Many U.S. investors ignore investment opportunities in Canada, despite the close proximity and strong cultural and business relationships between the two nations. However, several MoneyShow.com contributors are eager to venture north of the border to uncover investments that often fall under the radar of their Wall Street peers.
Gavin Graham, Internet Wealth Builder
Canada’s second-quarter GDP posted a blowout number of 4.5% annualized growth with the economy displaying strength on virtually all fronts.
Royal Bank yields just over 4% and remains a buy for its strong capital, market-leading position, and increasing presence in wealth management.
TD Bank is Canada’s second-largest bank, with a large U.S. retail presence, as well as owning 82% of discount broker TD Ameritrade. It has particular strength in retail banking and also has a strong presence in wholesale banking.
The dividend payment remains at $0.60 a quarter, after the 9% increase in March, giving the stock a yield of 3.6%. TD Bank remains a buy for its growing U.S. presence, strength in Canadian retail and professional management.
Benj Gallander, Contra the Heard
One of the reasons for our 26.9 percent annualized returns over the past five years is we frequently choose turnarounds before they happen. In particular, we scout for stocks with better than 100 percent upside.
One company that we have purchased is Blackberry, a much smaller player in the tech sector than it used to be. Our take is that CEO John Chen has been setting goals and hitting them. He forecasts growth in software and services in fiscal 2018 of 15 percent. That is without acquisitions.
This outfit is backed by the deep pockets of
The cash kitty is pretty fat. An arbitrated settlement with
Recently the company received approval to buy back 6.4 percent of its float. That demand could boost the trading price.
In addition, it might help that Andrew Left of Citron Research recently suggested that Blackberry would make an excellent takeover target. If that happens, it would likely be at a hefty premium. A double in the stock price from this level seems reasonable.
Matthew Castel and Peter Mantas, Logo LP
Savaria is a global leader in mobility solutions, ranging from platform lifts, stairlifts and residential and commercial elevators. It generates roughly $125 million in revenue and has a stated goal of $500 million in 5 years.
The company has increased cash flow by 15-fold since 2008, increased the dividend by 38% over the most recent quarter, and has strong internal returns with return on equity north of 12% in the trailing 12 months.
The company has a market cap of $576 million and has been on an acquisition spree over the last few years, particularly focused in the U.S. markets.
The company acquired Spin Master for $109 million and Visilift LLC for roughly $3.5 million, both of which are expected to grow Savaria's revenues by over 70%.
Although this is a volatile name in the short term and the company will go through some growing pains, we believe the company has demographic tailwinds, interesting economics and a scalable strategy.
At current price to sales, we expect the company to conservatively hit $1 billion market cap over the next 4-5 years, representing a 20% per year return.
Brit Ryle, The Wealth Advisory
Smart Real Estate Investment Trust — known as SmartREIT — invests in commercial real estate — with a focus on shopping malls and outlet centers. It is the largest landlord to Wal-Mart in Canada.
This is one of the only brick-and-mortar retail-related investment I recommend. In addition to Wal-Mart, SmartREIT has a bunch of other big-name customers that keep its real estate nearly to capacity.
For the past five years, occupancy rates haven’t wavered far from 99%. Even the latest additions to its portfolio have been filling to that level within weeks of purchase.
The stock price is down over the past month, but that’s just an opportunity to add more shares. I’m maintaining my rating of Strong Buy under $35. The 12-month price target is staying at $50.
Elizabeth Blessing, The Complete Investor
We also were impressed by recent acquisitions that seem shrewdly calculated to increase revenue and income over the shorter term while positioning the company for organic growth over the longer term.
In June, Canadian Imperial completed the purchase of Chicago-based PrivateBancorp for $5 billion; this gives it access to the wealth management business, a segment it sees as a fertile growth area.
In a further step to bolster its wealth management operations, the bank struck a deal in July to acquire the Chicago-based firm Geneva Advisors for an initial $135 million. Canadian Imperial is our latest Buy recommendation for income and value investors.
Dr. Carla Pasternak, Dow Theory Letters
In hunting for attractive foreign bank stocks, which offer a generous and sustainable income stream, we found a Canadian turnaround pick with promising growth prospects.
Canadian Imperial Bank of Commerce is the smallest of Canada's big five banks. Despite an aggressive acquisition strategy, it has a healthy balance sheet. Earnings are forecast to rise about 7% this year to $8.73 per share, driven by acquisitions and higher interest rates in Canada.
The shares currently yield 4.8%. Dividends are paid in Canadian dollars and automatically converted into U.S. dollars at the current conversion rate in a U.S. brokerage account.
Roy Ward, Cabot Benjamin Graham Value Investor
The U.S. stock market has been overvalued for quite some time. Canadian stocks, on the other hand, have been selling at very reasonable prices
We've added two Toronto-listed Canadian stocks to our value-focused model portfolio. Both companies are poised to participate in the economic resurgence in Canada.
Avigilon Corp. is a leading manufacturer of network-connected video surveillance systems, cameras, and video analytics based in Vancouver. Customers include police departments, schools, hospitals, prisons, airports and public transportation systems.
Earnings growth path has helped propel the stock price substantially higher during the past nine months and bodes well for the future. The P/E multiple of 15.1 is easily justified by Avigilon’s growth prospects.
Alimentation Couche-Tard is the leader in the Canadian convenience store industry, based in Laval, Quebec. In the U.S. under its Circle K brand, the company is one of the largest independent convenience store operators.
Couche-Tard has been very active on the acquisition front, which has enabled the company to grow sales and earnings at a steady, rapid clip during the past 37 years.
The company boasts a strong balance sheet and produces abundant cash flow. With a P/E of 19.1 times current EPS, and expected five-year earnings growth of 16.5%, the shares are very reasonably priced.
Ari Charney, Investing Daily’s Utility Forecaster
Canadian utility
What’s driving this action? With lack of opportunities up north, companies looking for new growth have to head south.
Following this latest deal, there’s now just one Canadian utility giant that has yet to make a play for a U.S. utility —
Of course, that doesn’t mean the company has to make such a move. But let’s suppose management is looking to extend the company’s footprint to the U.S. Where to look?
When identifying potential utility pairings, it always makes sense to start with companies that operate in nearby or adjacent service territories.
In addition to location, we narrowed our search to stocks with market caps below $5 billion. And, a potential target must offer the prospect of strong earnings growth at a reasonable value.
With these details in mind, the three companies that could attract Canadian Utilities’ attention are Allete,
We’d never buy a stock for its takeover potential alone. We only recommend stocks that we’d be comfortable holding through thick and thin, even if a takeover never materializes. Among these three, Allete is the company that best satisfies this crucial criterion.
Gordon Pape, Internet Wealth Builder
Based in Newfoundland, Fortis has electricity and natural gas distribution operations across Canada as well as in the U.S. and Caribbean; it also owns long-term contracted hydroelectric assets in British Columbia and Belize.
The stock has moved sharply higher since February — an unusual jump for a utility, especially during a period of rising interest rates. Good results, a listing on the NYSE, and a strong growth strategy sparked investor interest.
The company continues to execute its five-year growth plan on several fronts. It acquired Michigan-based ITC Holdings last fall and construction of the Tilbury liquefied natural gas facility expansion in British Columbia is nearing completion.
The shares pay a quarterly dividend of $0.40 to yield 3.6%. The company is targeting annual dividend increases in the 6% range through 2021. These are exciting times at this once stodgy utility.
