In this article, we discuss 10 stocks Canadian investors love.
In mid-June, the central bank in the United States raised the benchmark interest rate by 75 basis points, the biggest rate hike since 1994. The bank cited soaring inflation that was reflected in the supply and demand imbalances as one of the main reasons behind the decision, sending the stock market tumbling to new lows. Top stocks like Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP) also traded lower, reflecting the decreased investor confidence in growth equities.
The reverberations of this hike were also felt across the border in Canada, where the Toronto Stock Exchange had the worst day in two years, losing 618 points to close at 19,000 on June 16. Canadian investors are bracing themselves for a rate hike as well. The Bank of Canada has already raised the rate three times this year in an attempt to control soaring prices. From March onwards, the rate has grown from 0.25% to 1.5%. Investors believe the bank will raise the rate to 2.25%, the highest since the economic meltdown of 2009.
The hike has affected all prominent sectors of the Canadian economy, including energy, banking, healthcare, and information technology. This has created panic in the Canadian markets, where even well-established firms have seen their share price fall in the wake of recession fears, creating lots of buying opportunities for shrewd investors. Per news platform CBC, there are psychological barriers to this attitude. Anthony Scilipoti, the chief of Veritas Investment Research, believes the problem is that “selling begets selling”.
Our Methodology
The companies that are based in Canada and enjoy widespread popularity among investors were selected for the list. The business fundamentals of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by AlphaTradeZone
Stocks Canadian Investors Love
10. Algonquin Power & Utilities Corp. (NYSE:AQN)
Number of Hedge Fund Holders: 13
Algonquin Power & Utilities Corp. (NYSE:AQN) owns and runs power generation, distribution, and transmission facilities. On May 10, the company announced that it had agreed to a collaboration with tech giant Meta on a 112 MW Deerfield II wind project in Michigan. The project will contribute to the ESG targets of Algonquin. The firm will contribute $200 million for the project that is expected to begin commercial operations by 2023. The project will provide property tax revenue of $2 million per year.
Algonquin Power & Utilities Corp. (NYSE:AQN) has an impressive dividend history stretching back more than ten years. The firm has consistently grown the payout for the last twelve years. On May 13, the firm raised the quarterly dividend by 6% to $0.1808 per share.
At the end of the first quarter of 2022, 13 hedge funds in the database of Insider Monkey held stakes worth $177 million in Algonquin Power & Utilities Corp. (NYSE:AQN), compared to 16 in the previous quarter worth $141 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP), Algonquin Power & Utilities Corp. (NYSE:AQN) is one of the stocks popular among Canadian investors.
9. TFI International Inc. (NYSE:TFII)
Number of Hedge Fund Holders: 14
TFI International Inc. (NYSE:TFII) provides transportation and logistics services. The firm is beginning to build a dividend history, having grown the payout consistently for the past two years. These years have been challenging for the transport sector in general due to COVID-19 and oil price fluctuations. In mid-June, the firm declared a quarterly dividend of $0.27 per share, in line with previous. The forward yield was 1.41%. The dividend is payable to shareholders on July 15.
On June 27, Credit Suisse analyst Ariel Rosa initiated coverage of TFI International Inc. (NYSE:TFII) stock with an Outperform rating and a price target of $103, noting that the business model of the firm can be “replicated to drive shareholder returns in the years ahead”.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in TFI International Inc. (NYSE:TFII), with 433,784 shares worth more than $46 million.
In its Q2 2021 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and TFI International Inc. (NYSE:TFII) was one of them. Here is what the fund said:
“TFI International Inc. (NYSE:TFII) (formerly known as Transforce) is a recent addition to our portfolio – it is a Canadian logistics company with exceptional management operating in a consolidating industry. TFII came to our attention when they announced their purchase of the US operations of UPS Freight on January 25th, 2021. The company has a long history of growth through acquisition. Long time CEO Alain Bedard is fond of telling investors that he would rather own Scotiabank and get a 3% dividend than make deals that result in 3% returns57. This Canadian company also recently dual-listed in the United States.
UPS Freight, recently acquired by TFI International Inc. (NYSE:TFII), is a less-than-truckload (LTL) operation. LTL operations can build scale-based cost advantages as they require the consolidation of shipments in local hubs. This lends LTL operators to develop competitive moats based on local network density creating barriers to entry, as opposed to pure long-term trucking which is open to competition from anyone able to lease a truck. Pure play LTL companies such as SAIA, Inc. (SAIA) and Old Dominion Freight Line (ODFL) have historically generated very attractive returns for shareholders. Prior to the announced acquisition TFI already generated excellent returns for shareholders through very efficient operations and good capital allocation. Through the acquisition of UPS Freight US, the company immediately became one of the largest players in the US LTL market. The relatively low price paid for the asset (5.3x EBITDA pre-synergies, and the fact that UPS is taking a $500 million accounting charge on the deal) suggests TFII got a good deal. ODFL and SAIA both trade at over 15x EV/EBITDA.
