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(David Duprey)
(David Duprey)

Portfolio Strategy

Here's why Canadian investors should go shopping in the U.S. Add to ...

Now on sale: soup, toothpaste, laptop computers, tractors and, if that's not enough for you, surgical anesthesia.

All are available at the superstore known as the U.S. stock market. Prices there are being marked down on almost daily basis, so get your shopping list together.

The strong Canadian dollar is responsible for these price cuts. Our currency has recently climbed within plain sight of parity with its U.S. counterpart, and chances are good that it could rise still higher in the months ahead.

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If it were to climb as high as $1.03 (U.S.), the loonie would be high enough to buy you a dollar's worth of Campbell Soup, Colgate Palmolive, Hewlett-Packard, John Deere or Baxter International - they're the anesthesia people - and have enough left over to cover the brutal foreign exchange fees charged by the brokerage industry.

Sure, there are good reasons to stay away from the U.S. market. Unemployment is high, the housing market is sickly, the federal debt is colossal and the political environment is toxic. Still, that U.S. superstore has a lot of stuff we don't.

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Perhaps you're looking for some exposure to defensive sectors like consumer staples and health care. You can get that in the Canadian market, but most of the names are pipsqueaks compared to Colgate and Baxter. Or, maybe a big technology name like HP. Beyond Research In Motion, we have nothing of the sort in Canada.

Before we look at some ideas for your shopping list, let's consider the outlook for the dollar. "Looking ahead to the next month or two, I would be very surprised if we don't reach parity or go beyond it," said Matthew Strauss, vice-president and senior currency strategist at RBC Dominion Securities.

Mr. Strauss said our dollar is benefiting from high commodity prices, the federal government's comparatively mild debt issues, as well as the expectation of higher interest rates and stronger economic growth. Still more gains are possible for the currency, but he thinks most of the good news has already been priced in. That's why he expects the currency to be in a range of 96 cents to $1.02 in the next few years.

If you've bought U.S. stocks or funds in the past several years, you've probably been frustrated by the way in which your investment returns have been neutralized by gains in our dollar against the U.S. buck. The reason to consider buying now is that you'll quite likely be catching the currency at or near a peak.

That means less risk of more currency-related headwinds for your U.S. holdings, and also the possibility of a tailwind when ours starts to slip again.

While currency parity is here to stay for a while, it's not permanent. "I suspect that eventually, if you're looking out 10 years, we're going to drift back at some point," said Doug Porter, deputy chief economist at BMO Nesbitt Burns.

Now for some ideas on what to buy:

U.S. Stocks Analysts Like

These stocks were found by setting the filter on Globeinvestor.com to seek out companies listed on the New York Stock Exchange and Nasdaq with a consensus "strong buy" rating from analysts. To narrow the list down, only the 12 stocks most widely followed by analysts were included.

Company

Ticker

US$ Price

1-yr % chg

% Div. Yield

Apple

APPL-Q

235

123.6

n/a

Baxter International

BAX-N

58.2

13.6

2

CMS Energy

CMS-N

15.46

30.6

3.9

Enterprise Products Partners

EPD-N

34.58

55.4

4

Express Scripts

ESRX-Q

101.76

120.4

n/a

Google

GOOG-N

567.12

62.9

n/a

Hess Corp.

HES-N

62.55

15.4

0.6

HealthSouth

HLS-N

18.7

110.6

n/a

Hewlett-Packard

HPQ-N

53.15

65.8

0.6

Mastercard

MA-N

254

51.7

0.2

Medco Health Solutions

MHS-N

64.56

56.2

n/a

Visa Inc.

V-N

91.03

63.7

0.6

U.S. Stocks With Solid Technicals

These stocks have been singled out by the firm Phases & Cycles as having the potential to rise in the area of 40 per cent by year's end based on current trading patterns. Some investors may be tempted to wait until the dollar reaches parity to buy U.S. stocks. But Ron Meisels, president of Phases and Cycles, said there's no reason to wait. "Who cares if I miss a little on the currency," he said. "I can still make myself a heck of a lot of money."

