The town of stores is a result of Loblaws purchase of the Shoppers Drug Mart chain. (Fred Lum/ The Globe and Mail)Fred Lum/The Globe and Mail
The carnage in the energy sector has taken a substantial toll on the S&P/TSX composite index in recent months, playing the dominant role in more than halving the index's 2014 gains from 15 per cent in early September.
However, there are a number of Canadian stocks that stand to get a boost in this "new normal" of low oil.
Loblaw Cos. Ltd.
Consumer-oriented stocks are obvious winners from the rapid decline in crude oil prices.
The thinking here is simple: Lower prices at the pump free up cash to be spent in other areas. However, not all consumers benefit equally. The greatest benefits from lower oil accrue to lower-income households, which spend a larger portion of their earnings on necessities such as energy and food.
"Loblaw has the most exposure to low-income consumers across Canada of the major traditional grocers via its No Frills, Maxi, and Real Canadian Superstore formats," Credit Suisse analyst David Hartley said.
Compared with Dollarama, the Canadian equity with the most direct exposure to the low-end consumer, Loblaw is far less expensive on a forward price-to-earnings basis.
West Fraser Timber Co. Ltd.
One of the byproducts of falling crude oil has been a lower Canadian dollar, as our currency has historically tracked the movements of West Texas Intermediate quite closely. For West Fraser, which booked half of its revenues from the United States in fiscal 2013, foreign exchange is set to serve as a powerful tailwind on earnings.
A prolonged stretch of robust job gains and "echo boomers" (children of the baby boomers) beginning to enter into their prime home-buying years should provide a solid underpinning for a pickup in housing starts south of the border.
What's more, low oil prices have also contributed to the continued easing of 30-year fixed mortgage rates south of the border, which helps make home ownership more affordable.
Magna International Inc.
The low price of oil will do little to dampen demand for autos or discourage potential buyers from purchasing larger vehicles.
RBC Dominion Securities, which selected Magna as one of its top 30 global ideas for 2015, believes its growth rate will surpass that of global auto production over the next three years.
Margin improvement in Europe, growth in emerging markets, and aggressive buyback activity will help drive earnings, and in turn, the share price, according to RBC analyst Steve Arthur.
Agnico Eagle Mines Ltd.
Gold miners count oil among their key input costs, so the slide in crude has offered some relief at a time when the price of the shiny metal has hovered below $1,200 (U.S.) per ounce.
But while Barrick Gold Corp. has hedged roughly half of its exposure to oil for 2015 at a price 30 per cent above current levels, other firms are poised to reap considerably larger rewards.
Agnico Eagle is Credit Suisse's top pick in the space, as it stands to benefit more than its competitors from the decline in the price of crude oil as well as the depreciation of the loonie and the euro relative to the greenback.
"We estimate that 10 per cent of AEM's operating expenses are oil related," said Credit Suisse analyst Anita Soni, referring to Agnico's ticker symbol. "We do not see these relative benefits being factored in as AEM has underperformed peers by 5 per cent since the beginning of September."
Leisureworld Senior Care Corp.
Leisureworld, which owns and operates long term care and assisted living properties in Ontario and British Columbia, is well positioned to benefit from the greying of Canada, and is Laurentian Bank's preferred pick in the real estate sector.
"Leisureworld has a very stable long term care portfolio that provides steady cash flow with some organic growth through fee increases," said Laurentian Bank Securities analyst Nelson Mah.
A move away from a near-zero interest rate by U.S. Federal Reserve chair Janet Yellen and her colleagues would not necessarily sound the death knell for the low-rate environment that has allowed many real estate firms to flourish.
Rates would have to rise significantly at the long end of the curve for Canadian or U.S. fixed income to offer returns in the realm of Leisureworld's 6.5-per-cent yield.