Focus: North American Large Caps
Top Picks: Cash, Suncor, Eli Lilly
The inflation may prove more persistent than anticipated, with recent data showing a reacceleration. As long-term interest rates rise on a global scale, the cost of borrowing continues to climb. This creates a substantial challenge for consumers already managing record debt levels, which is why we believe consumer-oriented sectors and real estate should be avoided at this time.
In this climate, it is essential to maintain a focus on sectors that demonstrate relative strength and inherent inflation protection. For now, this involves looking beyond the crowded U.S. tech landscape. International markets, specifically Canada, Japan, and Latin America, are presenting attractive value and resilience. We are also identifying clear leadership in tangible, cash-generating businesses—particularly companies with pricing power in energy, financials, and commodities, as well as those with a proven history of consistent dividend growth.
When market participation narrows, playing strong defense is vital. By employing a disciplined sell strategy—such as using stop losses—and allowing cash balances to grow naturally as underperforming stocks are divested, investors can protect their capital. Barometer is currently maintaining a cash position of 25 to 35 per cent, depending on the specific mandate. This disciplined approach serves as a necessary safety net, preserving capital to deploy into new opportunities once the broader market health eventually recovers.
Holding a higher cash weight provides investors protection and optionality for when market conditions begin to improve.
In today’s environment of sticky inflation and elevated geopolitical uncertainty, Suncor Energy stands out as a highly defensive yet remarkably cash-generative investment. Commodities naturally appreciate alongside consumer prices, providing portfolios with a built-in hedge against diminishing purchasing power. Furthermore, Suncor’s vast reserves—boasting 30 billion barrels of contingent resources with zero exploration risk—offer a secure, domestic energy supply that is insulated from international flashpoints.
What truly distinguishes Suncor during periods of crude price volatility is its integrated business model. When global oil prices fluctuate due to geopolitical shocks, Suncor’s downstream refining operations—currently running at record throughput with capacity expanding—step in to capture strong refining margins, effectively smoothing out corporate earnings.
This operational stability, combined with long-life oil sands assets that require very low ongoing capital expenditure, translates into massive free cash generation. In the second quarter alone, free funds flow surged to $4.0 billion. Suncor is aggressively returning this capital directly to shareholders. Management recently accelerated monthly buybacks, pushing expected 2026 share repurchases to a massive $4.7 billion, while simultaneously growing their reliable quarterly dividend.
The company is executing this capital return strategy while operating from a position of pristine financial strength. Net debt to capital has plummeted to just 8.5 per cent. With corporate breakeven costs targeted to fall to a remarkable US$38 per barrel by 2028, Suncor offers investors a rare and compelling combination: robust inflation protection, a structural buffer against global energy shocks, and a rapidly compounding stream of shareholder returns.
Healthcare has recently become a core focus for our portfolios, driven by resilient structural growth, a favorable regulatory environment, and a significant tailwind from artificial intelligence.
Within this leading sector, Eli Lilly (LLY) stands out as a dominant, accelerating force.
The primary engine of Lilly’s growth is its revolutionary GLP-1 franchise, featuring blockbuster treatments like Mounjaro for diabetes and Zepbound for obesity. Capturing a commanding 55 per cent of the market, this segment is growing at an incredible 73 per cent year-over-year. With the injectable GLP-1 market projected to expand from roughly US$33 billion in 2025 to US$92 billion by 2030, Lilly is perfectly positioned to capture that upside. Furthermore, their once-daily oral pill, Foundayo, is actively taking market share. It provides a more accessible alternative that still commands 90 per cent-plus margins, vastly expanding their total addressable market as Medicare programs increasingly support GLP-1 usage.
Beyond its current offerings, Lilly boasts a robust pipeline of over 100 clinical-stage drugs. The crown jewel is Retatrutide, a next-generation “triple agonist” expected to hit the market next year. By targeting three distinct hormones—compared to competitor Novo Nordisk’s one—it promises unmatched efficacy and significant premium pricing power.
What truly solidifies Lilly as a “good, getting better” revaluation candidate is its aggressive integration of artificial intelligence (AI). Partnering with Nvidia to build “LillyPod”—the largest supercomputer in the pharma industry—Lilly uses AI to rapidly design molecules and engineer proteins. This technology cuts two to three years off traditional clinical development times, significantly reducing costs while dramatically accelerating life-changing medical breakthroughs.