Company

Ticker

US$ Price

1-yr % chg

% Div. Yield

AK Steel

AKS-N

22.86

221.1

0.9

Arch Coal

ACI-N

22.85

70.9

1.6

Baker-Hughes

BHI-N

48.84

64.1

1.3

Baxter International

BAX-N

58.2

13.6

2

Bristol Myers Squibb

BMY-N

26.7

21.8

4.8

Coca-Cola

KO-N

55

25.1

3.2

Colgate Palmolive

CL-N

85.26

44.6

2.5

Deere & Co.

DE-N

59.46

80.9

1.9

Home Depot

HD-N

32.35

37.3

2.9

McDonald's

MCD-N

66.72

22.3

3.3

Newsletter Favourites

Here's a list of "best buy" stocks compiled by Wall Street Stock Forecaster, which is part of the Successful Investor family. The first group of stocks have been chosen for income seekers -- all pay a dividend and offer the potential for dividend growth. The second group is aimed at people seeking conservative growth.

Company

Ticker

US$ Price

1-yr % chg

% Div. Yield

For Income Seekers

ConAgra Foods

CAG-N

25.07

48.6

3.2

Heinz

HNZ-N

45.61

38

3.7

Genuine Parts

GPC-N

42.24

41.5

3.9

Buckeye Partners

BPL-N

60.07

68.5

6.2

Conservative Growth

Campbell Soup

CPB-N

35.35

29.2

3.1

Diageo

DEO-N

67.45

50.7

2.7

General Mills

GIS-N

70.79

41.9

2.8

McDonald's

MCD-N

66.72

22.3

3.3

Wal-Mart

WMT-N

55.6

6.7

2.2

Wells Fargo

WFC-N

31.12

118.5

0.6

Beckman Coulter

BEC-N

62.8

23.1

1.2

Hewlett-Packard

HPQ-N

53.15

65.8

0.6

IBM

IBM-N

128.25

32.4

1.7

Popular Exchange-Traded Funds

These ETFs are among the most heavily traded in recent days on the New York Stock Exchange. The focus here is on broad market and sector ETFs that cover the U.S. market.

ETF

Ticker

US$ Price

1-yr % chg

SPDR S&P 500 ETF

SPY

117

47.1

U.S. Natural Gas Fund

UNG

6.91

-54.5

iShares Russell 2000 Index Fund

IWM

67.8

61.2

Financial Select Sector SPDR Fund

XLF

15.95

81

Energy Select Sector SPDR Fund

XLE

57.52

35.5

SPDR Gold Shares

GLD

108.95

20.7

iShares Silver ETF

SLV

17.14

34

SPDR Dow Jones Industrial Average ETF

DIA

108.61

43.2

SPDR S&P Retail ETF

XRT

41.3

80.3

U.S. Oil Fund

USO

40.29

38.7

Notes: Stock prices are to March 30; N=New York Stock Exchange; Q=Nasdaq; Fund returns are to Feb. 28





Fund: Beutel Goodman American Equity MER: 1.4% One-Year Change: 26% Minimum Investment: $10,000 Comments: Mr. Paterson said this fund seeks undervalued stocks and does not make big bets on sectors or individual positions. Performance has been strong, but with less volatility than the S&P 500 and most U.S. equity funds. Also, the management expense ratio is far below the category average of 2.59 per cent. Top Five Holdings: Metlife, Chevron, ConocoPhillips, Comcast, Johnson & Johnson

Fund: CI American Value MER: 2.32% One-Year Change: 19.1% Minimum Investment: $500 Comments: Mr. Paterson said the managers of this fund seek companies with strong management teams and a history of improving shareholder value. The portfolio is fairly concentrated, with the Top 10 holdings accounting for about one-third of the total. Returns have been comparatively strong, with less volatility than many other funds in the U.S. equity category. Top Five Holdings: Visa, Microsoft, Exxon Mobil, Oracle, Franklin Resources.

Fund: Trimark U.S. Small Companies Class MER: 2.86% One-Year Change: 61% Minimum Investment: $500 Comments: Mr. Paterson said this is a fund that seeks small- or medium-sized companies that are trading at a discount to what the managers believe is fair value. The portfolio is highly concentrated, with just 25 to 35 stocks overall and a Top 10 that account for more than half of the portfolio. Returns have been much stronger than average over the past two years. Top Five Holdings: Kinetic Concepts, International Rectifier, Smart Modular Technologies, FirstService Corp., Brightpoint.

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