Chris Blumas, Portfolio Manager at Raymond James Investment Counsel, shares his outlook on North American large caps. Focus: North American large caps. Top picks: Alphabet, Brookfield Infrastructure Partners, Mainstreet Equity.\n\nMARKET OUTLOOK: U.S. President Donald Trump’s One Big Beautiful Bill Act was signed into law on July 4. This piece of legislation was passed by the U.S. Senate by the narrowest of margins and is poised to increase budget deficits with huge spending increases slated for security and defense. In 2024, U.S. government spending was more than 50 per cent higher than the pre-COVID level of spending in 2019. This huge increase in government spending has been a major factor driving economic growth in the United States. Going forward, government spending in most developed economies is expected to play a key role supporting economic growth.\n\nDuring President Trump’s first term in office, he imposed tariffs on China that did not result in higher overall inflation. This time around, his tariffs target all his country’s trading partners. Despite this significantly more aggressive stance, inflation pressures in the United States have remained muted so far. Looking ahead, many economists believe that it could take up to 12 additional months for these higher costs to be fully reflected in consumer prices. However, many businesses could find it more difficult to pass along price increases as consumer budgets are showing greater strain after shouldering the most recent price increases associated with the COVID-19 pandemic.\n\nAll this uncertainty has the U.S. Central Bank sitting on its hands as it waits patiently to see how the inflation and employment transition over time. Given this uncertain backdrop, financial market volatility is likely to remain elevated as investors react to economic data and geopolitical events. While it’s difficult to know when this volatility will subside, history has proven that it pays to stay invested and remain mindful of company valuations. Over the long term, financial markets have rewarded patient investors and investors that have stayed invested and taken advantage of market volatility to achieve significantly better results than investors that have come in and out of the markets.\n\nGoing forward, I think it’s important for investors to remain well diversified and defensively positioned. In addition, I think investors should focus on companies that generate positive free cash flow and are self-sufficient from a financing perspective. Companies with strong, investment grade balance sheets and access to credit markets control their own destiny. These companies can endure tough times and are well positioned to create additional value for their owners by operating in a counter cyclical manner.\n\nTOP PICKS:\n\nAlphabet (GOOGL NASD): Alphabet is an investment holding company. The company’s main asset is Google which accounts for more than 90 per cent of Alphabet’s revenue. Google generates around 90 per cent of its revenues from online advertising and generates the remainder from the sale of apps and content. As advertising dollars continue to move online, Google is uniquely positioned to continue growing revenues and cash flow. On the negative side, Google continues to face significant antitrust pressure to lessen its dominance in the online search and search advertising markets. In addition, increased competition from AI-enabled search providers could limit search growth and negatively impact Alphabet’s market share over the long-term. The shares currently trade around 20 times forward earnings and have a trailing free cash flow yield of almost three percent. However, these valuation metrics do not account for the hidden value associated with the companies rapidly growing cloud services business and its portfolio of early-stage technology investments, which collectively generate negative operating income.\n\nBrookfield Infrastructure Partners (BIP-U TSX): Brookfield Infrastructure Partners (BIP) is a global infrastructure company with a diversified portfolio of assets. It operates through the following segments: utilities, transport (rails & terminals), midstream (pipelines & processing), and data (towers & data centers). The utilities and transport businesses are the most significant and accounted for around two-thirds of cash flows last year. BIP’s size, sponsor support, diversified operating model, and global platform are unique and allow the company to recycle capital opportunistically and grow cash flows at an above-average rate. The shares currently trade around 9 times funds from operations and have a dividend yield of 5.5 percent with a funds from operations payout ratio of around 50 percent.\n\nMainstreet Equity (MEQ TSX): Mainstreet is a real estate corporation that owns mid-market multi-family apartment buildings. The company is focused on the Western Canadian market and has more than 75 per cent of its total units in Alberta (55 per cent) and British Columbia (20 per cent). Mainstreet’s unique business model (structure, market focus, and operating capabilities) has allowed it to generate tremendous value for shareholders over the long-term. Going forward, the company has the capabilities and balance sheet required to continue growing and to take advantage of opportunities to increase densification across its portfolio. The shares currently trade at around 16 times forward funds from operations and at a five per cent premium to their International Financial Reporting Standards (IFRS) book value per share. Note: Mainstreet is a smaller market capitalization company and investors should consider using limit orders when buying and/or selling shares.

Chris Blumas’ Top Picks for August 12, 2025

Portfolio Manager Chris Blumas of Raymond James Investment Counsel provides an outlook on North American large-cap stocks, highlighting Alphabet, Brookfield Infrastructure Partners, and Mainstreet Equity as top picks. The article discusses the impact of President Trump’s 'One Big Beautiful Bill Act' on U.S. government spending and inflation, noting that despite increased defense and security spending, inflation remains muted. Blumas emphasizes the importance of diversification, defensive positioning, and investing in companies with strong free cash flow, investment-grade balance sheets, and self-sufficiency in financing. He notes that while Google faces antitrust and AI competition risks, its dominant position in online advertising and growing cloud services provide long-term value. Brookfield Infrastructure Partners is praised for its diversified infrastructure portfolio and strong dividend yield, while Mainstreet Equity is highlighted for its focus on mid-market apartment buildings in Western Canada and its ability to grow through densification.