The Best Stocks To Buy Now in Canada and What to Keep in Mind While Buying Them


The dreaded coronavirus has wreaked havoc across all the stock markets of the world. The virus originated from the wet markets of Wuhan, China and has claimed over 194,000 lives all over the world (at the time of writing this article). COVID-19, the disease caused by the coronavirus has disrupted the Canadian stock market in a major way. Equities have been bouncing around throughout March and April. The uncertainty and general negative trend was mirrored by stock exchanges all over Canada. The S&P 500 fell by about 3.5%, while the S&P/TSX Composite Index rose by about 1.5%. Since the stocks started freefalling on February 21st, the two markets went down by 25% and 27% respectively. A lot of people are now considering whether or not to take any additional cash they have and put it into the market. Many fund managers are investing a bit here and there, but they are also being cautious as another decline could come, especially if the quarantine lasts longer than expected/if a vaccine doesn’t come in 12 to 18 months as expected or if more people die or get sick than predicted. 

For those who want to buy some stock, dollar-cost averaging is a good approach. If you have, say, $12,000 earmarked for investing, put $1,000 into the market every month. If stocks fall again, then at least you’ve only lost a bit of that investment and then you get to buy again when stocks are lower. It will likely take a while for the market to rebound completely, so if it does rise, you can make money on the way up. In this post, we will cover the best stocks to buy now in Canada and also give you some important piece of advice on what to keep in mind while buying stocks in such perilous times (the general tips to buy stocks in Canada might need some tweaking in this case). But no matter what happens, stocks are still one of the best ways to invest money in Canada. Let’s get started with the list of the best stocks to buy in Canada first.

The best Stocks to Buy Now in Canada:

Suncor Energy (TSE:SU)

Suncor Energy Energy stocks can be boring. Unless the stock is undervalued. In that case, it offers the potential for attractive growth. That’s the case with Suncor Energy which, based on future cash flow projections is trading at a significant discount to the market. The question investors will have to answer is where they believe earnings are headed. Some analysts are projecting that SU will show negative earnings next year. However, for the past five years, the company has delivered over 20% year-on-year earnings growth. In the past year, the company’s earnings growth exceeded its five-year average as well as the average of the U.S. Oil and Gas Industry. However, even investors who may not buy into Suncor’s growth story should still pay attention to the company’s dividend. The company has been raising dividends in each of the last ten years and is currently showing a yield of 4.2%.

Canada Goose(TSE:GOOS)

Canada Goose stock suffered slightly because of extremely high expectations.. Retail is a challenging sector in the best of economies. With some studies pointing to weakening in consumer spending, Canadian retail stocks plunged. GOOS was among them, diving 40% from highs reached in 2018. However, after the decline, the stock looks to be priced at a much more realistic level. The company reported a 59% increase in first-quarter earnings, but the stock has remained stuck in neutral due to the trade war between the U.S. and China. In addition to the strong earnings report, analysts are cheering the efforts that Canada Goose is making to diversify their portfolio to include lightweight spring wear. The new additions are expected to boost sales growth by 50% this year. The stock is still trading at about a 30% discount to its February high making it an attractive option for investors looking to buy stocks that are on sale.

Black Berry (TSE:BB)

This is not the BlackBerry most consumers remember. But that may be a good thing. BlackBerry is making a strategic pivot out of the handset (i.e. phone) market into the software arena. In the short term, the company looks like a shadow of its former self and investors are treating it that way. However, the long-term outlook on BlackBerry may be bright. The company’s P/S ratio has grown to 5.2X in the fiscal year 2019 largely due to the higher margins and stronger sales growth they are seeing in their software related business. Software and service-related sales now account for over 95% of BlackBerry’s revenue, a 110% increase from 2014 levels. The company’s P/S ratio is comparable to Microsoft and easily outpaces its rival Mobile Iron. In addition, BlackBerry is reporting higher adjusted net margins of approximately 14% as compared to the negative levels they were in five years ago. The company is currently embarking on a promotional world tour to tout its cybersecurity services.

Canopy Growth (TSE:WEED)

The COVID-19 crisis has brought most high flying cannabis stocks, crashing down to the ground. Canopy Growth has also not been able to avoid the coronavirus buzzkill..Most notably, the stock suffered when regulatory delays caused an oversupplied Canadian market. Canopy, specifically, suffered from rumors that the company engaged in channel stuffing. However, Canopy Growth stock is well-positioned to move higher when the market for selling edibles opens in October. CGC plans to bring edibles and cannabis-infused beverages by December. Canopy also looks to be a major player in the vaping market. However, it remains to be seen to what extent Canada will follow the United States in regulating this market. The real growth for Canopy, as with other cannabis companies, will come when full legalization becomes a reality in the United States. The marijuana industry is moving into an important growth phase that will be punctuated by mergers and acquisitions. Canopy figures to exit this stage as one of the major players in this market that some analysts see as a $100 billion or higher player when full legalization becomes a reality.

