Best Canadian Stocks 2017: All-Stars

14 stocks took the top prizes this year

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by

From the December 2016 issue of the magazine.

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2017 Top 200

Canadian All-Stars

Coming off a negative year for Canadian equities, few stocks were able to pass all of our tests last year. But this year is a different story. We identify 14 All-Star Stocks, three more than last year.

canadian stocks

 

Only one stock made it to the very top of the Canadian class this year by earning both an A for value and an A for growth. The coveted double-A prize went to Toronto-based Fairfax Financial. The insurance-based conglomerate is run by value investor Prem Watsa in a style similar to his hero Warren Buffett’s Berkshire Hathaway. As it happens, Berkshire is on the U.S. All-Star list this year and I own shares of both firms.

The other 13 members of the All-Star team earned at least one A and one B on our value and growth tests. The team is larger than usual this year and we hope that’s a sign that the Canadian market isn’t over extended.

Five of this year’s All-Stars, including Fairfax, were also on the All-Star team last year. Two of the returning team members are Power Corp of Canada and its subsidiary Power Financial. Both firms are based in Montreal and have interests in insurance, money-management and a slew of other businesses. They also happen to pay generous dividend yields of 4.7% and 5.0%, respectively, and I own shares of both. Fortis was the next company to make the team again. It’s an electric and gas utility based in St. John’s, Nfld. that recently made a splash by buying U.S.-based ITC Holdings. The last returning team member is auto parts firm Linamar, which makes its home in Guelph, Ont. The company’s sales and earnings have been zooming ahead at a ferocious clip over the last three years.

The new members of the All-Star team include two well-known Toronto-based retailers. They are Indigo Books & Music and Canadian Tire. The former has, against the expectations of many, survived the digital revolution and chalked up an impressive 53% total return over the last year. The latter is a staple for handymen across the nation and its stock has rebounded nicely from its lows in 2009.

Two life and health insurance companies also made the grade. The first is Sun Life Financial, which makes its home in Toronto. The second is Industrial Alliance Insurance, which is based in Quebec City.

They’re joined by mortgage provider Home Capital Group, which hails from Toronto. Savers might know it better for the high interest savings accounts offered by its Oaken Financial brand. The stock trades at just six times earnings due to worries that the company might be hard pressed should the Canadian real estate market tumble.

On the materials side of the equation, Cascades makes and markets packaging and tissue products using recycled fibers. The firm is based in Kingsey Falls, Que. and its stock trades near a 52-week high. Martinrea International, from Vaughan, Ont., makes steel and aluminum parts primarily for the automotive sector.

TransForce helps to move materials by truck in North America and is headquartered in Montreal. Its stock trades at four times earnings thanks, in part, to the sale of its waste management segment last spring. Last but not least, WestJet Airlines takes to the skies and hails from Calgary.

Top 20 Canadian Value Stocks 

These 20 stocks got A-grades for value.
top 20 canadian value stocks

Top 20 Canadian Growth Stocks

Top 20 canadian growth stocks

 

Before dashing off to buy any stock, do your own due diligence. Make sure its situation hasn’t changed in some important way. Read the latest press releases and regulatory filings. Scan newspaper stories and get up to speed on all the recent developments. (Take particular care when buying or selling stocks that trade infrequently.) If you do, you’ll be more likely to enjoy what the market has to offer.

★ = All-Star stock
✔ = Earns an A for both value and growth

10 comments on “Best Canadian Stocks 2017: All-Stars

  1. Dear Mr. Rotherby, Thank you very much for the list, I have used this for many years and have always come out ahead. I’m not a very large investor but the monies are used for my pension activities since I only get CDN Pension to survive on. Your lists accompanied by some logic that I use from Vector Vest gives us about 10-11% every year. Thank you so very much for the work that you put into this activity.

    Regards ….Peter L (Burlington)

    Reply

  2. what are the checks and stars beside some of your stocks

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    • Hi Angela, we’ve added a clarification! Checks mean the stock received an A for both value and growth whereas a star denotes that it is also an All-Star stock.

      Reply

  3. Do I need to purchase all the 2017 all star stocks? Do I purchase in even percentage ? I have about 60m in locked in.Thank You I am so sorry the magazine is being cancelled.I am investing for my son who is 45years old.He has about 175m invested some in stocks and some in mutals.one rsp 2 locked in and one tfsa.

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    • You have combined investments of 235 million and your asking advice on a public message board. Might not be the best place to get the advice you need. :)

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      • I think she meant K not M, 60M locked in is unheard of specially since RRSP caps contributions at 18% of income per year.

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  4. It is quite striking that you give FFH top marks while Morningstar and GlobeInvestor scales both give it only 2 Stars. S & P Capital IQ as of Dec 8th, 2016 gives it negative rank in both Valuation and Growth. Reading just a little about FFH gives one the sense that Prem Watsa has had success in the past., but on more speculative plays than someone that wants to have feet-up-Couch-Potato strategy would like.

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    • Picking individual stocks is NOT a couch potato strategy as you put it. If my memory serves me, FFH has returned compounded annual returns of something like 19% over the last 30 years, absolutely crushing market returns. Watsa knows what he is doing

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      • I’m also seeing bad numbers for Fairfax Financial – it’s stock price fell 23% from Feb. 12, 2016 to Feb. 10, 2017 according to a chart I found on BMO’s InvestorLine site. I also saw newspaper articles with negative numbers. The Globe and Mail reported Feb. 10, 2017 that Fairfax had underperformed the S&P TSX by 44.6% last year and year to date it’s down 4.3%. I’m examining your recommendations as I’m wanting to move into some better stocks. I did see on Fairfax’s site that it had compound annual growth of 20.4% and 19.4% from 1985 to 2015, but I didn’t find any later dates. Any insights on what’s happening?

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  5. Your list was very helpful in my efforts to start learning about Canadian equities. I appreciate your soft style and restrained and cautious approach to investing.

    Reply

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