Slow and steady wins the race. It worked for the tortoise and it can be a useful strategy to build long-term wealth for retirement. While equity markets can be volatile, astute investors can find consistently profitable firms that can generate strong returns over the long-term.
Here are eight solid performers to consider, from two investment experts, that might fit in your portfolio.
Robert Tetrault, portfolio manager with National Bank Financial, Winnipeg
Tourmaline Oil Corp.: This energy company has long-term growth potential for investors who can stomach the volatility of the energy sector. With a strong balance sheet, the oil and gas producer is acquiring assets amid the downturn and can quickly ramp up production in step with increases in the price for a barrel of oil, Mr. Tetrault says. It also has "continually improved efficiencies and comes well under projected operating costs," he says. Still the company is very much at the mercy of oil prices, which could remain low for years. But the "recent pullback in price provides an attractive entry point," he adds.
Dollarama Inc.: Though it's considered a consumer discretionary stock, Dollarama performs particularly well during tough economic times. Same-store growth continues to improve while consumers are spending more at its stores as it decreases operating costs, Mr. Tetrault says. Moreover, management has boosted its guidance on earnings for the coming year. "It's always a good sign when management is letting us know we should expect better numbers on the financial statements," he says. Its stock doesn't come cheap, however; it trades at 27 times earnings. That means the market expects growth, and the pressure is on to deliver. "If management isn't able to replicate their growth numbers, this stock could drop in price."
Boyd Group Income Fund: One of North America's largest collision repair businesses has managed to grow steadily without resorting to strategies such as issuing new shares, which can dilute existing shareholders' equity. Rather, Winnipeg-based Boyd has expanded earnings through prudent acquisitions and same-store sales growth, Mr. Tetrault says. The marketplace in which it operates is "fragmented" and dominated by stores that are family-owned, which presents an opportunity for a well-managed business like Boyd, which has strong relationships with insurers, "to dominate the market and buy those assets for pennies on the dollar," he says. An investment in Boyd is not without risks, however, including changes in the regulatory environment and the potential souring of relationships with insurance providers.
Pure Industrial Real Estate Trust: REITs can help diversify a portfolio, providing both moderate capital growth and, more importantly, high-yielding income. Pure Industrial, which pays a distribution of more than 6 per cent, also offers value for investors trading at about six times earnings, Mr. Tetrault says. Equally important is management has taken steps to reduce leverage with a $130-million new issue to the market. At the same time it is acquiring more solid, income-generating properties to bolster its portfolio. But the "obvious risk as with any REIT is that of a strong economy that leads to a rise in interest rates, which would in turn increase borrowing costs and reduce profits for the company."
Uri Kraut, senior investment adviser, CIBC Wood Gundy, Winnipeg
Walt Disney Co.: With global brand recognition that is second to none, Disney has dominant retail and media operations. The owner of Star Wars and other popular franchises, its pipeline of entertainment products makes it a potential long-term "hold, as this investment can benefit both from the 'rise of the rest' [emerging markets] and profit as millennials leave their parents' basements and start raising families," Mr. Kraut says. The knock against Disney is its relatively expensive stock price. Furthermore, bad press and box office flops as well as a foundering economy could negatively affect its short- and medium-term outlook.
Smart Real Estate Investment Trust: This REIT offers exposure to the fairly conservative retail real estate sector, making it an option for defensive-minded investors, Mr. Kraut says. Smart Real Estate offers investors resiliency in the midst of a challenging economy with high occupancy rates and stable anchor tenants such as Wal-Mart. It could "be an ideal complement" to a portfolio of Canadian blue chip stocks, he says. Still he cautions: "It is fairly valued, so it's not a cheap buy," and like all REITs it is sensitive to interest rate hikes.
Apple Inc.: Punished by the market for failing to meet analyst expectations for iPhone sales, Apple's share price offers an attractive entry point for investors with a contrarian view on the California-based tech firm, Mr. Kraut says. In a world "where devices and software are getting smarter, Apple not only has the premium brand but also the loyalty of users who tend to have multiple devices," he says. Moreover, the company now pays a growing dividend with a yield of more than 2 per cent. The risk, besides slowing revenue growth, is Apple's heavy weighting on the NASDAQ; pessimistic investors selling the index would put downward pressure on Apple's price regardless of its own performance.
Raytheon Co.: The world's fifth-largest defence manufacturer provides steady dividend growth and could be a stabilizing addition to a portfolio, especially when markets are affected by geopolitical events. The company has four steadily growing arms to its business, but the fifth offers the most promise for future profit, Mr. Kraut says. This is Raytheon's cybersecurity solutions business, which services an expanding marketplace as large firms and governments face threats to their IT infrastructure by hackers. The downside is Raytheon is "a military weapons manufacturer and it may be outside the realm of some peoples' ethical ranges for investing," he says.