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Fundamentals will help Canadian stocks get back on track
Year to date, the S&P/TSX Composite Total Return Index has lost about 3.7 per cent, arguably driven by the poor performance of Energy, Materials, and Financials sectors in early part of the first quarter. Recall that these three sectors alone make up almost 65% of the S&P/TSX Composite (at the end of Q1 2018).
But consider that trailing economic statistics look hopeful for Canada as a whole, with our unemployment rate at all-time lows, and our capacity utilization rate at 12 year highs (signifying a productive economy). Investors with a medium- to long-term time horizon that believe our economy will continue to grow may consider this week’s strategy for some steadily growing companies.
MORE BY IAN TAM: Value U.S. stocks that could outperform volatilityTo find these steady-grower stocks, I first ranked stocks on the following factors:
MORE BY IAN TAM: How to find stocks with momentum and stable profits
The stocks that qualify for purchase into the strategy today are listed in the table below. As always, it is advised that investors conduct their own independent research before buying or selling any security.
| Rank | Symbol | Company | Market Cap ($CAD Millions) | Earnings Variability | 5Y Sales Growth (%/year) | 5Y EPS Growth (%/year) | 5Y Cashflow Growth (%/year) | 5Y Average Return on Equity (%) | Trailing Return on Equity (%) | Dividend Yield (%) |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | MTY | MTY Food Group Inc. | 1176.3 | 2.49 | 28.4 | 14.71 | 27.53 | 18.74 | 13.91 | 1.28 |
| 2 | CNR | Cdn National Railway | 71220.9 | 2.42 | 7.83 | 13.79 | 14.34 | 23.45 | 24.31 | 1.89 |
| 3 | BNS | Bank of Nova Scotia | 92078.2 | 1.69 | 5.82 | 6.72 | 11.41 | 15.2 | 14.99 | 4.27 |
| 4 | CSU | Constellation Software | 18699.8 | 7.18 | 30.15 | 37.84 | 41.8 | 99.62 | 89.08 | 0.58 |
| 5 | MRU | Metro Inc. | 9604.9 | 2.79 | 9.16 | 12.54 | 12.16 | 19 | 19.25 | 1.71 |
| 6 | NA | National Bank of Canada | 20161.4 | 2.42 | 4.04 | 6.66 | 4.22 | 17.92 | 17.96 | 4.05 |
| 7 | SAP | Saputo Inc. | 15891.1 | 2.98 | 8.84 | 9.11 | 10.31 | 18.45 | 16.84 | 1.56 |
| 8 | GWO | Great-West Lifeco Inc. | 33003.6 | 2.74 | 12 | 5.59 | 3.93 | 14.91 | 13.38 | 4.66 |
| 9 | RY | Royal Bank of Canada | 140485.2 | 2.93 | 6.25 | 7.86 | 7.12 | 18.24 | 17.67 | 3.87 |
| 10 | WCN | Waste Connections Inc | 24784.5 | 4.74 | 26.56 | 28.83 | 26.18 | 10.12 | 9.73 | 0.76 |
| 11 | CCL.B | CCL Industries Inc., B | 11079.3 | 7.35 | 29.71 | 39.95 | 29.59 | 19.66 | 23.39 | 0.83 |
| 12 | TRP | TransCanada Corporation | 49001.1 | 3.48 | 7.62 | 9.47 | 4.92 | 11.07 | 13.09 | 4.99 |
| 13 | GIB.A | CGI Group Inc., A | 18833.7 | 4.07 | 4.03 | 13.5 | 9.86 | 18.08 | 17.33 | 0 |
| 14 | T | TELUS Corporation | 26834.3 | 4.27 | 6.36 | 5.14 | 5.43 | 19.02 | 18.96 | 4.48 |
| 15 | CTC.A | Cdn Tire Corp. Ltd. | 11241.6 | 4.18 | 6.67 | 10.85 | 2.29 | 12.25 | 15.4 | 2.12 |
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