Stock Picks for February 2025

Today is February 14th, 2025 and it’s time for some new stock picks!

Happy Valentine’s Day!

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Market Overview

Investors are digesting the latest economic data, with inflation remaining higher than expected, around 3%. They are also digesting the announcements and actions out of the new Administration in the US, with DOGE (the “Department of Government Efficiency”) making headlines about their ability to cut waste in the first couple of weeks of operation. Tariffs and possible trade wars with Canada, Mexico, China and Europe are being discussed.

Meanwhile, equity valuations remain high, with the Shiller Cyclically Adjusted Price-Earnings ratio around 38 times, approaching the all time high of 43.2 it hit at the 2000 bubble top.

S&P 500 Shiller CAPE ratio.

The US equity market is likely overvalued but it still remains one of the best places to invest. We find good companies at good prices there plus generally speaking investors “leave more money on the table” by trying to time the market than the losses they avoid by correctly predicting bear markets. Again, generally, those that can stomach bear markets get rewarded by very nice gains during the bull markets that inevitably come. Additionally, when sticking to good business bought at good prices, we generally feel confident adding to our investments even when the market takes their share prices down.

The Hershey Company

With all that in mind and completely coincidentally with the fact that’s it’s Valentine’s Day today, my first stock pick is going to be the Hershey company, symbol HSY on the NYSE. Hershey is a leading US confectionery manufacturer (around a $25 billion market), controlling around 36% of the domestic chocolate space (per Euromonitor). Beyond its namesake label, the firm’s mix has expanded over the last 85 years and now consists of 100 brands, including Reese’s, Kit Kat, Kisses, and Ice Breakers. Hershey’s products are sold in about 80 countries, albeit with just a high-single-digit percentage of sales coming from markets outside the US, including Brazil, India, and Mexico.

The company is very highly profitable but many investors are pessimistic about the stock as it missed analysts’ consensous earnings estimate last quarter and the stock has not kept pace with the market. I like buying at a discount. So for Valentine’s Day, I’m buying a cheap chocolate company!  I love that!

Bank of N.T Butterfield & Son

My second stock pick is Bank of N.T Butterfield & Son, symbol NTB on the NYSE, an off-shore bank and wealth management company based in Bermuda. It operates the business through three geographic segments, Bermuda, the Cayman Islands, the Channel Islands and the UK. The company offers banking services, comprised of retail and corporate banking, and wealth management, which consists of trust, private banking, and asset management.

What we look for from banks is high (12%+) and stable return on equity and decent valuation. This bank is delivering on the profitability front and trades at a decent valuation of 1.75 times book value. I like that.

Total Energies SE

My third pick is Total Energies SE, TTE on the NYSE. Headquartered in France, Total Energies is one of the so-called oil supermajors. The other ones are ExxonMobil and Chevron from the US, BP from Britain, Shell from the Netherlands and ENI from Italy. These large oil & gas companies are fairly mature and are seeking ways to maximize returns for shareholders. Having said that, this stock is primarily for income oriented investors to hold outside tax sheltered accounts such as RRSPs as the dividend for Canadian investors is subject to 15% withholding tax which is not recoverable. The withholding tax is recoverable outside registered accounts but the dividend is taxed as ordinary income at the highest tax rate. The dividend yield is around 5.4% and stable and I expect a 5% annual growth in book value over the next 10 years. I expect long term total return of around 10% per year from this stock.

Give Us a Call

As always, if you have questions about whether these stocks fit in your portfolio or if you have any other investment related questions, give us a call! 604-288-2084

Thank you!

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