Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Place your bets: These are Bay Street’s highest and lowest rated stocks for 2020
The list of equity analysts’ top Canadian stock picks for 2020 goes well beyond the usual suspects of bond proxies and big banks, Tim Shufelt writes. Lower-profile and lesser-followed names such as Ottawa-based software company Kinaxis, fashion retailer Aritzia and specialty drug manufacturer Knight Therapeutics Inc., are among Bay Street’s darling stocks for the year ahead. These are stocks with unanimous sell-side support, meaning every analyst covering them has buy recommendations.
While some investors may consider mining this list for buying opportunities, contrarians may want to go in the opposite direction of analysts’ consensus. Universally beloved stocks tend to be strong recent performers, and the influx of investor money chasing returns can push valuations to the point of excess. Broad negative opinion, meanwhile, can point to stocks that have been overly punished.
Here’s the full list of the highest and lowest ranked TSX stocks for the year.
More from Tim Shufelt: Bay Street analysts’ lowest-rated stocks outperformed top-rated ones in 2019
This big bank stock underperformed in 2019 - time to snap it up
If you want to buy a promising Canadian bank stock this year, consider Canadian Imperial Bank of Commerce, David Berman writes. CIBC shares increased just 6.3 per cent in 2019 (not including dividends), trailing the other big banks. The reason to pounce: Canada’s big banks tend to rebound from bummer years. The numbers support this theory over the long term.
Since 2000, following a strategy of buying the previous year’s worst-performing bank stock and holding it for the current year delivered an average annual gain of 15 per cent (also not including dividends). The strategy beat the performance of the Big Six (which gained an average of 10 per cent since 2000) and the broad S&P/TSX Composite Index (5 per cent).
More from David Berman: Expect to make a killing off Canadian bank stocks in 2020? Forget it
An update to a simple stock-picking strategy that has left the TSX in the dust over the past decade
A blowout year for the S&P/TSX Composite Index pretty much guarantees a humbling for an ongoing experiment in simple portfolio building called the Two-Minute Portfolio, Rob Carrick writes. The past year was typical – if you look at total returns based on share price changes plus dividends, the index surged by 22.9 per cent and the Two-Minute Portfolio, or 2MP, made 19.4 per cent. Back in 2016, the index made 21.1 per cent and the 2MP gained just 7.5 per cent. You won’t keep up with index’s highest highs with the 2MP, but past experience suggests you can do very well over the long term.
Here are the returns for the 22 stocks in the 2MP for last year, along with the 2020 version of the portfolio. Thomson Reuters, Newmont Goldcorp and Canadian Apartment Properties REIT have been added to this year’s portfolio, replacing Canadian Pacific Railway, Nutrien and RioCan REIT.
More from Rob Carrick: Advice on how to improve your finances from people who have heard all your excuses
Gordon Pape: I’m keeping a close watch on these four stocks in 2020
There are the four stocks Gordon Pape is going to be keeping a close watch on in 2020. They include gold miner Agnico Eagle. Gold is a safe haven investment when international tensions rise, he writes. Last week’s assassination of a top Iranian general on orders from U.S. President Donald Trump certainly raised the temperature dramatically in the already unstable Middle East. There could be a lot more violence to come in that part of the world, and North Korea’s new belligerency is lurking in the background. None of this is good news for world peace and stability, but gold investors should prosper.
The other three stocks he’s watching are Walmart, Caterpillar and Canadian National Railway. Here’s why.
Ten important questions to ask before buying a stock
Financial investments are one of the most important assets in people’s lives, Jennifer Dowty writes. Yet many investors receive little education or training before putting their hard-earned money to work in the stock market. They often learn by trial and error – which can be quite costly. To help limit risks of a painful loss, consider asking these 10 questions before buying or holding onto a stock. They include:
- How profitable is each business segment? If a company has several revenue streams, it’s a positive sign that a high-margin revenue segment is growing and representing an increasing portion of total revenue.
- How leveraged is the company? Look at is the net debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio. If it’s too low, the company may not be fully optimizing its growth potential. A ratio that is too high may be a warning sign that future growth may stagnate.
- Does management have skin in the game? A large ownership position aligns management’s objectives with those of the shareholders.
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What investors need to know for the week ahead
Companies releasing their latest earnings in the week ahead include Shaw Communications, Cogeco, Aphria, JPMorgan Chase, Bank of America, Wells Fargo, CSX, Alcoa, BlackRock, Kinder Morgan and Rio Tinto. Economic data on tap include the Bank of Canada’s Business Outlook Survey (Monday); U.S. inflation figures for December (Tuesday); Canadian new motor vehicle sales for November, as well as Canada’s existing home sales, average prices and MLS Home Price Index for December (Wednesday); U.S. retail sales and import prices for December (Thursday); U.S. housing starts and building permits for December (Friday).
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