What are we looking for?
The beneficiaries of a dollar in decline.
The global commodity downturn has laid bare the risks of Canada's resource dependence, with economic warning signs now apparent everywhere.
Several forces have conspired to weaken the Canadian dollar. Crude oil benchmarks are down more than half in the past four months, foreign investors are pulling money out of Canadian securities, and the U.S. economy continues to improve. The loonie, as a result, has declined more than 11 cents against the U.S. dollar since July.
Currency parity now seems like a distant fever dream. A cautious outlook from the Bank of Canada could push the Canadian dollar below 82 cents on Wednesday – a level not visited since early 2009, said Camilla Sutton, Bank of Nova Scotia's chief foreign exchange strategist. Meanwhile, Bank of Montreal strategists said on Tuesday they expect to see an 80-cent loonie within the next 12 months.
As with any major financial shift, the currency slide generates winners and losers on the stock market. We sought to identify stocks well positioned for a weak-currency era in Canada.
How did we do it?
Back in October, National Bank Financial compiled a list of Canadian stocks poised to be the "big winners of a declining Canadian dollar environment."
We revisited that list to see how those stocks have fared, considering that the Canadian dollar has shed 7.5 cents since the report was released.
We also provided information on trading multiples and dividend yields.
What did we find?
The list of 21 stocks mostly represents companies with a significant portion of business generated in the United States, since U.S. dollar-denominated revenues receive a boost when converted by Canadian-based companies.
There were big moves on either side of the ledger since October, most of which were driven by company or industry-specific events rather than currency fluctuations. Investors should conduct their own research to determine which of these stocks stand to benefit from a weak loonie.