Stocks are getting slaughtered as we head into the final days of 2018. As painful as it is to follow our favorite stocks as they spiral downward, it’s important to remember that 2019 presents new opportunities.
If you look at all the stock markets in the world year to date through December 19, the average decline is 15% in U.S. dollars and 13.3% in local currency.
Here in the U.S., our markets are off by 12.2%, compared to the 16.8% loss (all countries mentioned are local currency) in Japan or the 13.1% loss in the UK.
Which countries are going to be the big winners in 2019?
Well, the U.S. always should be at the top of any list, with almost 50% of the world’s market capitalization, but in a contrarian play of sorts, I’m going to say Canada, which is down 12.0% year to date; its oil industry is in disarray and it’s housing situation could get worse with rising interest rates.
It’s not exactly the poster child for economic prosperity at the moment, but given most economists believe Canada won’t have a recession in 2019, I’m going to suggest these seven Canadian stocks to buy in 2019.
All of them trade on the New York Stock Exchange or NASDAQ.
Canadian Stocks to Buy: Canada Goose (GOOS)
The company best known for its super-warm winter parkas is losing some of its steam heading into 2019. Up 54% year to date through December 18; it’s lost 27% in the last month as investors lock in profits.
Not to worry.
Investors will be back in 2019 as the brand continues to deliver strong results from both its wholesale and direct-to-consumer businesses.
I’m so confident of Canada Goose’s (NYSE:GOOS) business model that I’ve made it my choice for InvestorPlace’s 10 Best Stocks for 2019, which brings together a group of financial experts to each recommend one stock they believe will outperform in the year ahead.
Traditionally, wholesale was Canada Goose’s primary source of revenue. However, over the last couple of years, it’s invested heavily in some different websites to serve online buyers in various parts of the world; also, it’s opening a small number of flagship retail stores to give consumers an up-close look at what the Canada Goose brand is all about.
Known as a three-season business, I believe the company will find a way to become a household name in the summer and not just winter, spring, and fall.
And one can’t forget the possibility of Canada Goose getting acquired. Strong brand, growing business. What apparel conglomerate wouldn’t want to own one of Canada’s finest exports?
Canadian Stocks to Buy: Brookfield Asset Management (BAM)
If you don’t know the name Bruce Flatt, you should. He’s the CEO of Brookfield Asset Management (NYSE:BAM), a global alternative asset manager that’s based in Toronto, but does business around the world.
Flatt’s run Brookfield since February 2002; he joined the company in 1990. When Flatt took the helm as CEO, Brookfield had just $3 billion in assets under management. Today, it has more than $330 billion invested in real estate, private equity, infrastructure, and renewable power assets.
Once upon a time, Brookfield was called Brascan; it was started as a vehicle to launch Brazil’s first electrical and transport utility in the late 1800s. Brookfield continues to do a lot of business in South America, more than 100 years later.
I won’t say too much about its assets — read a number of its quarterly and annual letters to shareholders to get a feel for the company — except to say that if you believe in Warren Buffett and Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) stock, Brookfield ought to in your portfolio in 2019 and beyond.
Canadian Stocks to Buy: Canadian Imperial Bank of Commerce (CM)
Of all the big Canadian bank stocks, Canadian Imperial Bank of Commerce (NYSE:CM) is likely the least known of the bunch; at least to Americans.
However, that’s changing ever so slightly, due to its 2017 acquisition of Chicago-based PrivateBancorp for $5.0 billion, which has given the bank a toehold into the high-net-worth segment of the U.S. financial services industry.
“We see this as a long-term strategic transaction that creates a platform for growth across North America, expands and deepens our client relationships, and creates a broader, diversified, and more valuable CIBC for our shareholders, our clients, and our team,” CIBC’s CEO, Victor Dodig, said in June 2016 announcing the acquisition.
It’s been 19 months since the acquisition closed and although CIBC stock is down 4% since the contribution by PrivateBancorp has been a meaningful one.
In the 12 months ended October 31, 2018, CIBC’s U.S. commercial banking and wealth management division had revenues of CAD$876 million, 128% higher than a year earlier and net income of CAD$203 million, 133% higher than in 2017.
Still, only a tiny fraction of the bank’s CAD$16.3 billion in annual revenue, PrivateBancorp and the rest of its U.S. business has become a platform for growth.
As we travel through 2019, I wouldn’t be surprised if CIBC made an acquisition or two in the U.S., to expand that platform even further.
