In RRSP season, an investor’s fancy turns to thoughts of that one special stock. While few would recommend exclusivity to a single security as a rational investment strategy, the right large-capitalization stock could add just the right mix of growth and stability to a portfolio, and just in time for the March 3 deadline for RRSP contributions. So we asked some investment professionals for a single Canadian large-cap stock that, all else being equal, they would pick for the average Canadian investor’s registered retirement savings plan.
John Schwinghamer, portfolio manager at Scotia McLeod and author of Purple Chips: Winning in the Stock Market with the Very Best of the Blue Chip Stocks
Great-West Lifeco (GWO-TSX)
Despite a recent, out-of-character profit miss, Great-West generally has more predictable earnings than the other top Canadian insurers, Mr. Schwinghamer said. “The low volatility in earnings tells me that they are less adventurous than their peers and therefore less risky for investors.” The stock also has a healthy dividend yield of 4 per cent and is currently trading at the lower end of its historical valuation range.
Stephen Takacsy, chief investment officer at Lester Asset Management
CCL Industries (CCL.B-TSX)
This label-making giant’s stock went on a tear this week after beating expectations on the integration of an acquired competitor. But there are “still lots of cost savings to be realized,” Mr. Takacsy said. “And plenty more acquisition opportunities worldwide.” CCL also benefits from a weak Canadian dollar, has strong free cash flow, a solid balance sheet and the strong potential for dividend increases.
Bruce Campbell, portfolio manager at StoneCastle Investment Management
Constellation Software (CSU-TSX)
This stock has been one of the hottest on the S&P/TSX composite index since the recession, having sustained relentless growth through a campaign of acquisitions. “Their model of M&A remains attractive and there continues to be deals for them to execute on,” Mr. Campbell said.
Ryan Bushell, a portfolio manager at Leon Frazer
Cenovus Energy (CVE-TSX)
Stocks that produce steady returns over time fit well into RRSPs since taxable losses can’t be claimed if the share price declines, Mr. Bushell said. On that note, Cenovus has “best in class, long life oil assets that will produce robust cash flow for years to come as current oil production is expected to more than double by the end of the decade,” he said. Cenovus stock, now trading at close to a three-year low, also has a compelling entry point.
Jeff Young, chief investment officer at NexGen Financial
Telus Corp. (T-TSX)
“Although there are some negative headlines around the wireless space in Canada I continue to consider Telus a core portfolio holding,” Mr. Young said. Telus also has shown strong growth in its wireless, Internet and Telus TV businesses, while committing to returning money to shareholders through share repurchases and dividend increases.
Nelson Cheung, senior portfolio manager at Formula Growth
CI Financial (CIX-TSX)
As the country’s largest independent mutual fund company, CI is poised to continue to capitalize on strong fund sales trends in Canada, Mr. Cheung said. “A very strong RRSP season in the first quarter will lead CI to be very well positioned to capture a large and growing share of net new sales as a result of their strong distribution and excellent relative fund performance.”
David Sherlock, portfolio manager, McLean & Partners Wealth Management
Intact Financial (IFC-TSX)
Canada’s largest property and casualty insurer was hit hard by a year filled with weather disasters in 2013. But the company has pricing power and can raise its premiums if required, Mr. Sherlock said. Now trading at about two times book value, Intact’s stock isn’t cheap, “but the company has consistently grown its book value and raised its dividend,” he said.
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