It was a year when crude oil got clobbered, the S&P/TSX got slammed and Bombardier got bludgeoned. It was also a year that Warren Buffett – a.k.a. the world's greatest investor – was revealed to be a mere mortal after all. But for all the gloom sweeping across Canada's resource sector, there were some bright spots in this country – dollar stores, for example. And, uh, convenience stores. Who said the only thing Canadians excel at is hockey? So grab a cup of Starbucks coffee, turn off the Netflix and get ready for the Stars and Dogs of 2015.
STARS:
Dollarama (DOL-TSX)
“A Dollarama gift card. Honey, you really shouldn’t have.”
A Christmas present from Dollarama may not have the same cachet as, say, a gift from Tiffany or Holt Renfrew, but most retailers would kill to have Dollarama’s sales numbers. For the nine months ended Nov. 1, Canada’s favourite discount chain posted comparable sales growth of 7.1 per cent – or 13.4 per cent including new store openings – as earnings per share leaped 39 per cent. With bargain-hungry shoppers snapping up everything from clothing and kitchen gadgets to food and electronics, Dollarama surpassed the 1,000-store mark in the third quarter and expects to open 60 to 70 net new stores in the next fiscal year.
But investors should tread carefully: With Dollarama’s stock priced for perfection – it trades at about 27 times estimated earnings for the current year – any sort of earnings stumble could potentially bring the stock’s six-year string of double-digit gains to an end. -John Heinzl
Dec. 22 close: $80.04; up $20.64 YTD, or 34.7%
Starbucks (SBUX-Nasdaq)
Introducing the Starbucks Intravenous Drip – no more lines, no more waiting. Just an IV bag of your favourite coffee connected directly to your bloodstream to keep your nervous system on high alert all day long. Okay, the IV part isn’t true – not yet, anyway – but thanks to Starbucks’ popular mobile app, java junkies can now place and pay for an order on their smartphone and skip the lines when they pick up their beverage, saving valuable seconds to get their daily caffeine fix. By tapping into the power of mobile technology and constantly tweaking its food and beverage offerings – coming soon to a Starbucks near you: beer and wine – the world’s biggest coffee chain provides a textbook case of how to build a brand that connects with customers. And there’s no sign of the company slowing down: After a year in which same-store sales jumped 7 per cent globally, it plans to add 1,800 new locations in fiscal 2016 to its existing base of 23,000, creating countless more caffeine addicts in the process, no doubt. -JH
Dec. 22 close: $59.99 (U.S.), up $18.96 YTD, or 46.2%
Netflix (NFLX-Nasdaq)
For years, skeptics have been predicting that Netflix’s richly valued share price would collapse. But like the intrepid hero in an action movie, the video-streaming service keeps defying the odds. Even as Netflix faced growing competition from the likes of HBO Go, Amazon Prime and Hulu, its shares continued marching higher – so high, in fact, that the company split its stock seven for one last summer. With Netflix expanding into Japan, Spain, Portugal and Italy in 2015 – and setting its sights on South Korea, Hong Kong, Taiwan and Singapore in 2016 – it was easy for investors to forget that, for all of Netflix’s growth and hit programming, the company isn’t exactly raking in the profits: It’s expected to earn just $90-million (U.S.) or 22 cents a share in 2015, which equates to a price-to-earnings multiple of more than 500. Whether Netflix can actually grow into such a lofty P/E remains to be seen, but either way the next few years will make for some riveting drama. -JH
Dec. 22 close: $116.24 (U.S.), up $67.44 YTD, or 138.2%
CCL Industries (CCL.B-TSX)
It’s a brave new world of 3-D-printed driverless cars and cloud-based wearable smart drones, or some such. CCL makes labels. The very word “label” can serve as a powerful sedative, which is perhaps why CCL doesn’t get the same level of attention of some of its flashier peers. But the company has proven that you can still become a multibillion-dollar enterprise the old fashioned way: by slapping stickers on stuff. CCL has become an earnings powerhouse catering to large companies in the consumer products, health care and durable goods sectors, with a long list of qualities appealing to investors. It has low debt levels, a solid track record of shrewd acquisitions, consistent profit beats, and a dividend that has increased by 50 per cent since mid-2014. Plus, CCL can boast of what has quickly become a cardinal virtue for a Canadian company – nearly all of its sales are generated outside the country. As a result, in the stock’s worst calendar year out of the past four in 2012, it rose by 37 per cent. – Tim Shufelt
Dec. 22 close: $226.61, up $100.74 YTD, or 80.0%
Alimentation Couche-Tard (ATD.B-TSX)
Through its commitment to the global expansion of convenience, Couche-Tard did its part for the S&P/TSX composite index in a year spoiled by commodity prices. With a 28-per-cent increase in its share price, Couche-Tard exerted more upward pressure on the composite than any other stock in the benchmark. It did so pretty much by sticking to what it has been doing – acquiring chains of convenience stores and gas stations in the United States and Europe, cutting expenses and realizing synergies. The latest acquisition, announced in early December, brought Topaz Energy Group into the fold, adding 464 stations across Ireland. With a return on equity of about 25 per cent, Couche-Tard speaks to the universal language of profits, even for those anglophones who have no idea what its name means. – TS
