Mike Archibald, vice-president and portfolio manager at AGF Investments Inc. in Toronto. Illustration by Joel KimmelThe Globe and Mail
Some investors are looking away from the U.S. to find growth, but money manager Mike Archibald remains bullish on the world’s largest economy, especially after the most recent earnings season.
“We saw an incredible first quarter of earnings being reported. It’s hard to foresee an environment in which stocks don’t do well when earnings are growing as aggressively as they are right now,” says Mr. Archibald, vice-president and portfolio manager at AGF Investments Inc. in Toronto.
He points to data from FactSet showing that more than 80 per cent of companies on the S&P 500 beat first-quarter revenue and earnings-per-share (EPS) expectations, with the growth spread across various sectors.
Although there are market risks, including the front-and-centre conflict in the Middle East, Mr. Archibald says fiscal and monetary stimulus will continue to drive broader business and consumer spending in the U.S.
“Our view is that the U.S. is a very good place to be – and we still see higher stock prices over the next six to 12 months,” says Mr. Archibald, who helps oversee about $23-billion in assets across five funds.
Still, he says not all sectors will outperform. Mr. Archibald, who co-manages the $12-billion AGF American Growth Class alongside Auritro Kundu, sees the most potential in information technology and industrial stocks, especially companies benefiting from spending on artificial intelligence (AI). He’s cautious on defensive sectors such as health care and consumer discretionary.
AGF American Growth Class, Series F – with its top five holdings Nvidia Corp. NVDA-Q, Alphabet Inc. GOOGL-Q, Amazon.com Inc. AMZN-Q, Corning Inc. GLW-N and Applied Materials Inc. AMAT-Q – has returned 14.3 per cent so far this year. Its one-year return is 33 per cent while its three- and five-year annualized returns are 28 per cent and 17.4 per cent, respectively. The performance is based on total returns, net of fees, as of May 8.
The Globe spoke with Mr. Archibald about three stocks he bought recently – all of which are tied to AI – and a sell in the health care sector:
Let’s start with the three buys. What are they?
Caterpillar Inc. CAT-N, the U.S.-based global leader in heavy equipment and power systems, is a stock we started buying in January and added throughout the first quarter. Our average price was US$661 a share.
Caterpillar gives us access to the traditional heavy industrial segments of the market, such as construction, mining and energy, which are all growing as commodity prices remain elevated and U.S. re-shoring and manufacturing activity pick up.
It has also successfully repositioned itself as a critical infrastructure provider for the digital age. The massive build-out of data centres and the need for large-scale, reliable power have been major drivers of Caterpillar’s power and energy segment. Revenue and earnings should grow above trend for the next three years.
GE Vernova Inc. GEV-N, a global leader in the energy transition, is a stock we bought in March this year at an average price of US$885 a share.
GE Vernova operates in three key segments: power, electrification and wind. It operates directly in the buildout of data centres by providing gas turbines and grid equipment for the massive number of AI data facilities being constructed in the U.S. and globally.
The super-cycle of demand for AI data centres makes it a key ‘picks and shovels’ power player for the industry, with a massive backlog, improving margins and visibility out for several years.
As demand and pricing power for its products continue to improve, GE Vernova has consistently beaten and raised guidance expectations, and we expect the company to generate significantly more free cash flow in the future, pointing to higher capital returns for shareholders in 2026 and beyond.
Corning Inc. GLW-N, a key electronic equipment and instruments player in the AI build-out theme, is a stock we bought in December last year at an average price of US$95 a share.
Corning provides fibre-optic cables and connectors to enable high-speed data transmission over longer distances with lower power requirements. With increasing data needs for AI queries, faster, more reliable bandwidth is required, which traditional copper can’t provide. Corning recently signed an agreement with Nvidia to be a key supplier, boosting its production capacity by more than 50 per cent.
Corning is well-positioned as a key AI infrastructure scaling partner, which should help drive its growth in the coming years. We expect further partnership announcements, which should lead to sustained 30 per cent earnings per share (EPS) growth rates for the next three years.
Name a stock you sold recently.
Boston Scientific Corp. BSX-N, the medical device company, is a stock we started selling in December last year and exited the position in the first quarter of this year. We owned the company for more than two years, buying it at an average cost of US$49 a share and selling it for an average cost of US$89.
We decided to sell it as part of our move away from health care and because of the company’s slower growth profile over the next few years.
Boston Scientific has gone from an average annual EPS growth rate of about 22 per cent from 2023 to 2025 down to projections of around 12 per cent from 2025 to 2028.
That turned out to be a good call because the stock has continued to weaken throughout the second quarter.
This interview has been edited and condensed.