In this note, we present our Top 30 Global Ideas for Q3 2022. This list remains one of high-conviction, long-term ideas, with quarterly updates that enable dynamic changes into names that we think offer higher- conviction upside potential.

Since publishing our Q2 update on April 4, 2022, the Top 30 list has delivered a total return of -17.4% (in USD terms) versus our benchmark, the MSCI World Index, at-15.6%. Year-to-date, the list has delivered a total return of -14.0%, above the benchmark at -20.1%, and since inception of our quarterly list at year-end 2019, the Top 30 has delivered a total return of +20.8%, above the benchmark at +13.2%.

Recession risk, rising rates and inflation remain key areas of focus across sectors. As of our latest US Equity Strategy RBC Macroscope update (published June 6, 2022), on a 6-12 month view, our Strategy team continues to believe that stock market leadership is transitioning from Value to Growth and that defensive areas have started to look over-owned and overvalued, while acknowledging near-term risks to that view should equities start to price in a full recession.

With the changes to the Top 30 list this quarter, we switch into best ideas that we also view as offering more attractive positioning against the current macro backdrop. On an equal-weighted basis, we increase the Top 30 list’s Real Estate and Utilities exposure to overweight versus the MSCI World Index, maintain a modestly overweight position in Financials, and remain notably overweight Energy and Industrials, driven by the inclusion of individual high-conviction names under coverage.

In Real Estate, we add Communications Infrastructure company American Tower (AMT US), which we think is well positioned to benefit from mobile 5G spending by its carrier customers, with accelerating site leasing trends in its core US market as well as many of its international markets. In 2023 and beyond, we believe AMT should post 10%+ AFFO/share growth and an attractive dividend, coupled with inflation protection in most of its international markets given its CPI-linked lease escalators.

In Utilities, we add independent power producer The AES Corporation (AES US). We believe AES offers a compelling decarbonization story, potential to become a leader in the clean energy producer space, and attractive valuation relative to defensive utility peers.

In Health Care, we add Lonza Group (LONN SW), which we think is positioned to benefit from multi-year structural tailwinds in biologic pharmaceutical manufacturing. We see life science funding concerns as overblown for CDMOs, and our recent supply/demand analysis suggests the long-term growth outlook is de- risked. In our view, the shares appear attractively valued at current levels vs. peers and due to the high return on incremental invested capital (25-30%), as well as opportunities to invest using its strong balance sheet. We remove robotic-assisted surgery company Intuitive Surgical (ISRG US) as we see potential for a tightening of hospital capital spending in the near term, elongating sales cycles. That said, we maintain an Outperform rating and continue to view ISRG as uniquely positioned for a multi-year runway of growth.

In Information Technology we replace Twilio (TWLO US) with Veeva Systems (VEEV US), which we view as offering defensive attributes (Veeva sells mission critical software to life sciences, a defensive industry), multiple growth drivers, a leading financial model, and reasonable valuation.

In Consumer Discretionary, we remove Amazon.com (AMZN US) as we see risk to H2/22 outlook in the event of marginal consumer softness and associated excess capacity, while maintaining an Outperform rating. In Materials, we remove building solutions manufacturer Louisiana-Pacific (LPX US) given potential for near-term headwinds associated with higher interest rates and slowing North American housing growth, while our long- term positive thesis remains intact.

This report contains further detail on our investment thesis for each of the names on the Q3/22 list beginning on page 7. We encourage you to reach out to our team to continue the dialogue regarding their investment ideas.

We see our fundamental work being increasingly augmented by our four flagship research products: RBC Fusion^TM, RBC ^TM, RBC Elements^TM, and RBC ESG Stratify^TM. RBC Fusion offers peer-reviewed, unique reports on our highest-conviction, most-differentiated calls. RBC Imagine is a series of fundamental research reports focused on disruptive forces that we believe will transform the world. Our RBC Elements work features proprietary insights generated in collaboration with our internal data science team. With RBC ESG Stratify, we separate the signal from the noise on ESG matters with precise, analytical research.