January 22, 2025
January 2025
1. Introduction
Welcome to this month’s edition of InnoFocus. As we kick off the year, I’m excited to share that our portfolio, concentrated in 20 high-conviction growth ideas, had an exceptional performance last year. These carefully selected positions—each aligned with our long-term investment philosophy—significantly outperformed expectations, reflecting the strength of our focused strategy.
As we move into the new year, we remain committed to identifying high-growth opportunities across key sectors while maintaining a disciplined approach to risk management. In this edition, we’ll take a closer look at the portfolio’s performance, the trends shaping the market, and how we’re positioning for continued success. Thank you for trusting us to guide your investment journey.
2. Market Overview
The U.S. economy continues to show impressive resilience, driven by strong consumer spending, robust corporate earnings, and ongoing economic growth. Despite global uncertainties, key indicators such as GDP growth, employment figures, and consumer confidence remain solid, reinforcing the U.S. as a top destination for growth-focused investments.
On the other hand, the Canadian economy is exhibiting signs of weakness, with slower growth and challenges in sectors such as housing and consumer spending. While Canada benefits from its strong natural resources sector, the broader economic environment has been underperforming relative to the U.S.
Interest rates in Canada remain meaningfully lower than in the U.S., creating an increasingly attractive yield differential for U.S. investments. Furthermore, recent geopolitical tensions involving the U.S. have added a layer of complexity to the global investment landscape, making U.S. assets and the U.S. dollar more appealing as safe-haven investments.
Given these factors, we are strategically favoring U.S. investments and maintaining a bullish stance on the U.S. dollar in the near term. This approach aligns with our goal of capitalizing on the strong economic momentum in the U.S. while managing the risks presented by global volatility.
3. Featured Recent Investment: ASML Holding N.V.
Executive Summary
ASML Holding N.V. (ASML) stands as a critical player in the semiconductor industry, enjoying a near-monopoly in the lithography market essential for the production of advanced microchips. This report highlights ASML’s unparalleled market position, robust financial performance, strong management, and significant growth prospects fueled by increasing demand for generative AI and cloud computing. Given these factors, ASML represents a compelling investment opportunity for long-term growth.
Key Investment Highlights
- Monopoly-like Position in Lithography Market
ASML is the sole supplier of Extreme Ultraviolet (EUV) lithography machines, a critical technology for producing advanced semiconductor chips at the cutting-edge 5nm and 3nm nodes. Its proprietary technology and high barriers to entry have solidified its dominance, making ASML indispensable to leading foundries and chipmakers, including TSMC, Intel, and Samsung. - Strong Financial Performance
In FY2023, ASML reported revenue of €27.6 billion and net income of €7.8 billion, reflecting a YoY net profit growth of 28.44%. Gross margins currently exceed 50%, driven by high average selling prices (ASPs) and strong operational efficiencies. ASML’s EUV systems are priced at approximately $380 million USD per unit, with significant backlog orders showcasing strong demand. - Exceptional Management and Financial Stability
ASML’s dominant position in the lithography market, robust financial health, and alignment with transformative trends such as AI and cloud computing make it an exceptional investment opportunity. The company’s innovative capabilities and critical role in semiconductor manufacturing ensure sustained long-term growth. The management team has a proven track record of strategic execution, maintaining innovation leadership and effectively managing supply chain complexities. ASML boasts a robust balance sheet with low debt levels and significant cash reserves, ensuring financial flexibility to invest in R&D and scale operations. - Growth Tailwinds from Generative AI and Cloud Computing
The global AI and cloud computing boom is driving unprecedented demand for high-performance semiconductors, which require ASML’s advanced lithography solutions. As chipmakers race to enhance computing power and energy efficiency, ASML’s EUV technology remains pivotal to meeting these demands. - Future-Proof Innovation
ASML continues to innovate with its High-NA EUV lithography systems, set to revolutionize chipmaking further by enabling sub-2nm node production. These advancements position ASML to capture even greater market share as the semiconductor industry evolves. ASML’s stock is trading at a forward P/E ratio of 30, reflecting investor confidence in its growth trajectory. Comparatively, the company’s valuation is justified by its dominant market position, high margins, and significant growth prospects. The stock is not cheap, but the valuation is reasonable given the growth, making it an attractive GARP (growth at a reasonable price) stock for us. - Geopolitical Risks
Export restrictions to certain regions could impact revenue. Mitigation includes diversifying the customer base and lobbying for favorable trade policies. - Competitive Threats
While currently unrivaled, potential competitors could emerge. ASML mitigates this risk by maintaining its R&D investment and technological edge. ASML believes that competitors would be at least 15 years behind on deep ultra-violet lithography for next-gen chips.
4. Model Equity Portfolio (As of January 10, 2025)
| Ticker | Name | Current Weight |
| NVDA | NVIDIA Corporation | 7.25% |
| TSM | Taiwan Semiconductor Manufacturing Company Limited | 5% |
| AVGO | Broadcom Inc. | 5% |
| CRWD | CrowdStrike Holdings Inc. | 2.5% |
| MSFT | Microsoft Corporation | 7% |
| GS | The Goldman Sachs Group Inc. | 5% |
| BRKB | Berkshire Hathaway Inc. | 5% |
| BLK | BlackRock Inc. | 5% |
| META | Meta Platforms Inc. | 5% |
| GOOG | Alphabet Inc. | 7% |
| WMT | Walmart Inc. | 3% |
| AMZN | Amazon.com Inc. | 7% |
| UBER | Uber Technologies Inc. | 5% |
| ENB | Enbridge Inc. | 5% |
| LULU | Lululemon Athletica Inc. | 5% |
| SPGI | S&P Global Inc. | 5% |
| LVMHF | LVMH Mot Hennessy – Louis Vuitton Socit Europenne | 5% |
| ASML | ASML Holding N.V. | 2.5% |
| TMO | Thermo Fisher Scientific Inc. | 2.25% |
| FBTC | Fidelity Bitcoin Fund | 1% |
| Cash (USD) | 5.5% |
5. Disclaimer
This information has been prepared by Luc LeBlanc, CFA who is a Portfolio Manager] for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this [presentation, newsletter, text, post] comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.