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Best Canadian Stocks

Stockhouse Editorial
0 Comments|June 4, 2019

When it comes to investing in Canadian companies, bigger is not always better.

Canada’s historic corporate giants – energy and material sectors, such as the forestry industry – have had a difficult time over the past few years due to macroeconomic conditions. Although conditions are improving, the outlook for both the aforementioned two sectors is still suspect at best, and people are holding off on buying these stocks.

Seems now, everything has gone to pot (pardon the pun). Fact is cannabis stocks led Canada’s equity benchmark to its best first quarter since 2000. And most of which are small cap companies.

Canadian cannabis licensed producers (LPs), the darlings of the stock market in 2016 and 2017, got off to a rough start in 2018, with the Canadian Cannabis Composite Index down 12.7% year-to-date despite a surge in early January to all-time highs. A longer-term view puts the decline into perspective as a correction of a very strong advance since mid-2016.

Value investors in the small cap marketplace are thrifty bargain hunters who like to buy solid stocks for low prices. That’s why we prefer companies with low price-to-book-value ratios (P/B). The ratio compares a company’s market value to the amount of money it might theoretically raise by selling its assets (at their balance-sheet values) and paying off its liabilities. A low-P/B ratio indicates a company is likely selling for less than the value of its parts. To get top marks for value, a stock must have a low price-to-book-value ratio compared to the market and compared to its peers within the same industry.

The TSX Venture 50 is a ranking of top performers on TSX Venture Exchange over the last year. The ranking is comprised of 10 companies from each of five industry sectors, selected based on three equally weighted criteria: Market Capitalization Growth, Share Price Appreciation, and Trading Volume Amount.

This is a good starting point to research and determine the right kind of stock for specific investors.

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