S. Treasuries at 4.55 per cent it provides an alternative to equities.
• Already high expectations in the market with the S&P 500 Index trading at 22 times earnings and expected earnings per shares growth at 12 per cent.
• The U.S. economy may slow down – an issue that no one is expecting.

Saying all that, we see volatility as our friend. There is opportunity in chaos. We do not fear volatility in fact we seize the opportunity to buy existing companies or add new securities to our portfolio.

• Market-moving news, fast: Get the BNN Bloomberg App now
• Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe

TOP PICKS:

Alphabet (GOOG NASD)

Alphabet is a top search destination on the web and provides a leading search marketing platform for advertisers and merchants. The company continues to see growth in YouTube and its ability to monetize advertising. The stock trades at 20 times earnings below the market valuation. It will generate 69 billion in free cash flow in 2025 and has no debt. Has significant secular growth form internet advertising, strong market share in search and other internet advertising segments. Google has 30 per cent share of U.S. digital ad revenue and global ad revenue is expected to reach well over $400 billion in 2025 and digital advertising accounts for more than 50% of total ad spend.

Novo Nordisk (NVO NYSE)

NVO is a Danish multinational pharmaceutical company. Novo Nordisk is controlled by majority shareholder Novo Holdings A/S which holds approximately 28 per cent of its shares and a majority (77 per cent) of its voting shares. The diabetes and obesity care segment includes diabetes, obesity, cardiovascular, and emerging therapy areas. The rare disease segment refers to rare blood disorders, rare endocrine disorders, and hormone replacement therapy. The company major drug is Ozempic and Wegovy that continue to drive revenue and earnings. We believe we are in the early stages of these blockbuster drugs and the continue research that shows the drug helps reduce heart disease, stroke, fatty liver, and sleep apnea. Qzempic and Wegovy sales should be around 26 billion this rising to 41 billion next year which should lead to double digit revenue and eps growth.

MSCI Inc. (MSCI NYSE)

MSCI is a provider of critical decision support tools and solutions for the global investment community. Its operating segments include index, analytics, ESG and climate, and private assets. Its indexes are used in various areas of the investment process, including indexed product creation, performance benchmarking, portfolio construction and rebalancing, and asset allocation. The analytics segment offers risk management, performance attribution and portfolio management content, applications, and services. The company is basically an oligopoly for data analytics. It has gross margins of 82 per cent and operating margins of 53 per cent.

PAST PICKS: December 28, 2023

Stryker (SYK NYSE)

• Then: US$299.12
• Now: US$387.85
• Return: 30%
• Total Return: 31%

Visa (V NYSE)

• Then: US$260.4
• Now: US$349
• Return: 34%
• Total Return: 35%

Essilor Luxottica (ESLOY OTCMKTS)

• Then: US$100.1
• Now: US$150.91
• Return: 51%
• Total Return: 53%

Total Return Average: 40%