Richard Fogler's outlook on North American Equities (April 27, 2026)

Key Concepts

• Long-term Compounding: An investment philosophy focused on holding high-quality companies for 5+ years to benefit from growth, rather than timing market cycles.
• Price Dislocations: Market volatility that creates opportunities to purchase quality assets at lower valuations.
• Private Credit: A segment of the financial market involving non-bank lending; identified as a current area of concern but viewed as manageable by experts.
• AI Transformation: The shift of legacy tech companies (e.g., Oracle, Microsoft) toward AI infrastructure and software integration.
• Toll Road Business Model: Companies that provide essential infrastructure or services (e.g., TMX Group, Citigroup’s liquidity network) that competitors must use, ensuring consistent revenue.
• Return on Equity (ROE): A key metric used to evaluate a company's profitability and efficiency in generating earnings from shareholder capital.

1. Market Outlook and Economic Perspective

Richard Fogler, CIO at King West and Company, argues against attempting to forecast recessions or market bottoms. He notes that while "technical recessions" (two quarters of negative growth) are discussed, Canada has effectively experienced five years of negative GDP growth per capita. He emphasizes that the Canadian economy is inextricably linked to the U.S., which accounts for 20% of Canada's GDP, and suggests that economic competition with the U.S. is counterproductive.

• Investment Strategy: The firm maintains a concentrated portfolio (approx. 25 stocks in Canada, 25 in the U.S.) and focuses on holding through bear markets, which occur on average every 4–5 years.
• Market Philosophy: "The trick for an investor is to get on that line [the long-term upward trend of the market] and hold on."

2. Company Analysis and Case Studies

Oracle (Not held)

• Status: Transforming into an AI powerhouse with a massive increase in CAPEX ($50B vs. $25B last year).
• Risk: High-stakes transition; if the AI infrastructure investment fails to yield high returns, the company faces significant trouble.

KKR (Held)

• Performance: A long-term holding (since 2012) that has performed well despite recent volatility.
• Growth Drivers: Expansion into the retail market (potentially larger than the institutional business) and the scale of their AUM (Assets Under Management) growth.
• Private Credit: Acknowledged as the "elephant in the room," but Fogler believes defaults will be manageable and the sector will correct itself.

TD Bank (Held)

• Status: Recovering from a "money laundering fiasco."
• Outlook: Fogler views TD as one of the cheaper and better-managed Canadian banks. He dismisses the need to sell or move into covered call ETFs, citing the bank's strong dividend growth history.

Brookfield Corp (Held)

• Valuation: Trading at ~$60, while the sum of its public parts and high-quality real estate (Canary Wharf, Hudson Yards) suggests a value of $90+.
• Real Estate: Fogler notes that their high-quality office portfolio is currently undervalued by the market.

GFL Environmental (Held)

• Business Model: A stable, long-term contract-based waste management business.
• Acquisitions: The acquisition of Secure Waste is viewed as highly accretive. Fogler dismisses U.S. analyst concerns regarding the "oil patch" exposure, clarifying that it is a waste collection service, not an oil exploration business.

Microsoft (Held)

• AI Integration: The "Co-Pilot" product is a key competitive advantage because it integrates with the existing, massive databases of corporate clients.
• Security: AI is moving rapidly, and while it offers efficiency, it also introduces new risks regarding "hackability" that corporations are currently struggling to patch.

Citigroup (Held)

• Turnaround: CEO Jane Fraser is successfully shrinking the bank to focus on corporate/institutional business and high-net-worth individuals.
• Competitive Moat: Their money-trading business provides liquidity to 90+ countries, a network that is effectively "irreplaceable."

Smith & Nephew (Held)

• Sector: Medical services (orthopedics, wound care).
• Thesis: Trading at half the valuation of its competitor, Stryker. Fogler expects margins to improve as new management executes a turnaround, potentially doubling the stock price.

3. Notable Quotes

• "We don't worry too much about [bear markets]. We don't fret about them. We don't try to forecast them. What our strength is, is finding companies that we believe will compound their value through positive change." — Richard Fogler
• "The trick for an investor is to get on that line [the market's long-term upward trajectory] and hold on." — Richard Fogler
• "JP Morgan is the sine qua non of banks." — Richard Fogler

4. Synthesis and Conclusion

The core takeaway from the discussion is a disciplined, long-term approach to equity investing. Fogler advocates for ignoring short-term market "blips" and focusing on companies with strong management, defensible "toll road" business models, and clear paths to compounding value. Whether dealing with the AI transition in tech or the cyclical nature of banking and construction, the firm prioritizes fundamental business quality over macroeconomic timing.