Robert Gill, senior vice president and portfolio manager, Goodreid Investment Counsel

FOCUS: Canadian large caps

MARKET OUTLOOK:

Right now is a great time to buy Canadian equities. The S&P/TSX Composite Index is offering some very attractive opportunities at the moment. Buying high-quality Canadian companies - that are attractively valued has historically done very well in an inflationary environment like we are experiencing today.

So far this year, the TSX is up around 6.5 per cent.  Meanwhile, the S&P 500 Index is up around 20 per cent, driven by the tech rally. This return can really be attributed to just a few well-owned companies. However, the differential in performance shows that the TSX has quite a bit of room to play catch-up.

Looking forward, we believe that the Canadian market is setting itself up for more success. A big reason for that is the very attractive valuation multiple. In summary then, the Canadian market is trading at the best discount to the U.S. market in decades.

Not only are Canadian valuation multiples far cheaper than the U.S. market, but our dividend yield on the TSX is two times the U.S. market. Additionally, the Canadian market has a history of outperforming the U.S. market when it trades at such a large discount. 

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TOP PICKS:

North West Company (NWC TSX)

Last purchase: $32.43.

NWC is a retailer of food, clothing, and small appliances. Many of its stores are located in remote communities and in Canada’s Arctic and Alaska. As a result, there is limited competition, which leads to higher margins and better profitability relative to many retailers. Shares have sold off temporarily and now is a good time to add. Shares trade at an attractive multiple of 11.9 times earnings and have an impressive yield of 4.9 per cent.

TC Energy (TRP TSX)

Last purchase $46.60.

TC Energy is an energy infrastructure company with a large portfolio of oil and gas pipelines that connect supply from production basins to key North American markets. Shares have sold off on account of recent assets that were sold at a multiple slightly below what the market was looking for. Also, the company has announced a spin-off that will change the corporate structure of the company. Investors are concerned that management has been focused on the new corporate structure and debt reduction rather than growth. Shares trade at an attractive multiple of 11 times and have an impressive 8.2 per cent dividend yield.

Saputo (SAP TSX)

Last purchase: $28.14.

Saputo is Canada’s largest dairy manufacturer and distributor. It is number three in the U.S. and number 10 globally. SAP manufactures and markets cheese, butter, spreads, milk and other dairy products which they sell in over 60 countries worldwide. Shares sold off recently due to quarterly results falling short of estimates. The inflation issues that the company is facing are temporary and shares should eventually rebound. This is a good entry point at 15 times earnings and a 2.6 per cent dividend yield. 

PAST PICKS: May 3, 2023

Bank of Nova Scotia (BNS TSX)

• Then: $66.15
• Now: $65.02
• Return: -2%
• Total Return: -0.1%

Canadian National Railway (CNR TSX)

• Then: $160.75
• Now: $158.48
• Return: -1%
• Total Return: -1%

TD Bank (TD TSX)

• Then: $81.47
• Now: $85.90
• Return: 5%
• Total Return: 7%

Total Return Average: 2%