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Paul Harris’ Top Picks: December 28, 2023

Published

10 months ago

December 29, 2023

Harry Miller

Paul Harris, partner and portfolio manager, Harris Douglas Asset Management

FOCUS: North American and global stocks

MARKET OUTLOOK:

We think the stock market will most likely be higher in 2024. However, there are potential catalysts for corrections in the coming year: significant, sudden policy shifts around key elections, contagion from conflicts around the world, unexpected setbacks related to technology, as well as higher inflation and lower corporate earnings. I think Canadian stocks may outperform U.S. stocks in 2024 as Canada is more rate-sensitive, and banks and utilities may perform better if rates fall. We believe that rates are in the process of normalizing around the world and this is important for investors as they now have a choice for their investable assets.

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TOP PICKS:

Paul Harris’ Top Picks

Paul Harris, partner and portfolio manager at Harris Douglas Asset Management, discusses his top picks: Stryker, Visa, and Essilor Luxottica.

Stryker (SYK NYSE)

Stryker is one of the world’s leading medical technology companies. The company offers innovative products and services in orthopedics, medical and surgical, neurotechnology and spine and with the acquisition of Wright Medical will have products for hands and ankles. The company has 73 per cent of its business in the U.S., 21 per cent is international (developed markets) and six per cent in emerging markets. Great demographic play: as the population ages, Stryker’s products become more useful and helpful. Furthermore, there is somewhat of an annuity with med tech products, as once surgeons start and learn they tend not to change. SYK is a well-diversified company and with its strong balance sheet should be able to manage through any macroeconomic pressures. SYK is generating nearly US$3.3 billion of free cash flow in 2022 of which about 25 per cent being used for dividends. This still leaves the majority of SYK’s annual free cash flow that could be used for M&A or to pay down debt. They cover their interest payments 11.4 times and have a high free cash flow conversion rate.

Visa (V NYSE)

Visa is like a toll both. When you use the card, Visa gets .15 basis points per transaction. It processes over 65,000 transactions per second. Visa still has growth in the business-to-business market especially with loyalty programs. We think we will see acceleration in revenue growth into the teens driven by an improving macro backdrop, successful competitive changes around pricing and faster-than- anticipated consumer payment innovations such as mobile payments. Visa offers long-term secular-driven stocks especially benefiting from COVID as more people use less cash, and it should provide solid organic growth with opportunities for margin expansion. Visa is expected to generate $19 billion in free cash flow in 2023.

Essilor Luxottica (ESLOY OTCMKTS)

Essilor Luxottica is a global leader in design, manufacture and distribution of ophthalmic lenses, frames and sunglasses. Essilor is a market leader across the entire value chain in eyewear. The global eyewear market offers attractive long-term resilient growth, especially when screen use has gone up exponentially. We see the Grand Vision acquisition as transformational and Essilor will be a winner in the digital transformation of eyewear. The stock has a dividend yield of 1.75 per cent, has a strong balance sheet and accelerating free cash flow growth

Past Picks: Jan. 26, 2023

Paul Harris’ Past Picks

Paul Harris, partner and portfolio manager at Harris Douglas Asset Management, discusses his past picks: Apple, Amazon.com, and Alphabet.

Apple (AAPL NASD)

Then: US$143.96
Now: US$193.88
Return: 35 per cent
Total Return: 35 per cent

Amazon.com (AMZN NASD)

Then: US$99.22
Now: US$153.36
Return: 55 per cent
Total Return: 55 per cent

Alphabet (GOOG NASD)

Then: US$99.16
Now: US$141.40
Return: 42 per cent
Total Return: 42 per cent

Total Return Average: 44 per cent

GOOG NASD	Y	Y	Y
AMZN NASD	Y	Y	Y
AAPL NASD	Y	Y	Y

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Business

TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

Published

9 hours ago

November 7, 2024

Anne Joseph

CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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Business

BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

Published

9 hours ago

November 7, 2024

Anne Joseph

BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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Business

Canada Goose reports Q2 revenue down from year ago, trims full-year guidance

Published

9 hours ago

November 7, 2024

Anne Joseph

TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.

The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.

Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.

On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.

In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.

It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:GOOS)

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