Chris Blumas’s Top Picks for Feb. 11, 2026
Published:
Chris Blumas, Portfolio Manager, Raymond James Investment Counsel
Focus: North American Large Caps
Top picks: Thomson Reuters, Descartes Systems, Constellation Software
MARKET OUTLOOK:
In early 2025, President Trump’s One Big Beautiful Bill Act (OBBBA) was signed into law.
This legislation has led to greater U.S. government budget deficits with huge spending increases for border security and defense. Last year, U.S. government spending was more than 50 percent higher than the pre-covid level of spending in 2019. This huge increase in government spending is not unique to the U.S as developed countries around the world have also stretched their budgets to support their economies and adjust to the new realities of global trade. Overall, government spending has been a major factor driving global GDP growth and this is poised to continue over the medium term.
While the announcement of the federal funds rate captures the most attention, in a press conference late last year, U.S. Federal Reserve Chairman Jerome Powell confirmed that the central bank has started expanding its balance sheet and has transitioned to an easing of monetary policy. This is a significant policy reversal that should not go unnoticed by investors. Growth in government debt is a crucial factor in determining how much money the Federal Reserve creates and if they do not monetize enough of the government’s new debt, market liquidity will tighten, bond yields will increase, and the U.S. economy could start to contract.
Given this accommodative macroeconomic backdrop, it is likely that asset prices will remain high and if the Federal Reserve is forced to act more aggressively, it could push asset prices higher. While it is difficult to know how things will play out over the short term, history has proven that it pays to stay invested and remain mindful of company valuations. Over the long term, financial markets have rewarded patient investors and investors that have stayed invested and taken advantage of price dislocations have achieved significantly better results than investors that have come in and out of the markets.
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TOP PICKS:
Thomson Reuters (TRI TSX)
Thomson Reuters is a leading provider of specialized business information. The company generates most of its revenues (approximately 75 per cent) from the North American marketplace and has three main operating segments (legal professionals, corporates, and tax, audit, and accounting professionals). Last year, Thomson Reuters’s “Big 3” segments accounted for more than 80 percent of revenues and the remainder was generated by its news and global print businesses.
Over the last year, the shares of Thomson Reuters are down by around 50 per cent as fears around AI have negatively impacted the company. Going forward, these fears could be misplaced as the company has a number of competitive advantages that may allow it to maintain and potentially deepen its moat. Thomson Reuters has the proprietary content and staff expertise required to deliver professional results. While AI or large language models (LLMs) are very good at automating general tasks, they do not have the content or people required to compete with Thomson Reuters and obtaining these assets would require a massive upfront investment for a product market that is relatively small.
On the positive side, Thomson Reuters has been incorporating AI tools across its product suite and within its technology development process and is likely to be a prime beneficiary of AI over the long term. In addition, the company has the balance sheet and cash flow characteristics required to continue investing in its products and generating value for its shareholders. The shares currently trade around twenty times forward earnings and have a trailing free cash flow yield of around 5.3 per cent.
Descartes Systems (DSG TSX)
Descartes is a logistics and supply chain management software provider with a global presence. The company generates more than 90 percent of its revenues using a software-as-a-service (SaaS) pricing model. The United Sates is Descartes largest market and accounted for almost 70 percent of revenues last year.
Over the last year, the shares of Descartes are down by around 50 per cent as fears about trade uncertainty and AI have negatively impacted the company. The chaotic trade environment led to strong demand growth and record profits in the prior quarter and this positive momentum is likely to continue in subsequent quarters. Descartes operates a logistics network that connects supply chain participants. The connections and data that emanate from this network is very valuable to its customers and in the words of CEO Ed Ryan “there hasn’t been a new network entrant in 20 years”.
On the positive side, AI allows Descartes to offer new products and services that leverage its network and/or data. In addition, it also allows the company to run its operations more efficiently.
During prior periods of economic weakness, the management team at Descartes has been opportunistic and acquired competitors with complimentary capabilities. Currently, the company has a strong balance sheet with no long-term debt and around $280 million in cash available for opportunistic initiatives. The shares currently trade around 23 times trailing cash flow and have a trailing free cash flow yield of around 4.2 percent.
Constellation Software (CSU TSX)
Constellation Software is an enterprise software consolidator with a global presence. Last year, the company generated almost 90 per cent of its revenues outside of Canada. Constellation has six operating subsidiaries that function as independent businesses with a common capital allocation framework. This decentralized operating model has allowed the company to complete more than a thousand acquisitions since its IPO in 2006. Constellation typically targets smaller companies that are too small to attract the interest of other IT conglomerates or private equity firms.
Over the last year, the shares of Constellation Software are down by around 50 per cent as fears around AI have negatively impacted the company. The company has historically focused on smaller acquisitions in industries that are more mature and slower to adapt to change. The size and diversification associated with Constellation’s product markets is a significant defense because many of its customers are too small and may have no financial incentive to consider an alternative product if one exists. In addition, many of the company’s customers lack the scale and/or financial resources to build and maintain software internally and depend on Constellation to enhance the products they use.
On the positive side, it is now more cost effective for Constellation to further customize its software and adopt AI features for customers and prevent them from transitioning to more advanced systems.
Over the years, the company has expanded its operating infrastructure so that it can continue targeting smaller acquisitions and continue compounding cash flows at an above average rate. Over the last three years, the compound annual growth rate for cash flow per share is 19 per cent. The shares currently trade around fourteen times trailing cash flow and have a trailing free cash flow yield of around 4.7 per cent.
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Source
https://www.bnnbloomberg.ca/markets/2026/02/11/chris-blumass-top-picks-for-feb-11-2026/
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