Market Call: Brian Madden's outlook on Technology Stocks (May 7, 2026)

Key Concepts

• Market Drivers: Earnings growth, AI-driven demand, and geopolitical developments (Middle East conflict).
• Energy Sector: Impact of supply chain disruptions on oil/gas prices and the long-term outlook for Canadian energy infrastructure.
• Investment Strategy: Fundamental research, technical analysis, and quantitative (machine learning) tools.
• Data Center Buildout: The structural increase in power demand driving utility and hardware valuations.
• Vertical Market Software: Niche, mission-critical software businesses with high barriers to entry.

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1. Market Overview and Economic Outlook

Brian Madden (CIO, First Avenue Investment Counsel) attributes the current market highs to a "barn burner" earnings season, with S&P 500 companies reporting 27% year-over-year growth.

• AI Surge: A recovery in "Magnificent Seven" and hyperscaler stocks following Q1 sell-offs.
• Geopolitical Impact: The Middle East conflict has choked global supplies of LNG, oil, and fertilizers. Madden notes that while markets are pricing in a resolution, energy prices will likely settle higher than pre-war levels due to permanent infrastructure damage and long-term supply chain interruptions.

2. Sector Analysis and Case Studies

Energy and Utilities

• Capital Power: A $10B market cap utility transitioning from coal to natural gas and renewables. It is a strong long-term hold due to its 4% dividend yield and 7% compounded annual dividend growth. It benefits from the U.S. data center power demand.
• ARC Resources: Following Shell’s acquisition bid, Madden advises shareholders to hold until the gap between the current price and the offer price closes, noting this as a sign of renewed foreign interest in Canadian energy.
• Trican Well Service: Viewed as "best-of-breed" in the well-service industry. Madden highlights the strategic acquisition of Ironhorse Energy Services and the potential for increased activity in the Western Canadian Sedimentary Basin as LNG terminals come online.

Technology and Hardware

• Arista Networks: Experienced a sell-off due to conservative guidance caused by supply chain bottlenecks (wafers, silicon, memory). Madden views this as a "first-class problem" where demand outstrips supply and considers the pullback a good entry point.
• Constellation Software: Despite a 50% pullback over the last year, Madden maintains a "buy" conviction. He argues that the "vibe coding" (AI-generated code) threat is overstated because these companies provide mission-critical support, security, and maintenance that small businesses cannot replicate.

Pharmaceuticals and Retail

• Novo Nordisk/Eli Lilly: Madden is cautious regarding the GLP-1 (weight loss) market due to price-volume dynamics and patent competition. He currently favors Eli Lilly for its broader drug pipeline.
• Home Depot: Currently in the "consumer discretionary" category. Madden notes it is highly interest-rate sensitive and tied to the housing market. He expects a rebound as the company clears inventory and continues its strategic acquisitions (e.g., SRS Distribution).

3. Investment Methodology

Madden describes his firm’s process as "multifaceted":

1. Deep Fundamental Research: Analyzing company financials and competitive moats.
2. Technical Analysis: Reviewing charts to identify entry/exit points.
3. Quantitative Analysis: Utilizing machine learning tools to identify patterns.
4. Macro Thematic Research: Aligning ideas with global economic expectations.

4. Notable Quotes

• "Data are just the plural of anecdotes." — Brian Madden, regarding the volatility of energy prices.
• "[Constellation Software is] like a private equity fund masquerading as a listed software company." — Brian Madden.
• "Banking is technology and scale advantage." — Madden, explaining why he prefers "Money Center" banks like JP Morgan over regional players.

5. Top Picks (New Recommendations)

• Agnico Eagle (TSX): Canada’s largest gold miner. Madden highlights its 99% gold revenue purity, low political risk in its operating jurisdictions, and a track record of beating earnings estimates in 29 of the last 30 quarters.
• McKesson Corp (NYSE): A dominant player in the pharmaceutical distribution oligopoly. It is a "need, not a want" business with a 25-year history of dividend payments and high returns on invested capital.
• Costco (NASDAQ): Despite being "expensive every day," Madden justifies the investment through its 92% member retention rate, efficient supply chain, and superior same-store sales performance.

Synthesis/Conclusion

The market is currently driven by a combination of strong fundamental earnings and structural shifts in energy and technology. Madden emphasizes that investors should look past short-term volatility—often caused by supply chain "hiccups"—and focus on companies with strong moats, such as those involved in the data center buildout or mission-critical software. He remains bullish on Canadian energy and banking, provided the companies demonstrate operational discipline and scale.