Bonterra Energy (TSE:BNE) 

Bonterra is a small-cap oil company that pays an attractive dividend yield that is currently around 2.3%. BNEFF has seen a drastic 75% cut in its stock price over one year. However, for Bonterra that has brought its market cap down to approximately $125 million. That makes the stock attractive because it has the potential to multiply many times over. On the other hand, the company has a significant level of net debt that is currently worth approximately 177% of the company’s market cap. This would seem to justify the company’s PE ratio which, at 8.9 is below the Canadian market average of 14.1. The key for Bonterra 0will be to prove that they can continue to grow earnings. Over the past year, BNEFF’s earnings growth has exceeded the CA Oil and Gas Industry average (70.9% vs. 62.2%). It has also shown a nice reversal from its five-year average which was -0.25%. If they can continue to post solid earnings, then the attractive PE should spur stock price appreciation to compliment the dividend.

Bank of Nova Scotia (TSE:BNS)

Bank of Nova Scotia In recent months, BNS has spent billions of dollars building a presence in Latin America. The bank is specifically targeting Peru, Chile, Colombia and Mexico. These four countries are home to over 230 million consumers. The plan is for BNS to see rising demand for loans and investment products as the middle class in these countries grows. Growth from these countries would continue to boost the bank’s profit from international operations which already accounts for almost 30% of its profits. An additional sign of strength for the stock is insider buying. While executives may sell a company’s stock for a variety of reasons, there is typically only one reason to buy. That is, they expect the stock to appreciate from its current level. The Bank of Nova Scotia is one of Canada’s Banking All-Stars. The company recently raised its dividend to $0.03 per share. This was in addition to an additional dividend increase earlier in the year, putting their total dividend increase to 5.88% for 2019.

Spin Master (TSE:TOY)

Unicorns may not be real, but SpinMaster is banking on the fact that kids will still want their Llalacorn. This part unicorn, part llama toy is the latest in the company’s line of Hatchimals toys and launches in mid-September. The Llalacorn follows the company’s proven formula of being a cute toy that hatches from an egg. The egg takes around five minutes to hatch by tilting the egg back and forth. Each time the Llalacorn hatches it wakes up in one of 10 different moods. Walmart and Amazon are two retailers that have named the Hatchimals Wow Llamacorn as one of the 2019 Holiday season “hot toys”. This should increase the demand for the toy and provide a nice tailwind for the company’s stock price which has already seen a nice 12% gain for the year. A “Santa Claus rally” for the stock could put it close to the pace of the S&P 500 Index which is up 19.6% for the year.

Questor Technology (CVE:QST)

Another small-cap stock that is worth a closer look is Questor Technology. Questor sells, rents, and services devices that companies will use to eliminate and reduce waste gases. QST occupies an important strategic space as more countries are imposing environmental restrictions. These restrictions make Questor’s technology essential. Questor points to the ability of its technology to help companies save money and improve efficiency as key reasons why a company would look to change its existing operations. In the last three years, Questor’s EPS has grown by an average of 87% per year. The company has displayed a great top line strength and a revenue increment of 11%. The company’s stock price has outperformed the overall sector which is negative in 2019. Despite what some analysts call a “flawless” balance sheet, the company’s stock has been volatile in the past few months. Still, it’s an attractive stock that is clearly outperforming its sector.

Telus (TSE:T)

Telus is one of the three main telecom companies in Canada (in terms of market share). TU currently holds 30% of the total Canadian telecom market and serves approximately 10 million customers. The company has three main business units, the largest revenue driver being its wireless segment. In 2018, this segment accounted for 57% of total revenue. The company is coming off strong second-quarter earnings which saw a 2.8% increase in wireless volume and a 6.4% increase in wireline revenue. EBIDTA was up 9% and net income was up 31% YoY. The stock currently has a PE multiple of 16.82x, slightly below its 5-year average. However, the company’s price-to-book ratio is trading at an 11% discount to its 5-year average. The consensus price target for Telus is $52.15 which would be an 8% increase from the stock’s present value. As a long-term play, some investors may want to wait for the price to come down. However, since Telus also pays an attractive dividend, growth-and-income investors may choose to jump into the stock simply to capture the dividend.

