Brian Madden, chief investment officer, First Avenue Investment Counsel

FOCUS: North American equities 


Inflation is falling steadily and has been for nine months, but it won’t fall fast enough for the liking of central bankers. In turn, central bankers won’t give up the fight against inflation fast enough for investors liking, or for commercial bankers liking as the two recently failed U.S. regional banks learned the hard way earlier this month. 

The upcoming earnings reporting period may be a telling time of reckoning for investors in many North American companies. The expected rate of corporate earnings growth for Canadian and U.S. companies remains too high overall and out of step with the forecasted growth rate for the overall economy this year. However, there are pockets of opportunities our team is finding in technology and in China re-opening trades, to name a few recent thematic focus areas.

Economic growth forecasts themselves may be too high in light of the credit contraction that the recent crises in U.S. and global banks will almost certainly bring about. Sentiment, which is of course the most reliable of contrarian indicators, is inching down and away from neutral, with FOMO (fear of missing out) slowly being displaced by classic fear. Along with 30+ other macroeconomic, cross-asset class, geopolitical and market internal/technical indicators that our team monitors weekly, a sentiment washout is something we’ve been waiting for to signal a durable turning point in the now 15-month-old bear market.  We aren’t there yet, but things move very quickly at major turning points and we are accordingly on high alert. We continue to invest cautiously, all while working up detailed files on companies we plan to introduce into portfolios when conditions warrant a more aggressive stance, which we are increasingly confident will occur this year.  

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Brian Madden's Top Picks

Brian Madden, CIO at First Avenue Investment Counsel, discusses his top picks: Nuvei, TD Bank, and Fortinet.

Nuvei (NVEI TSX)

Latest purchase March 2023 at $46.95:

Nuvei is a founder and venture capital-backed global payments technology business that had a blockbuster initial public offering in 2020, only to falter in late 2021 before regaining financial and share price momentum very recently. The company offers solutions to a number of online verticals, including sports betting, social gaming and e-commerce, foreign exchange trading, cryptocurrency and travel as well as on-premise payments processing solutions. The recent $1.4 billion acquisition of Paya is additive to growth opportunities in less cyclical verticals like healthcare, education, government and utilities and is synergistic and accretive to margins. With a prospective growth rate above 20 per cent, given the size and growth of the addressable market, the shares trade at an undemanding multiple at 20x earnings and are breaking decisively out of a steep 15-month downturn.

TD Bank (TD TSX)

Latest purchase August 2022 @ $85.60:

TD is Canada’s second-largest bank and may be on the verge of becoming America’s sixth-largest bank as well should its contentious acquisition of First Horizon close as planned.  Recent turmoil among U.S. regional and community banks affords TD and other large banks an excellent opportunity to leverage its financial and reputational strength toward market share gains in the U.S. TD earns a 16 per cent return on shareholder’s equity and has grown earnings per share at a nine per cent rate over the last decade, with a commensurate increase in its dividend.  Currently offering a 4.9 per cent yield, and with dividends likely to continue growing at a high single-digit pace, we see a logical and visible path to continued low double-digit total returns over a cycle. This is a pattern that has allowed TD and other Canadian banks to outperform the S&P TSX Composite in 17 of the last 25 years.  This pattern of outperformance is quite unlike its U.S. peers, even the best of which have no better than coin-flip odds of beating the S&P 500. Canadian banks are better managed, better governed, better regulated and overall just better businesses than U.S. banks – period. 

Fortinet (FTNT NASD)

Latest purchase December 2021 at $66.95

Fortinet offers integrated network security solutions including firewalls, virtual private networks, intrusion prevention antivirus and antispam. It has deployments on-premise, in the cloud and on mobile devices. Recent financial results have shown rapid growth with sales and billings, an indicator of forward demand both growing at an > 30 per cent pace in the latest quarter and earnings  per share growing an even faster 76 per cent.  Growth is cooling from the torrid pace of 2022 this year but is still expected to be close to 20 per cent on the top and bottom line, given the ever-present cybersecurity imperative within businesses globally. Trading at 42x forward earnings, the shares are quite rightly pricey in the absolute sense, given the high and sustainable growth rate, but are actually trading below Fortinet’s historic average P/E ratio of 45x earnings and are reversing last year’s downtrend. 




PAST PICKS: May 4, 2022

Brian Madden's Past Picks

Brian Madden, CIO at First Avenue Investment Counsel, discusses his past picks: Agnico Eagle Mines, CVS Health, and Quebecor.

Agnico Eagle Mines (AEM TSX)

  • Then: $76.09
  • Now: $69.91
  • Return: -8%
  • Total Return: -5%


  • Then: $100.57
  • Now: $74.05
  • Return: -26%
  • Total Return: -25%

Quebecor (QBR.B TSX)

  • Then: $29.51
  • Now: $31.89
  • Return: 8%
  • Total Return: 13%

Total Return Average: -6%