Canadian Stocks to Buy: Shopify (SHOP)
InvestorPlace contributor Tom Taulli recently suggested that investors take a pass on Shopify (NYSE:SHOP) stock because of its valuation.
His argument why not to own one of Canada’s tech darlings is a sound one.
Essentially, Taulli feels that given the company’s revenues are slowing — Q3 2018 revenue grew 58%, down from 72% a year earlier, and projected to be just 44% in the fourth quarter — a very jittery market might not be the best time to buy a stock that’s trading at 15 times revenue.
It’s hard to argue with logic.
After all, Amazon (NASDAQ:AMZN) is trading at less than four times sales and is a much bigger e-commerce company than Shopify.
So, why do I think you should buy it in 2019?
Well, for two reasons.
First, I could easily see Shopify getting acquired next year. It might be a little premature, but Shopify’s made a lot of progress in the last year and would make a good catch for a larger organization geared to e-commerce.
However, CEO Toby Lütke would have to be on board with any takeover offer as he owns 36% of the votes.
Second, the company recently raised CAD$657 million, which it will use to acquire other emerging tech companies, to better position Shopify as competition heats up. With $2 billion in cash, you can expect it will go shopping in 2019.
Canadian Stocks to Buy: Lululemon (LULU)
When it comes to the best Canadian apparel export, Canada Goose is solidly second best while Lululemon (NASDAQ:LULU) remains the gold standard by which all apparel brands are evaluated.
The past year started badly with former CEO Laurent Potdevin stepping down in February due to inappropriate conduct that failed the company’s sniff test.
Executive Chairman Glenn Murphy took until the end of July to hire Calvin McDonald as the company’s new chief executive. Since McDonald, the former head of Sephora’s North American business, has come on board it’s been smooth sailing for LULU stock. Up 47% year to date through December 19, despite a market meltdown in the final three months of the year, the company is in a great position to grow in 2019 and beyond.
Lululemon’s goal is to grow revenues to $4 billion by the end of 2020 with $1 billion from men, $1 billion online, and $1 billion outside North America.
Known for underpromising and overdelivering, LULU is expected to blow through these goals, likely achieving them by the end of next year.
As every quarter passes, the Lululemon story gets better and better.
Canadian Stocks to Buy: Ritchie Bros. Auctioneers (RBA)
If you’re looking for a defensive stock to own that does well in good times and bad, Ritchie Bros. Auctioneers (NYSE:RBA) is a great place to start when it comes to Canadian stocks.
Like its name suggests, Ritchie Bros. auctions off used industrial equipment, bringing buyers and sellers together, both online and at live auctions, to transact business.
The company gets a piece of the action for bringing the parties together. It wins by processing large volumes. In Q3 2018, the company’s gross transaction value (GTV) was $1.04 billion, up 2% from a year earlier. More importantly, its online auctions saw GTV increase by 16% year over year, while its live auctions had a slight decline despite 13 fewer industrial auctions.
As the company continues to build a genuinely multi-channel auction business that meets the needs of its existing and new customers, the top and bottom line will continue to grow.
It’s a relatively dull business that doesn’t seem to generate a whole lot of news from one quarter to the next. Long term, however, RBA has delivered double-digit returns for shareholders.
And that’s all that matters.
Canadian Stocks to Buy: CAE (CAE)
CAE (NYSE:CAE) is the world’s leading civil aviation trainer with more than 50 locations globally providing more than 250 full-flight simulators for training on more than 160 commercial aircraft.
With more than 300,000 new pilots needed to service commercial airline flights around the world, CAEs training services continue to be in high demand.
Recently, it acquired the business aircraft training division of Bombardier (OTCMKTS:BDRBF) for $645 million, providing it with a market-leading position in the business aircraft market.
The area of its business that might be less familiar to investors is its defense and security business which provides training to more than 50 defense agencies around the world and accounts for 40% of the CAEs overall revenue.
“Over the last few years, CAE has been able to reach a market share of 25 per cent in the traditional flight simulation defense market — a mature position which management is comfortable with,” Desjardins Securities analyst Benoit Poirier said after a tour of the company’s Alabama training center. “Nevertheless, the company has been working to increase its exposure to services and to expand in other segments of the TSI (training systems integration) market.”
Long story short.
CAE continues to grow its revenue streams beyond the sale of flight simulators, and that’s great news for shareholders heading into 2019.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
