Gordon Reid, president & CEO of Goodreid Investment Counsel, shares his outlook on U.S. Equities.

Gordon Reid, President & CEO, Goodreid Investment Counsel

Focus: U.S. equities

Top picks: Elevance Health, Rocket Companies, Synovus Financial

MARKET OUTLOOK:

Markets performed well in the third quarter, surprising many investors and pundits who increasingly are calling for a correction (or worse).

In Goodreid’s opinion, the ingredients of a bubble and potential market crash are just not there. While in 1996, then Fed Chairman Alan Greenspan famously called out the market for ‘irrational exuberance’, we would argue that today’s market represents ‘rational’ exuberance.

Certainly, a subset of the market, those companies developing large language models and chip technology have witnessed their stock prices surge, but their valuations are contained because they are so profitable.

Also, the vast majority of index components are trading at historically reasonable valuations with good to excellent prospects for their businesses. Corrections can occur at any time for a variety of reasons, but under current circumstances it is likely that any correction would be followed by a quick rebound as investors would view it as a buying opportunity.

The AI trade is in the early innings. The true impact will be felt through the application of the technology, not the development of it. Margins will expand allowing higher valuations to be justified.

These are exciting times, but not the time to increase risk tolerance. Goodreid remains well diversified across economic and market sectors.

TOP PICKS:

Gordon Reid’s Top Picks: Elevance Health, Rocket Companies & Synovus Financial Gordon Reid, president & CEO of Goodreid Investment Counsel, shares his top stock picks to watch in the market.

Elevance Health (ELV NYSE)

Elevance, formerly named Anthem, is a managed care operator with 47 million members. The industry has been under duress as lumpy results after the pandemic and worries about government reimbursement rates pressure stock prices. Elevance is trading 37 per cent below its all-time high, but more importantly its valuations are attractive, both in absolute terms and from a historical relative standpoint.

Rocket Companies (RKT NYSE)

Rocket, through an aggressive acquisition strategy, is transforming into a vertically integrated real estate solutions company. As a provider of home mortgages, Rocket has bolted on Redfin, a technology aided real estate brokerage company, and Mr. Cooper, which specializes in mortgage servicing. As the interest rate picture clears, we expect transaction activity in the existing home market to grow meaningfully.

Synovus Financial (SNV NYSE)

SNV is a quality regional banking concern. The company agreed to be acquired by Pinnacle Bank (PNFP), a transaction that was largely panned by the market, but lauded by analysts. That said, the combined entity offers an attractive option for investors looking for under-owned issues with promise. PNFP trades at 10 times earnings, yet management has telegraphed outstanding growth prospects.

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PAST PICKS: OCTOBER 22, 2024

Gordon Reid’s Past Picks: Alphabet, Meta Platforms & Visa Gordon Reid, president & CEO of Goodreid Investment Counsel, discusses his past stock picks and how they’re doing in the market today.

Alphabet (GOOGL NASD)

Then: US$165.14

Now: US$253.18

Return: 53%

Total Return: 54%

Meta Platforms (META NASD)

Then: US$582.01

Now: US$734.73

Return: 26%

Total Return: 27%

Visa (V NYSE)

Then: US$284.79

Now: US$345.77

Return: 21%

Total Return: 22%

Total Return Average: 34%

DISCLOSUREPERSONALFAMILYPORTFOLIO/FUNDGOOGL NASDYNYMETA NASDYNYV NYSEYNY