The Canadian market has had a decent year so far, with the benchmark S&P/TSX Composite Index gaining more than 12% for the year. While the sharp pullback in oil prices over the past two years had a negative impact on the Canadian economy, the outlook for oil has improved somewhat this year, providing Canadian equities with a much-needed rebound. However, the index still remains below its 2014 highs.
In this article, we’ll take a look at the five Canadian stocks that the hedge funds in our database like the most, which are Valeant Pharmaceuticals International Inc. (NYSE:VRX), Barrick Gold Corporation (USA) (NYSE:ABX), Potash Corporation of Saskatchewan (USA) (NYSE:POT), Canadian Pacific Railway Limited (USA) (NYSE:CP) and Kinross Gold Corporation (USA) (NYSE:KGC). We’ll also analyze how these stocks have performed and what they may have in store for investors.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
A total of 31 funds that we track held $722.9 million worth of Kinross Gold Corporation (USA) (NYSE:KGC) shares at the end of the June quarter, accounting for 11.90% of the company’s outstanding shares. At the end of the March quarter, 28 funds held approximately $417.94 million worth of the company’s shares. Kinross Gold Corporation (USA) (NYSE:KGC) announced earlier this month that it had repaid $250 million in senior notes that were due September 1. With the repayment, the company now has no other debt maturities until 2020. Kinross believes that its strong balance sheet and liquidity position provides it with the financial flexibility needed to fund organic growth opportunities.
Among the hedge funds in our system, 32 held $946.90 million worth of Potash Corporation of Saskatchewan (USA) (NYSE:POT) shares at the end of the June quarter, up from 23 funds with $793.78 million worth of Potash Corporation shares at the end of March. The collapse of the Belarusian Potash Company in the summer of 2013 completely changed the dynamics of the potash market. Given the increasing competition in the market, producers have been looking to consolidate. Last year, Potash Corporation of Saskatchewan (USA) (NYSE:POT) launched a hostile bid for its German rival K+S, though it failed to take over the German potash producer. This week, Potash and Agrium Inc. (NYSE:AGU) announced a merger that would create a global leader in the fertilizer industry. According to the terms of the merger agreement, Potash shareholders will receive 0.40 common shares of the new company for each common share of Potash that they own, while Agrium shareholders will receive 2.230 common shares of the new company for each common share of Agrium that they own.
We’ll check out hedge funds’ three favorite Canadian stocks on the next page, eh?