BMO BMO chief strategist Brian Belski is looking for a bounce in domestic small caps,
“As we reiterated last week, we believe Canada remains the predominant contrarian call in terms of developed equity markets in 2024. Granted, the TSX composite has recently eclipsed all-time price highs, but overall index performance pales in comparison to its neighbour to the south. From our lens, Canadian small cap stocks are an even deeper contrarian call within an already contrarian context with respect to overall Canadian equities – an asset class that we believe is primed for a catch-up trade that could even eclipse the large cap stocks. In fact, while the S&P/TSX small cap index has managed to keep pace with its large cap peers so far this year, the index remains well off its 2022 historical high. Furthermore, our work suggests the fundamental underpinnings are improving faster than its large cap peers, with earnings growth set to rebound to double digits over the next twelve months, well ahead of the single-digit growth expectations for the overall S&P/TSX composite. As such, we believe investors should be looking within the Canadian small cap universe for both value and growth opportunities with a tilt toward traditional cyclical areas of the market”
Stocks in the BMO Research Small Cap Canadian Equity Portfolio include Air Canada, AltaGas Ltd., Algonquin Power 8 Utilities Corp., Aritzia Inc., Brookfield Business Partners LP, Celestica Inc., Crescent Point Energy Corp., Capstone Copper Corp., Canadian Western Bank, Dream Industrial REIT, Element Fleet Management Corporation, EQB Inc., Guardian Capital Group, Hudbay Minerals Inc., Headwater Exploration Inc., Interfor Corporation, InterRent REIT, Jamieson Wellness Inc., Linamar Corporation, Lightspeed Commerce Inc., Maple leaf Foods Inc., Topaz Energy Corp., Whitecap Resources Inc. and Sleep Country Canada Holdinqs Inc.