Lightspeed POS (TSE:LSPD)

As mobile technology continues to fundamentally disrupt traditional payment networks, Lightspeed POS is becoming a major player in Canada. The company’s stock has been one of the hottest stocks in Canada since launching its initial public offering (IPO) this past spring. Some are even suggesting that it could be the next Shopify. During the five months between April and early August, LSPD stock increased by more than 100% to $45 per share. The good news for investors is that the stock has come down a little bit meaning investors can get a second bite of the apple by buying the stock at a modest discount of $35 per share. Lightspeed’s revenue is projected to grow at a rate of over 20% annually which would exceed the Canadian market average. Of course, future projections on the stock are somewhat limited as Lightspeed is not yet profitable, but that’s the case with many growth stocks. Analysts applaud the company for its solid balance sheet which should support the growth in revenue.

Crucial stock buying tips:

When it comes to buying stocks right now, the more important question right now is how should you buy in? What sectors might rebound faster than others? What sort of company fundamentals should you be paying attention to in a time like this? 

Buying beaten-down asset classes

There’s an idea in investing that what goes down must come up. That’s especially applicable with certain asset class types, such as equities, bonds and gold. When an asset class has a bad year, it seems to rebound the next. For instance, in 2008, the S&P 500 fell by 36.9%; in 2009 it was up 25.9%. In 2008, the MSCI Emerging Market Index was down 52.2%, then went up 78% the following year. In 2015, the worst year for stocks since the Great Recession (at that point), the S&P 500 rose by just 1.4%; it was up 12% the next year.

If you buy low and sell high, then a down or modest return year could signal a buying opportunity, while a strong year could suggest that it’s time to take profits, which would, in turn, cause an asset class to fall. Will the same happen this time? It’s hard to know given the depth of job losses and the devastating impact the crisis has had on the economy, but at some point these beaten down asset classes and indexes should rise again. 

Stick to historically strong sectors

Every sector has taken a hit, though some have fallen less than others. U.S. energy stocks are down about 50% year-to-date, the most of any sector, while consumer staples have fallen the least, down about 12%. In Canada, our two main sectors, energy and financials, have fallen by about 40% and 30%, respectively. 

The “what goes down must come up” theory doesn’t always work on a sector basis – Canadian energy stocks have underperformed for years – but you may want to take a look at historically strong-performing industries that have taken a hit over the last month. 

For example, financials look interesting, says Allan Small, a senior investment advisor with Allan Small Financial Group in Toronto. Many of the banks are down about 30% off their pre-crisis levels, but yet they’re still good operators that are continuing to pay a dividend. They survived financial crises before, and they’ll survive again, he says. 

It could take a while before banks pop: Mortgage deferrals and lower interest rates could impact their bottom lines in the short term, but banks aren’t going anywhere. “You know they won’t disappear and you want to own stuff that will come back in the not-so-distant future,” Small says. He thinks technology and energy could see good rebounds, too. (On the flipside, the airline sector, which looks like a steal now, is one Small is avoiding as many of these businesses are at risk of bankruptcy at this point.) 

Keep fundamentals in mind

There are two ways to buy into stocks today, Small says: Purchase the poor-performing companies, or buy the ones that are doing well, like Walmart and Zoom. (The former is up 0.76% since Feb. 21, 2020, while the latter has jumped by 271%.) He cautions people from getting too bullish on the stocks that are outperforming right now; once the market starts to turn, money will flow out of the ones that stayed afloat and go into the cheap companies that are poised for a rebound. 

Saying that, investors shouldn’t just chase the stocks that are doing well or the ones that are doing the worst in the hopes they’ll see big gains in the months ahead. You still need to consider fundamentals, though without earnings, many of the main investing metrics will be out of whack. Small suggests looking at where a company was trading at before all of this happened and whether its earnings and fundamentals were strong. 

As always, he wants to see companies that are paying good dividends and he wants to know that those payouts are secure. To know that, look at a company’s payout ratio to see how much of their earnings they’re paying out in dividends. If the payout ratio has spiked or is close to 100% then that could be a warning sign – if it’s paying too much out, then that dividend may have to get cut. 

In the shorter term, companies that are doing business in China could see a boost as commerce there is starting to slowly come back online. “A company like Starbucks has a lot of exposure in China and stores are up and running,” he says. “I am more partial to companies who have businesses there.” (Starbucks is still down 27% since February 21) 

Whether you want to get in now or wait a little longer is up to you, but there are opportunities to be had. The key, says Small, is to have a plan and to not deviate from it. If you’re the kind of investor who likes buying undervalued companies with strong fundamentals, then continue being that kind of investor. If you like high-flying growth operations, then look for those. In this kind of market, there’s something for everyone. Try your hand at the best stocks to buy in Canada.

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