Brian Madden's Top Picks: November 3, 2021
BNN Bloomberg
Top picks from Brian Madden, senior vice president and portfolio manager at Goodreid Investment Counsel
MARKET OUTLOOK:
Canadian stocks remain near all-time highs as third-quarter results roll in, showing strong growth against easy comparisons a year ago. Trading at 16.5x 12 month expected forward earnings, the S&P/TSX Composite is exactly in line with its twenty-year average P/E ratio.
Analysts foresee 7 per cent further earnings growth in 2022, a figure that seems readily achievable amidst ongoing broad-based economic growth, with 4 per cent GDP growth foreseen in 2022, which would make 2022 the third best year of this millennium.
Moreover, with the largest segment of the market - banks - showing subdued growth expectations (-1 per cent) and the second largest - energy (+18 per cent) - also constrained by consensus commodity price forecasts that are conservatively 6 per cent below futures strip pricing for oil and 7 per cent below for natural gas, we believe earnings could surprise to the upside in 2022.
Nevertheless, with persistently high inflation, we favour price makers over price takers, we favour companies that can substitute capital and productivity enhancing technology for labour and we favour companies whose products and services address the mass market over those that address mainly the affluent.
TOP PICKS:
