Jason Donville, president & CEO of Donville Kent Asset Management, discusses his outlook for the markets. This time last year there were three major forces in your favour. Low valuations, declining interest rates and cash on the sidelines. 2024 turned out to be a great year and many stocks rebounded well and reached new highs. Valuations are now not as cheap as they were, but rates are still set to decline moderately in the U.S.
and more so in Canada and the amount of cash in bank accounts and money market funds is still at historic highs. Based on earnings growth, valuations and the direction of interest rates, we expect 2025 to be a good year in the market. The largest companies that are driving the stock market are growing earnings at roughly twice the market’s long-term rate plus their free cash flow margins are almost three times the historical rate. This type of profitable growth from such large businesses is significant not only because of the cash and value created directly by these companies but the knock-on effects for the thousands of smaller companies involved in this growth in some form. We’re focused on finding these up-and-coming compounders early. There are many interesting industries in Canada that are seeing accelerating growth like space and defence, healthcare technology and energy technology. Within these pockets of growth, we are still finding high growth, highly profitable companies at fair valuations. Enterprise Group (E TSX) Enterprise Group provides specialized energy site infrastructure and is made up of four business units. Each segment is highly profitable but their growth going forward is driven by their Evolution Power Projects (EPP) business, which was established in 2022. EPP is disrupting how sites are powered by using specific low emission natural gas turbines to displace high polluting and high-cost diesel generators. We recently participated in its capital raise, and we’re excited for them to deploy this capital in 202