The 3 Best Canadian Stocks to Buy Now

Between the decade-long U.S. bull market prior to this year’s coronavirus crash and the always tantalizing allure of emerging market stocks, it’s easy to forget about Canadian stocks. You shouldn’t. Canadian stocks, while underperformers compared to U.S. stocks and many emerging markets, tend to be less volatile. Besides, there are still plenty of good growth opportunities in Canadian stocks.

One of the generally accepted wisdoms in recent years has been that the U.S. stock market is where the action is. But relative performance of ex-U.S. markets is showing that’s no longer the case. There are market-beating returns available to those investors willing to step abroad. And one of the easiest steps to take is just over the border with our neighbor to the north, Canada. For the modestly adventurous investor, I think there are quite a few Canadian stocks worth a look right now.

Buying Canadian stocks is a relatively easy pitch to U.S. investors, in my view, especially to those that live within a day’s drive of the border. It’s a stable, developed economy and an established trading partner (for the moment). While there are certainly a lot of differences between the U.S. and Canada, the country is friendly both for travel and investment, and many Canadian stocks have considerable exposure to the U.S. economy.

Comparing GDP growth between any countries is futile at the moment, given the extreme likelihood that most global economies will retreat in the second quarter thanks to worldwide shutdowns and stay-at-home orders. However, it is worth noting that Canada’s GDP fell much less (-2.6%) in the first quarter than America’s (-4.8%) did. Like I said, the highs may be lower in Canada … but so are the lows.

With that in mind, here are three Canadian stocks that have held up well during the early-2020 carnage, including one that’s actually on quite a run. When the virus finally goes away (it will!) and life returns to normal, these companies will likely be humming. And because the market is forward looking, that means their stocks are worth investing in long before that happens.

Canadian Blue-Chip Stock #1: Canadian Pacific Railway (CP)

Market cap: $29.5 billion

Transportation was a key focus of the new, NAFTA-replacing trade agreement – namely Canadian and Mexican automakers, which were granted exemptions from future tariffs on up to 2.6 million vehicles exported to the U.S. It didn’t say anything about railroad companies, which is what Canadian Pacific Railway is (as you might have guessed). And perhaps no news is good news: prior to social distancing, CP shares were on a tear, vaulting from 180 to 257 in 2019 and rising as high as 270 in February. They came crashing back to the low 180s this March, but have since rebounded nicely, and are currently trading at 217, in line with its 50-day moving average and just below its 200-day line.

Railroads aren’t going away, even though very few people are traveling by train (or by any mode of transportation) at the moment. So this looks like a nice entry point into a stock that has a long history of growth.

Canadian Blue-Chip Stock #2: Lululemon Athletica (LULU)

Market cap: $28.2 billion

We don’t think of Lululemon as a Canadian company. But it was founded in Vancouver in 1998, and it’s still based there. The athletic apparel company best known for its yoga wear is coming off its best year for sales growth since 2012 and best year for profit growth since 2011. As a result, the stock was trending quite nicely until a couple months ago, and the damage has been limited this year, as people need athletic wear (and yoga) more than ever these days.

Canadian Blue-Chip Stock #3: Shopify (SHOP)

Market cap: $76.3 billion

SHOP was the top pick of 2017 by our growth investing expert Mike Cintolo. And the stock showed remarkable resilience in 2018 (+37%) after getting dinged by short-selling research firm Citron, which called the Canadian stock a “get rich quick scheme,” and put a price target of 60 on it (50% below its share price at the time). Instead, shares of Shopify currently trade right around 646, and its e-commerce platform continues to attract thousands of small- and mid-sized businesses in Canada, the U.S. and elsewhere. Along with PayPal (PYPL) and Square (SQ), Shopify helps smaller players take advantage of selling online. And the company has multiple avenues of growth: subscription revenue for using the product, a cut of gross merchandise sales from its customers and some newer capital offerings like cash advances.

Because it’s all online, Shopify isn’t dependent on improved synergies between the U.S. and Canada; and it’s not as impacted by the rampant shuttering of retail locations, as its e-commerce platform remains in high demand. As a result, LULU is one of the rare stocks in North America (or anywhere really) that’s actually up in 2020—a whopping 62% as of this writing!

That’s a great-looking chart in any market. In this historically volatile environment, it makes Shopify (SHOP) a virtual must for any growth portfolio – particularly if you’re searching for low-risk companies headquartered outside U.S. borders.


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