We expect earnings to rise sharply at TFI International Inc. (NYSE:TFII) over the next twelve months as the economy accelerates postCovid. We are currently also long shares of Saia, Inc. (SAIA), the LTL operator headquartered in Georgia, based on the same investment thesis. Shares of Saia, Inc., are up +25 % year-to-date and +87.3% over the past twelve months. Shares are +118.42% year-to-date and +165.39% over the past twelve months.”
8. TELUS Corporation (NYSE:TU)
Number of Hedge Fund Holders: 15
TELUS Corporation (NYSE:TU) provides telecommunications and information technology services. In early June, the company announced that it would be investing $10 million to provide enhanced cellular service and broadband internet to Haida Gwaii. The investment represents the latest move in a long-term plan of the firm that has seen its footprint in the region grow steadily to include 13 remote communities in the island area. All these were brought into the TELUS network within the last fifteen years.
On June 28, Scotiabank analyst Maher Yag assumed coverage of TELUS Corporation (NYSE:TU) stock with an Outperform rating and a price target of C$33.50, noting that firms with higher wireless exposure would outperform peers in the months ahead.
At the end of the first quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $212 million in TELUS Corporation (NYSE:TU), up from 10 the preceding quarter worth $129 million.
7. The Bank of Nova Scotia (NYSE:BNS)
Number of Hedge Fund Holders: 18
The Bank of Nova Scotia (NYSE:BNS) provides banking products and services. On May 25, the firm posted earnings for the second fiscal quarter, reporting earnings per share of C$2.18, beating market estimates by C$0.22. The revenue over the period was C$7.9 billion, up more than 2.5% compared to the revenue over the same period last year and beating analyst estimates by C$70 million. The return on equity for the firm over the time was 16.4%, compared to 14.9% in the previous year.
On May 26, Canaccord analyst Scott Chan maintained a Buy rating on The Bank of Nova Scotia (NYSE:BNS) stock and raised the price target to $92 from $89. Other advisors like Stifel and RBC Capital are also bullish on the stock.
At the end of the first quarter of 2022, 18 hedge funds in the database of Insider Monkey held stakes worth $192 million in The Bank of Nova Scotia (NYSE:BNS), up from 15 in the preceding quarter worth $172 million.
6. Nuvei Corporation (NASDAQ:NVEI)
Number of Hedge Fund Holders: 20
Nuvei Corporation (NASDAQ:NVEI) provides payments technology solutions. On June 7, the firm announced that it had partnered with GAN, an online gaming firm based in California, to offer payment solutions to gaming operators. GAN is one of the primary suppliers of gaming software and service solutions to the casino industry in the United States. Through the partnership, players on GAN platforms will be able to deposit and request payouts instantly through the cashier tech of Nuvei.
On May 11, Canaccord analyst Joseph Vafi maintained a Buy rating on Nuvei Corporation (NASDAQ:NVEI) stock and lowered the price target to $85 from $110, noting the firm had “one of the richest solution sets for online gaming operators”.
At the end of the first quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $355 million in Nuvei Corporation (NASDAQ:NVEI), compared to 24 in the previous quarter worth $342 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Sea Limited (NYSE:SE), and Shopify Inc. (NYSE:SHOP), Nuvei Corporation (NASDAQ:NVEI) is one of the stocks that Canadian investors are flocking to.
5. Royal Bank of Canada (NYSE:RY)
Number of Hedge Fund Holders: 21
Royal Bank of Canada (NYSE:RY) operates as a diversified financial services firm. The company has one of the most solid dividend profiles in the banking business, having consistently paid a dividend to shareholders for the past 32 years. In the last six years, the payouts have registered consistent growth as well. On May 26, the firm declared a quarterly dividend of C$1.28 per share, an increase of close to 7% from the previous dividend of C$1.20 per share. The forward yield was 3.98%.
On May 26, investment advisory National Bank maintained an Outperform rating on Royal Bank of Canada (NYSE:RY) stock and raised the price target to C$148 from C$147. Analyst Gabriel Dechaine issued the ratings update.
At the end of the first quarter of 2022, 21 hedge funds in the database of Insider Monkey held stakes worth $855 million in Royal Bank of Canada (NYSE:RY), up from 15 in the previous quarter worth $1 billion.
4. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 24
Enbridge Inc. (NYSE:ENB) operates as an energy infrastructure firm. In early May, the firm announced that it would be building a carbon hydrogen and ammonia production facility in Texas with Humble Midstream. The facility would also be capable of exporting. As part of a push towards lowering carbon emissions, Enbridge hopes to sequester almost 95% of the carbon generated during the production process. The firm is already in discussions with offtake customers in this regard.
