It was a long-term bet on Big Tech and a mix of consumer and health care stocks that helped Murray Wealth Group deliver double-digit, benchmark-beating returns last year.
“We buy companies we believe in for the long term and that we’re comfortable buying in stressed times,” says Jamie Murray, portfolio manager and head of research at Murray Wealth Group, which manages about $180-million in assets.
The company says its flagship Global Equity Growth Fund returned 21.5 per cent in 2020, which beat the 12-per-cent return of its benchmark, which includes 75 per cent of the MSCI World Index and 25 per cent of the S&P/TSX Composite Index. The company says the fund’s five-year return was 13.3 per cent versus 10.5 per cent for its benchmark.
The performance last year was driven by the fund’s top four holdings – Facebook Inc. , Amazon.com Inc. , Microsoft Corp. and Google parent Alphabet Inc. The investment team also took profits on some strong-performing stocks such as Pfizer Inc. , Gilead Sciences Inc. and Home Depot Inc. , and put some of those proceeds into hard-hit and rebounding names such as Royal Caribbean Cruises Ltd. and Tapestry Inc. , the company behind luxury retail brands such as Coach and Kate Spade.
Despite the market run-up in recent months, Mr. Murray says his team is forecasting the recovery to continue into this year and next – with some expected volatility – as the global economy recovers from the pandemic amid the widespread vaccine rollout.
“The market appears expensive, but we think that earnings growth that will float through the economy in the next two to three years will make it look more attractive,” he says.
Below are four Canadian stocks he expects to do well amid an anticipated recovery (performance figures are total returns as of Feb. 2):
Air Canada (AC-T)
Wednesday close: $21.81
Market cap: $7-billion
Three-month return: 42 per cent
One-year return: minus 52 per cent
Mr. Murray’s team sold Air Canada in early 2019 and started buying the stock again last November, as positive vaccine news started to come out, believing it will benefit from people starting to book travel again.
“I think there’s tons of pent-up demand for travel and Air Canada is in a relatively strong financial positive versus global airlines peers,” he says.
Mr. Murray points to industry estimates showing the travel market will begin to fully recover in the next year or two. “We think, long term, Air Canada probably doubles or triples from its current price,” he says.
There is a risk that the recovery may be delayed, he notes, which would in turn likely delay an anticipated rise in the stock price.
Aritzia Inc. (ATZ-T)
Wednesday close: $27.59
Market cap: $3-billion
Three-month return: 40 per cent
One-year return: 10 per cent
The Vancouver-based retailer is Murray Wealth Group’s largest Canadian-based holding and its fifth-largest holding in the global fund. Mr. Murray says his team likes the company’s expansion plans in the United States and its growing e-commerce business.
“We think it’s a great company … with strong brands,” he says, noting that it has held up relatively well during the pandemic. Artizia came into the pandemic in a strong position compared with other retailers, which has allowed it to keep investing in prime real estate locations and top talent, he adds.
Linamar Corp. (LNR-T)
Wednesday close: $69.96
Market cap: $4.4-billion
Three-month return: 55 per cent
One-year return: 58 per cent
Mr. Murray’s team likes the Guelph, Ont.-based manufacturer of auto parts, agriculture and industrial equipment for its disciplined operations and overall strong cash flow performance.
“It’s a phenomenally run company,” he says. “We just think it’s a good company to own as the economy reopens.”
Mr. Murray says the company also makes electric vehicle parts, positioning it for future growth in the auto industry. “The company continues to find new ways to grow,” he says.
His firm has owned the company for about three years and bought more in the $30 to $40 range last year.
Stelco Holdings Inc. (STLC-T)
Wednesday close: $22.67
Market cap: $1.9-billion
Three-month return: 44 per cent
One-year return: 118 per cent
Mr. Murray’s fund has owned the Hamilton-based steel maker since 2018 and bought more last summer and into October as steel prices began to bounce back.
“In addition to the steel price, Stelco has also been investing in its operations to make itself one of the lowest-cost steel companies in North America,” he says. “Even if we do see steel price moderation, Stelco should be profitable.”
He also says the company has a good history of returning cash to shareholders through dividends, including special payouts.
Another side benefit to the steel maker, according to Mr. Murray, is its industrial land holdings in Hamilton, which could be suitable for different types of real estate development down the road, “which we don’t think is priced into the company.”
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