Market Call: Brian Madden's outlook on North American Equities (June 5, 2026)

Key Concepts

• Market Sentiment: "Rabidly enthusiastic" demand for equities, characterized by record highs in the S&P 500 and TSX.
• Supply/Demand Dynamics: The impact of massive upcoming IPOs (SpaceX, OpenAI, Google) on market liquidity and investor capital allocation.
• "AI Witch Hunt" Trade: A market phenomenon where investors sell off companies perceived to be threatened by AI, which the speaker argues is often a misunderstanding of these companies' competitive moats.
• Total Return Investing: The strategy of prioritizing dividend growth and long-term compounding over short-term capital appreciation.
• Vertical Market Software: Specialized software essential for niche industries (e.g., veterinary clinics, golf courses), characterized by high customer retention.
• GLP-1 Agonists: A class of drugs for diabetes and weight loss (e.g., Zepbound, Mounjaro) driving significant growth in the pharmaceutical sector.

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Market Outlook and IPO Activity

Brian Madden highlights a "sea change" in market sentiment, noting that the current environment is defined by intense demand for stocks. A critical test for the market is the upcoming influx of supply from major IPOs, specifically SpaceX (targeting a $75 billion raise) and OpenAI. Madden notes that while these events garner attention, history suggests they do not always perform well in their "rookie season." He posits two potential outcomes: these IPOs could fuel further thematic enthusiasm or siphon capital away from existing index heavyweights.

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Analysis of Specific Equities

1. Financials

• Wells Fargo (WFC): Madden views it as a "middle of the pack" performer with a high efficiency ratio (operating expenses to revenue) compared to peers. He prefers JPMorgan Chase, citing its superior efficiency (52% vs. 67%) and status as the world's largest private-sector bank.
• Canadian Banks: Despite trading at 52-week highs, Madden advises against selling. He suggests trimming positions if they become an "undue concentration" in a portfolio, but emphasizes that their dividend growth and exposure to the U.S. economy provide a solid long-term total return.

2. Engineering and Infrastructure

• WSP Global: Madden defends the company against the "AI Witch Hunt" narrative. He argues that AI cannot replace the legal liability, physical on-site presence, and accountability of professional engineers. With a backlog growing at 15% and a strong position in grid modernization and data center builds, he views the current stock price (15x earnings vs. a 25x historical average) as a "buy the dip" opportunity.

3. Waste Management

• GFL Environmental: Madden considers GFL a "riskier and lower quality" operator compared to industry leaders like Waste Management. He advises investors currently holding Secure Energy (being acquired by GFL) to elect for cash if possible or sell before the deal closes.

4. Technology and Retail

• Shopify: Despite being a target of the "AI Witch Hunt," Madden remains bullish. He notes that Shopify’s value lies in its complex payments ecosystem and enterprise-level services, which are not easily replicated by generative AI.
• Lululemon: Madden is cautious, citing leadership turnover and increased competition from upstarts like "Alo." He advises staying away, noting that turning around a clothing brand is a difficult, long-term endeavor.
• Constellation Software: Described as a "narrowly focused private equity fund," Madden views the recent 50-60% drawdown as a buying opportunity for a company that has generated a 21,500% total return since its 2006 IPO.

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Past Picks Review

• Tourmaline Oil: While the stock has been range-bound, Madden remains bullish due to the strategic value of the Western Canadian Sedimentary Basin and the potential for LNG Canada expansion.
• Costco: Viewed as a "buy and hold forever" stock. Madden highlights its membership-based revenue model (high margin) and its successful transition into an omnichannel retailer.

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Top Picks for Current Market

1. Eli Lilly (LLY): A leader in GLP-1 drugs (55% of revenue). Madden highlights its 150-year history of innovation, strong patent protection (biologics), and aggressive M&A strategy.
2. Netflix (NFLX): Madden expects double-digit revenue growth and margin expansion. He points to their pricing power, ad-supported tier, and expansion into live events (sports/comedy) as key catalysts.
3. Constellation Software: Re-emphasized as a top pick due to its exceptional capital allocation track record and mission-critical software products.

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Synthesis and Conclusion

Madden’s core investment philosophy centers on risk management and long-term compounding. He warns against "trader stocks" like lumber producers, which are subject to cyclical tariffs and commodity volatility. Instead, he advocates for companies with "sticky" revenues, high barriers to entry, and the ability to deploy capital effectively. His overarching advice is to ignore the "AI noise" that threatens to disrupt established businesses and focus on companies that provide essential services or possess deep domain expertise. As he famously stated regarding JPMorgan: "When is a good time to own it? Any day that ends in Y."