On May 9, investment advisory RBC Capital kept an Outperform rating on Enbridge Inc. (NYSE:ENB) stock and raised the price target to C$65 from C$60. Analyst Robert Kwan issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Florida-based firm GQG Partners is a leading shareholder in Enbridge Inc. (NYSE:ENB), with 47 million shares worth more than $2 billion.
3. Canadian Natural Resources Limited (NYSE:CNQ)
Number of Hedge Fund Holders: 32
Canadian Natural Resources Limited (NYSE:CNQ) is an oil and gas exploration and production firm. On May 5, the firm posted earnings for the first quarter of 2022, reporting earnings per share of C$2.86 and cash flows of around $3 billion from operating activities. In the first quarter, the average natural gas production of the firm was a record 2,006 MMcf/d, an increase of 26% from the previous year.
On June 30, Stifel analyst Michael Dunn maintained a Buy rating on Canadian Natural Resources Limited (NYSE:CNQ) stock and raised the price target to C$115 from C$111. National Bank also has a bullish rating on the shares.
Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Yacktman Asset Management is a leading shareholder in Canadian Natural Resources Limited (NYSE:CNQ), with 16.9 million shares worth more than $1 billion.
2. Canadian Pacific Railway Limited (NYSE:CP)
Number of Hedge Fund Holders: 41
Canadian Pacific Railway Limited (NYSE:CP) owns and runs a transcontinental freight railway in Canada. The firm is one of the few transport stocks with enhanced exposure to the agriculture sector and also benefits from merger activity that aims to connect the United States, Canada, and Mexico through the rail. If the firm is able to buy Kansas City Southern, it will have access to the US Midwest as well as all major Mexican industrial, energy, and metropolitan hotspots, connecting the Mexican industry to the US and onwards to Canada directly.
On July 6, Susquehanna analyst Bascome Majors maintained a Positive rating on Canadian Pacific Railway Limited (NYSE:CP) stock and lowered the price target to $84 from $91, noting that for rail stocks, “volume recovery is at risk from macro downside or capacity constraints”.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Canadian Pacific Railway Limited (NYSE:CP), with 55 million shares worth more than $4.6 billion.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Canadian Pacific Railway Limited (NYSE:CP) was one of them. Here is what the fund said:
“The other major headwind to relative performance in the quarter was Canadian Pacific Railway Limited (NYSE:CP). The stock has been a strong performer for the Strategy but negative sentiment around its bidding war for U.S. rail operator Kansas City Southern has weighed on the stock since late May. As a result, the cyclical uptick we expected from the company has been masked by the takeover. Indeed, we have been frustrated by the muted performance among Canadian Pacific Railway Limited (NYSE:CP) and other recently added positions in our structural bucket of growth companies with more cyclical business models or that are undergoing a restructuring that should lead to a step change improvement in earnings. As more regions reopen from COVID-19 and spending rebounds, we expect better performance from our structural names, including Airbus and hospitality and food service provider Compass.”
1. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 72
Shopify Inc. (NYSE:SHOP) provides a commerce platform and related services. On June 7, the shareholders of the firm approved a new voting rights plan for Tobi Lutke, the CEO and founder of the firm, that will give him enhanced power at the company. Under the new plan, Lutke will enjoy at least 40% of voting rights under particular conditions, like staying at the company. The holdings of the founder were also classified as a “founder share” that he is not allowed to pass on to anyone else.
On July 7, Evercore ISI analyst Mark Mahaney maintained an Outperform rating on Shopify Inc. (NYSE:SHOP) stock but lowered the price target to $560 from $660, noting that foreign exchange headwinds were weighing on large cap internet stocks.
At the end of the first quarter of 2022, 72 hedge funds in the database of Insider Monkey held stakes worth $5.7 billion in Shopify Inc. (NYSE:SHOP), compared to 86 in the preceding quarter worth $12 billion.
In its Q1 2022 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“We added to the Portfolio’s position in e-commerce company Shopify Inc. (NYSE:SHOP) in the first quarter after a sharp share-price decline. This brought the Portfolio’s weighting in the company to 2%. We believe Shopify provides a uniquely positioned platform, and we like the company’s strategy of continuing to invest in its business in an effort to strengthen its competitive advantages. The market’s affinity for businesses like Shopify Inc. (NYSE:SHOP) may have changed, which created an opportunity for us to build our position in the company at what we believed to be compelling valuations.”
You can also take a peek at 10 Penny Stocks Redditors are Buying in August and 10 Best Nickel Stocks to Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- 15 Best Jim Cramer Stocks to Buy Now
- 10 Best NFT Stocks to Buy Now
- 10 Best SPACs to Invest In According to Reddit
Disclosure: None. 10 Stocks Canadian Investors Love is originally published on Insider Monkey.
