We recently compiled a list of the 7 Most Profitable Canadian Stocks To Invest In. In this article, we are going to take a look at where Cameco (NYSE:CCJ) stands against the other profitable Canadian stocks.

Economy of Canada

According to a report by S&P Global, Canada’s economy is showing signs of recovery, with growth expected to pick up pace in the coming years. Although the forecasted GDP growth of 1.2% in 2024 and 2.0% in 2025 is still below the country’s potential growth rate of 1.8%, it’s a step in the right direction.

The labor market is experiencing a slowdown, with reduced hiring and rising unemployment. Whereas, wage growth is currently outpacing productivity growth, which is inconsistent with the 2% inflation target. The unemployment rate is expected to reach 7% by the end of 2024 before declining in 2025.

However, the Bank of Canada is turning its focus to potential risks to economic growth, despite the current slowdown. The BoC has already cut interest rates three times in a row and is expected to make further 25 basis point cuts in the fourth quarter and January.

The predicted recovery in 2025 is expected to be driven by investments, particularly in residential and non-residential sectors, rather than consumer spending. Consumer spending is likely to remain subdued due to the cumulative impact of higher interest rates. The effectiveness of changes to immigration policies is a key uncertainty in the forecast.

Canadian households, which hold the highest debt levels among G7 countries, have been severely impacted by interest rate increases since 2022. Real consumer spending per person has declined in five of the last six quarters, with an even more pronounced effect on home-building. However, consumer spending and residential investment are expected to increase as interest rate decreases help restore demand.

Warren Buffett on Investing in Canada

In Berkshire’s 2024 annual meeting, legendary value investor Warren Buffett expressed his confidence in investing in Canada, stating that his firm has a significant presence in the country with many operations and investments across various entities. He feels comfortable investing in Canada, just like in the US, because he understands the business environment and economy. Buffett noted that the Canadian economy moves closely with the US economy, and the results from his firm’s businesses with Canadian operations are consistent with those in the US.

Greg Abel, Vice Chairman of Berkshire, stated that the company has a significant presence in Canada across many of its operating entities. He noted that the company is always looking to make incremental investments in Canada because it’s an environment they’re comfortable with. Abel specifically mentioned that Berkshire has made substantial investments in Alberta, particularly in the energy sector, and that the Canadian economy is consistent with what Berkshire sees in the US.

Investing in Canada offers a unique opportunity to tap into the growing demand for green hydrogen and its various applications. The region’s abundant natural resources and innovative technologies make it an ideal location for the production of green hydrogen, which can be leveraged to create new industries such as ammonia and fertilizer production, as well as green steel. With that in context let’s take a look at the 7 most profitable Canadian stocks to invest in.

Our Methodology

For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 40 largest companies in Canada by market cap. From that list, we narrowed our choices to 7 stocks with positive TTM net income and 5-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 5-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Cameco (NYSE:CCJ)  

TTM Net Income: $190 Million  

5-Year Net Income CAGR: 11.82%  

Number of Hedge Fund Holders: 60  

Cameco (NYSE:CCJ) is a leader in uranium production, with a significant presence in Canada’s Athabasca Basin through its Cigar Lake and McArthur River mines. The company’s integrated business model also encompasses uranium refining, conversion, and fuel manufacturing, making it a significant player in the nuclear fuel cycle. Cameco (NYSE:CCJ) is also a critical player in the development of small modular reactors (SMRs).

Cameco (NYSE:CCJ) has a 40% stake in the Inkai deposit in Kazakhstan, the world’s largest uranium deposit, which provides a substantial source of uranium production. The nuclear industry is driven by the increasing global demand for clean and reliable energy, and Cameco (NYSE:CCJ) is well-positioned to capitalize on this trend. The company’s diversified business, strategic partnerships, and expertise in the nuclear fuel cycle make it an attractive player in the market. Government policies to reduce carbon emissions and meet growing electricity needs are expected to drive up uranium prices, benefiting Cameco (NYSE:CCJ), given its significant uranium reserves and production capacity. Aristotle Capital Management stated the following regarding Cameco (NYSE:CCJ) in their Q2 investor letter:

“Cameco Corporation (NYSE:CCJ), one of the world’s largest publicly traded uranium producers, was the top contributor during the period. Support from governments and policymakers for nuclear energy has continued to increase in 2024 as countries realize it can play a crucial role in both promoting energy security and lowering dependence on fossil fuels to meet environmental goals. With higher demand for uranium across the world, Cameco’s production was up more than 25% year-over-year, and its long-term supply contracts have increased (annual commitments now standing at 28 million pounds per year through 2028). We view these fundamental improvements as further proof Cameco is making progress on our catalyst of increasing its uranium volume sold at higher prices, all while lowering production costs through scale and its access to some of the highest-grade ore on the planet. In addition, we believe the company’s continued integration of Westinghouse Electric Company’s market-leading downstream capabilities will allow it to offer a highly competitive nuclear fuel solution. In our opinion, this puts Cameco on track to enjoy higher levels of FREE cash flow and the ability to de-risk its balance sheet as it meets global energy needs.”

Cameco (NYSE:CCJ) expects to deliver 32-34 million pounds of uranium in 2024, representing a 1.5% increase from the previous year. The company’s expertise in uranium mining and conversion positions it well to capitalize on the growing demand for nuclear energy. As of June 30, Cameco’s (NYSE:CCJ) stock was held by 60 hedge funds with stakes worth $846.57 million.

Overall CCJ ranks 1st on our list of the most profitable Canadian stocks to invest in. While we acknowledge the potential of CCJ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CCJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.