Dec. 22 close: $62.18, up $13.49 YTD, or 27.7%
DOGS:
Bombardier (BBD.B – TSX)
Well, now we know what the C in C Series stands for: Corporate welfare case. With Bombardier’s stock in a freefall, its debt rated as junk and the company burning through cash, the long-struggling plane and train maker turned to one of the few remaining sources of cash that wouldn’t slam the door in its face: the Quebec government. Aiming to save thousands of jobs, the province pledged to inject $1-billion (U.S.) in exchange for a 49.5-per-cent stake in the long-delayed – and $2-billionU.S.$ over budget – C Series jet program. Not everyone was convinced it would be enough: “This is like a Band-Aid for a stab wound,” one aerospace consultant said of Quebec’s investment. Bombardier snagged a further $1.5-billionU.S.$ from the Caisse de dépôt et placement du Québec for a 30-per-cent stake in the company’s rail business. But these moves did little to halt the stock’s relentless descent, which – if you believe in the market’s predictive powers – points to more dark clouds on the horizon for Bomber.– JH
Dec. 22 close: $1.36, down $2.79 YTD, or 67.2%
Crude oil (CL-FT)
Alberta bound, Alberta bound, it’s good to be Alberta bound – except when the price of oil is plunging, in which case it’s good to be bound for just about anywhere else. Hammered by tens of thousands of layoffs, soaring office vacancy rates and a rising debt load that triggered the loss of the province’s triple-A credit rating with Standard & Poor’s, Alberta was at the epicentre of a crude oil collapse that just wouldn’t quit. With the United States awash in oil and Saudi Arabia and other members of the Organization for Petroleum Exporting Countries abandoning production limits, the price of crude sank to levels last seen during the financial crisis of 2008-09, dragging the Canadian dollar down to its lowest level in more than a decade. Even as oil and gas companies curtailed production and slashed dividends, few observers were predicting a rebound in the price of crude. Instead, the grim consensus was that 2016 will bring more oil price declines, more layoffs and – for Alberta in particular – more pain. – JH
Dec. 22 settle: $36.14 (U.S.), down $24.34 YTD, or 40.2%
Valeant (VRX-TSX)
Valeant’s reign as the single largest Canadian stock lasted all of two days in late July. The company’s campaign of relentless growth through acquisition catapulted its shares over the first seven months of the year, as a 110-per-cent price gain was good enough to briefly surpass the market capitalization of Royal Bank of Canada. The performance of Valeant shares alone was enough to keep the composite from reflecting the true weakness spreading through the Canadian market. Such was the strength of that run that the stock is only down by 5 per cent this year – a remarkably slim loss considering how bad things got from September onward. Then, a cartoonishly villainous pharmaceutical CEO and now accused fraudster named Martin Shkreli forced drug prices into the U.S. election debate. That brought unwelcome attention onto Valeant’s own pricing. The company was then targeted by short sellers, and its accounting practices questioned, as have its connections to mail-order pharmacy Philidor, over which Valeant now faces investigations. Valeant has now lost more than $60-billion in market value over the past five months. – TS
Dec. 22 close: $158.09, down $8.24 YTD, or 4.95%
S&P/TSX composite index (TSX-I)
This year, Canada’s inferiority complex turned out to be justified. The world stopped wanting what we sell, our largest single listing as of July fell into a vortex of controversy, our currency was reduced to fun-coloured polymer best used in crafting, and Canadian stocks were headed for their worst year since 2008, when everyone thought the global financial system was tipping into oblivion. Blame the shale revolution and Saudi brinkmanship for dousing a world already awash in oil with new supply; blame China, for daring to grow at a rate less than “furious”; but mostly blame the resource dependence that holds Canadian stocks hostage to the commodity cycle. In mid-2014, prior to the sharp selloff in oil and other commodities, the energy and materials sectors accounted for nearly 40 per cent of the composite. And this year, those sectors are down by 27 and 22 per cent, respectively.– TS
Dec. 22 level: 13,082.86, down 1,549.58 points YTD, or 10.6%
Berkshire Hathaway Inc. (BRK.A-NYSE)
It’s rare that Warren Buffett finds himself counted among the losers. Sure, he has down years, but he pretty reliably outperforms the S&P 500 index, and almost always in years when the benchmark is down. Excluding 2011, when the S&P was essentially flat, Berkshire shares have not fallen short of the index in a down year since 1990. That streak looks doomed. While the S&P has declined by about 1 per cent, Berkshire’s A shares have had their worst single year since 2008. They are down by 14 per cent to below the $200,000 (U.S.) mark, making the stock still just barely out of reach to the common investor. The best of the index this year – New Economy luminaries such as Amazon.com Inc. and Netflix Inc. – are absent in Mr. Buffett’s top holdings, which focuses on blue-chip giants like International Business Machines Corp., American Express Co., Procter & Gamble Co., and Wal-Mart Stores Inc., all of which have incurred double-digit losses.– TS
Dec. 22 close: $199,680.00 (U.S.), down $26,320.00 YTD, or 11.6%