John O'Connell, chief executive officer, Davis Rea Ltd.

FOCUS: North American large-cap stocks 

MARKET OUTLOOK:

 For the past 24 months, the S&P 500 has made little progress and fallen 20 per cent from its peak. Investors have incessantly debated interest rate policy, the always next, most important data point that will reveal the path forward and whether and when a recession will occur.

Interest rates have risen to levels where it’s difficult to believe. In light of recent bank failures, at best, growth will slow, jobs will be lost and inflation will revert back to its historical levels. The dilemma for investors after having anticipated these events for two years is what to do next seeing as most have now come to the same conclusion. Generally, when the majority are bearish, the narrative is well entrenched. Stocks have made little progress at best and a financial accident has just occurred, it is wise to have a shopping list of good-quality companies and begin to think of what might go right. The bell never rings at the bottom, but the thud of bad news always harkens value.

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TOP PICKS

Amazon.com (AMZN NASD)

Amazon has made little progress from a stock perspective for the past two years and is down 60 per cent. However, its revenues are up 20 per cent and its adjusted EBITDA is up 26 per cent. Investors are giving the company little credit for the massive investments it has made in its quest to deliver best-in-class services across its massive service offerings.

Accenture (ACN NYSE)

Accenture is one of the worlds most successful and admired global consulting companies. It continues to be a leader in assisting companies with strategy and assistance as it adapted to the ever-changing technological changes and advances that it must confront to remain relevant and competitive. Accenture stock price has made little progress the past two years and yet revenues have grown 24 per cent and its profits have grown 27 per cent.

UnitedHealth (UNH NYSE)

UnitedHealth is the leading health insurer in America and is best in class in adapting and utilizing technology to bring health care and related services to States, companies and individuals. The stock of the company has fallen 14 per cent since March of 2022 yet its revenues have grown 12 per cent and its profits per share have grown 17 per cent. 

PAST PICKS: January 7, 2022

Amazon.com (AMZN NASD)

• Then: $3,251.08
• Now: $98.69 (After 20-for-1 stock split on June 6, 2022)
• Return: -40%
• Total Return: -40%

Citigroup (C NYSE)

• Then: $65.78
• Now: $44.08
• Return: -33%
• Total Return: -30%

Walt Disney (DIS NYSE)

• Then: $157.83
• Now: $93.36
• Return: -41%
• Total Return: -41%

Total Return Average: -37%