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.
Why Canadian banks aren’t the only game in town
Many Canadian investors hold a couple of truths to be self-evident, Ian McGugan writes. One is that big banks rule. The other is that only stocks with big dividend yields deserve to be considered as potential investments. The charts here demonstrate both bedrock beliefs deserve to be questioned. They show the total return of the different sectors of the S&P/TSX Composite over the past 20 years, and then over each of the decades in that 20-year stretch. The big winner for Canadian investors has been the consumer staples sector, a group that encompasses grocers such as Loblaw and Metro, as well as food producers such as Maple Leaf Foods and Saputo.
One of the best-performing TSX stocks over the past year may be running low on fuel
Gas-station convenience stores are hot properties under the ownership of Alimentation Couche-Tard, David Berman writes. But how long can the company keep this winning streak going? The stock has been hitting record highs this year, following a rally of more than 50 per cent since last May. The gains are giving a glamorous sheen to a business model based on, well, convenience: Visits average just three to four minutes and most merchandise is consumed within an hour of purchase, raising questions about the importance of brand as Couche-Tard expands its empire of Circle K stores.
Canadian stock market is a bin of bargains
The Canadian stock market is up 20 per cent from its Christmas Eve low. Despite the gain, it appears to be reasonably valued. Looking at the exchange sector by sector reveals a bin of bargains, Norman Rothery writes. Focusing on larger-cap companies, the Canadian market is a relative bargain at 13-times earnings compared with the 2.1-per-cent yield offered by long-term government bonds. Mind you, stocks are also riskier and they are a good deal more volatile than bonds. Bargain hunters are keen to research the cheapest stocks the market has to offer. This table highlights stocks with the lowest P/Es in each sector apart from consumer staples, which has two bargains as a result of a tie.
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How this actively managed Canadian dividend ETF has been outperforming its competitors
Computers can win at chess, control driverless cars and predict the weather. But can they pick great dividend stocks? Srikanth Iyer is convinced they can, John Heinzl writes. He is the lead portfolio manager for the Horizons Active Canadian Dividend ETF (HAL), whose five-year annualized total return of 6.8 per cent (through Feb. 28) was tops in The Globe and Mail’s recent survey of Canadian dividend exchange-traded funds. It also beat the annualized total return of 5.5 per cent for the S&P/TSX Composite Index over the same period. What makes HAL different? While most ETFs passively track an index, HAL employs an active approach that relies on sophisticated computer models to choose stocks to buy and sell.
Dividends and buybacks: A stock picking strategy that takes both into account for producing superior returns
Dividend investors may be leaving some money on the table, writes John Reese, CEO of Validea. Picking stocks based on their dividend payouts is a time-tested strategy, boosting returns for investors compared with the broad market and providing steady income. But company managements are increasingly using the share buyback as a way to return capital to shareholders, and strict dividend investing doesn’t capture that activity. Investors should look at a broader measure, called shareholder yield, which takes into account both dividends and share buybacks. Picking stocks with higher shareholder yields may be a way to beat the market and a dividend-only strategy.
What investors need to know for the week ahead
In the week ahead, the Bank of Canada makes its latest policy announcement on Wednesday, with expectations that it will keep its key lending rate unchanged. Corporate earnings season continues, and companies releasing results include Boeing, Kimberly-Clark, Canadian Pacific Railway, Coca-Cola, Lockheed Martin, TD Ameritrade, Teck Resources, Facebook, Twitter, AT&T, Microsoft, PayPal, Restaurant Brands International, Aecon Group, Bristol-Myers Squibb, Choice Properties REIT, Intel, Comcast, Freeport-McMoran, Hershey, Newmont Mining, Raytheon, Sherritt International, Southwest Airlines, Starbucks, UPS, ADM, Colgate-Palmolive, Exxon Mobil and Imperial Oil. Economic data on tap: U.S. existing home sales (Monday); Canadian wholesale trade for February and U.S. new home sales for March (Tuesday); U.S. durable goods orders for March (Thursday); Canadian budget balance for February and U.S. real GDP for the first quarter (Friday).