Chill Picks, Hot Returns: What Brian Madden’s Watching
Brian Madden’s market moves reveal why strategy, structure, and staying power still dominate North American investing in 2025.
Brian Madden, chief investment officer at First Avenue Investment Counsel, isn’t easily shaken by market noise. As economic growth forecasts are revised downward and the earnings outlook dims slightly, he remains clear-eyed and deliberate. His focus is razor-sharp: quality North American equities that demonstrate long-term resilience, fundamental strength, and compelling narratives. Despite macroeconomic headwinds and the specter of geopolitical and trade policy turbulence, Madden has not retreated. He has recalibrated, not panicked. And his latest top picks—Constellation Software, Lennox, and the Bank of Montreal—are a masterclass in strategic investing.
The broader market context is anything but simple. In the United States, GDP growth has been revised down to 1.4 percent for the year, slipping from the earlier projection of 2.1 percent. Canada has followed a similar trajectory, with forecasts falling to 1.2 percent from 1.8 percent. At the same time, analysts’ earnings growth projections have been trimmed to a range of six to seven percent, down sharply from the bullish 12 to 13 percent estimates floated just a few months ago. This retreat in expectations mirrors a more cautious outlook from economists and investors alike. But it hasn’t derailed the performance of major equity indices, which have rebounded sharply from mid-February and early April lows—driven by growing hopes for trade stabilization and potential tax cut extensions in the U.S.
Staying the Course: The Power of Dual Mandates
Madden’s disciplined dual-mandate strategy—one rooted in dividend-growing stalwarts and the other in momentum-driven leaders—has proven particularly adept in this environment. While many managers find themselves scrambling in response to volatile conditions, he’s sticking with companies that don’t just survive market shifts—they capitalize on them. In his Dividend Growers portfolio, he favors firms with robust balance sheets, durable competitive advantages, and the ability to hike payouts year after year. On the Momentum side, he’s zeroing in on firms that dominate fast-growing, structurally advantaged sectors and deliver outsized gains backed by strong price action.
Constellation Software: Quietly Dominating
At the top of his list is Constellation Software. This Toronto-based juggernaut has quietly become one of the most impressive compounders in the North American market. Unlike many tech firms, Constellation doesn't chase headlines or court analysts. Its leadership team is notoriously tight-lipped, preferring to let performance speak. And what a statement it makes. With a 24 percent compound earnings growth rate over the last decade and a mind-blowing 36,000 percent total return since its 2006 IPO, Constellation has redefined what a roll-up strategy can achieve in the software space.
Its formula is elegant in its simplicity: acquire vertical market software firms that are mission-critical but often overlooked, then improve margins and unlock growth through operational discipline. These are not flashy unicorns or high-burn ventures. They're reliable businesses serving niche industries—municipal services, healthcare, transportation, and more. With the shares currently trading at 40 times expected earnings, some may balk. But Madden sees that premium as fully justified—backed by rare consistency, capital efficiency, and a management philosophy that values long-term wealth creation over short-term noise.
Lennox: Riding the Climate Curve
Next is Lennox, a name that might not scream excitement at first glance. But dig deeper, and it becomes clear why this HVAC heavyweight is turning up the heat for investors. As climate change intensifies, demand for air conditioning is surging—not just in traditionally hot markets, but in regions that once considered AC a luxury. This structural shift is reshaping the entire industry, and Lennox is well-positioned to ride the wave.
Roughly 75 percent of the company’s revenue comes from replacement units, with the remainder split between new construction and parts servicing. That built-in resilience means even in slower housing markets, Lennox’s cash flow remains robust. But 2025 has brought even more tailwinds. A new U.S. regulation phased out the use of R410-A refrigerants in favor of greener alternatives, boosting Lennox’s pricing power and mix. Add in a new, state-of-the-art manufacturing facility and a focused plan to improve margins, and the result is a company poised for low double-digit earnings growth. Madden notes the firm’s 12 percent compound dividend growth over the last decade as a benchmark for what’s to come.
Bank of Montreal: Cross-Border Banking Muscle
Last on Madden’s radar is the Bank of Montreal. Often overshadowed by its bigger Canadian peers, BMO is quietly building a formidable North American footprint. With its acquisition of Bank of the West, BMO is now among the 15 largest banks in the United States, with a physical presence in 32 states. That scale is more than symbolic—it gives BMO the kind of cross-border leverage few other Canadian financial institutions can match.
The bank’s strength lies in commercial lending, both in Canada and the U.S., and it's complemented by a sizeable wealth management operation and capital markets arm. After some recent softness in return on equity, BMO has laid out a clear strategy to return to mid-teens ROE through better balance sheet optimization and operational efficiency. Madden sees upside in both earnings growth and valuation re-rating. With the stock trading at just 1.3 times book value, and dividend growth continuing at a steady seven percent annual clip, BMO presents a classic case of low downside risk and asymmetric upside potential—exactly the kind of opportunity long-term investors crave.
Conclusion: Steady Hands Win in Shaky Markets
Brian Madden’s picks reflect a deep conviction in fundamentals, but also a keen awareness of macro shifts. Constellation Software offers long-term compounding power backed by quiet execution. Lennox benefits from undeniable secular tailwinds and operational savvy. And Bank of Montreal brings scalable, diversified strength to a banking sector that remains underappreciated. These aren’t moonshots or fads—they’re durable plays in a market that rewards discipline. For investors looking to ride out uncertainty without giving up on performance, Madden’s picks offer a strong blueprint.