Brian Madden

Good times for equity investors. And for bond market investors as well, after 1-3 difficult years in the bond market. We can chalk it up to a Goldilocks scenario in the minds of investors. 

The BOC was ahead of the Fed with rate cuts, and continued with another one this month. And then with the Fed, the long-awaited, pined-for, initial rate cut came last week, and it was a doozy. A double, so to speak, at 50 bps. Investors have developed some conviction that we're going to get some relief in the rate-sensitive segments of the market.

Despite the fact that we're seeing tentative signs of weakness in the labour market, there's a jelling consensus that the Fed might be able to stick a soft landing and avoid a recession. He's in that camp. There have been a lot of naysayers anticipating a recession, going back to 2022, and there were some compelling arguments for that.

But fiscal largesse allowed us to stick-handle our way through what many thought would be a recession in 2022-23. He's cautiously optimistic that we'll avoid one in 2024-25 as well.

A lot of factors at play to explain these moves.

Yes, they are defensive sectors, but not solely. Real estate is a value play, and perhaps an emerging view that offices are going to start filling up again. And with the loosening conditions in the labour market, the balance of power might start shifting away from employees (who have enjoyed working in their pyjamas and Lulus the last 4 years) and back toward employers.

Utilities are defensive, regulated, and defensive, and there's going to be a secular increase in power demand as we move to a greener economy. But it's also a second derivative trade on the AI mania that's swept the market for the last 2 years. Data centres and the AI chips use a tremendous amount of power.

Doesn't have a bright outlook for its future. Not a good bank. Multi-decade series of strategic blunders. Increasingly, scale matters, and this one is sub-scale. Put themselves up for sale, but why would anyone buy it when they can just eat their lunch for free and take their market share?

Different from NA takeover of CWB; both of those banks are good banks.

Frustrating backslide, but continues to believe in it. #1 player in a 3-player oligopoly. A need, not a want. Demographics of aging and morbidity trends are tailwinds. #9 position on the Fortune 500 is very secure. Pullback due to short-term headwinds of lower revenue in one small unit plus drug going off-patent. Rexall sale is a blessing, as it was a drag on performance.

Dividend has grown at 10% compound rate over 10 years, will continue. Trades at 14x earnings, likely to grow at 11-12% over next 3 years. Opportune entry point.

Gotten mojo back. Admires management, especially as it's fashion (and women's fashion, to boot). Gets his nod over, say, a LULU.

Struggling. Demand is, perhaps, satiated. Started narrow with yoga pants and expanded. Crosses the gender boundaries. Not enough to right the ship.

On his shopping list. Dominant franchise in a duopoly with MA. Fantastic compounders, 10-year compounded total shareholder return at about 18%. Pullback from recent all-time high, on news that under DOJ scrutiny. Pullback is buyable, Visa will escape unscathed. Trades at 27x earnings, MA is ~34x. Discount to historical average of 29x.

Will continue its double-digit growth going forward. You buy these dominant companies on dips.

First-mover advantage plus best content library. Rolling out new revenue models. Biggest catalyst to growth is cracking down on password sharing. Market focus is on new subscribers, and they keep beating. In his momentum fund, holding onto this category killer as long as its key performance indicators are intact.

This one gets the nod for growth.

Sold BCE a few months ago. Slowed down its dividend growth. Core businesses are facing sluggish secular growth. Balanced sheet is more leveraged, debt downgraded. Applauds selling sports asset, but not enough to get his interest.

CNQ gets the nod for growth.

Sold BCE a few months ago. Slowed down its dividend growth. Core businesses are facing sluggish secular growth. Balanced sheet is more leveraged, debt downgraded. Applauds selling sports asset. Not enough to get his interest.

Didn't work out, sold around $200. Thought brand was bulletproof. Input inflation was endemic to the whole industry, but then volumes started to be affected. Accounting transition hiccups. Cocoa prices spiked, but have relaxed. K-shaped economy has lower-income consumers really picking spots for indulgences.

An industrial, but classified as a materials company because they make industrial gases. Low beta. Mission-critical inputs. Long-term, take-or-pay contracts. A happy shareholder.

Credit cycles follow interest-rate cycles the way night follows day. Big commercial lending footprint, so credit losses have been larger than expected. Volatile share price. Reasonably pleased with performance. He's holding.

Can't have a view on this name without having a view on copper. Emerging view that historical cyclicality of copper may be dampened going forward by secular demand of greening the grid and EVs. But the cyclicality is still there. Global GDP growth is slowing, China's economy remains anemic underlying all the "stimulus".

There will be a time to get behind this name, but not right now. FCX would be his #1 choice, TECK.B #2.