Our 21st pick: Cervus Equipment
Our 20th pick: Manulife Financial
Our 19th pick: Couche-Tard
Our 18th pick: HEXO Corp
Our 17th pick: Toromont Industries
Our 16th pick: Badger Daylighting
Our 15th pick: Constellation Software
Our 14th pick: Dollarama
Our 13th pick: Magna International
Our 12th pick: Stantec
Our 11th pick: Open Text
Our 10th pick: ScotiaBank
Our 9th pick: Enbridge
Our 8th pick: Intact Financial
Our 7th pick: Aurora
Our 6th pick: GoEasy Limited
Our top 5 picks: ?
Building a list of the best Canadian stocks on the TSX is no easy task.
Why is that?
Because the TSX is primarily dominated by three sectors:
These sectors make up over two-thirds of the market.
Financials are for the most part established, low to moderate growth companies.
Both energy and materials have had a difficult time over the past few years due to macroeconomic conditions. Although conditions are improving, the outlook for both the aforementioned two sectors is still suspect at best.
**Further narrowing the field, this list was limited to mid-large companies with market capitalizations in excess of $500 million.**
Despite the limited options, there is still some solid growth plays and stocks to invest in on the TSX.
In selecting these companies, we looked at historical performance and expected future growth. We also paid close attention to the company’s market potential and management’s track record of delivering on their expectations.
When it comes to investing in growth companies, there is no perfect formula and does require a decent level of assumptions.
As per the National Association of Investors Corporation (NAIC), a good barometer for growth companies is projected five-year growth rates in excess of 10%
All companies on this list are expected to exceed over the next few years, making them some of the best stocks to buy today on the TSX.
What’s new on our best Canadian stocks for the first 2019 update
We’ve added a few more stocks, two to be exact. It’s tough to find solid growth stocks but this group here is in our opinion the cream of the crop. Our top 5 Canadian stocks have performed insanely well as a whole, and we are looking forward to better results in the first half of 2019.
Our top growth list is subject to a lot of movement, as some of these stocks are fairly volatile so you will see a lot of companies changing positions on this update. But overall, these are some of the best Canadian stocks to buy and hold on the TSX right now.
Like these stocks? Don’t forget to check out our other top stock lists:
Our best Canadian stocks to buy for 2019
21. Cervus Equipment
Cervus has fallen to the bottom on our list of the best stocks to buy in Canada.
Cervus is engaged in the sale, after-sale service and maintenance of agricultural, transportation, construction and industrial equipment.
The company services and sells several high-profile brand names including John Deere, Peterbilt, Bobcat, JCB, Clark, Sellick and Doosan.
Although the company’s operations are primarily in located in Canada, is also has dealerships in Australia and New Zealand.
After a few rough years with declining income, Cervus rebounded in 2017 with sales growing 15% YOY through nine months and net income growing 10% over the same period.
The reason this stock broke our list of the hottest stocks to buy in Canada is simple.
The company operates in an industry with high barriers to entry and is well positioned to take advantage of the continued recovery of both the oil and gas industry and agriculture industries.
The company is also actively looking to grow through acquisition, targeting companies which are trading at attractive values and that would fit well with existing operations.
These factors have led to analysts’ to estimate that net income will rise by 32% in 2018. The company currently trades at an attractive valuation and at 11.4x earnings, their share price is not keeping up with expected earnings growth providing investors with an attractive investment opportunity.
20. Manulife Financial
The company is also a Canadian Dividend Aristocrat having raised dividends for five consecutive years. This is a notable accomplishment given that the company’s dividend was stagnant for years following the financial crisis. As a percentage of future twelve-month earnings, the company’s payout ratio is only 32%. This leaves plenty of room for continue dividend growth.
Insurers have been flocking to Asia, which has been a boon for the company. Since entering the Asian market in 2014, new business value in the region has grown by 38% annually. The company is focused on high-return businesses and leveraging the scale of its Asian operations. As a result, the company saw 7% margin improvement since 2014. Expectations are for margin expansion to continue.
19. Alementation Couche-Tard
Falling down a couple spots on our list of stocks to watch today is Alimentation Couche-Tard.
Alimentation Couche-Tard is the largest convenience store operator in Canada and 2nd largest in North America. While constantly expanding its presence in the US and Europe, it successfully built a convenience store including daily use products.
Many stores are also combined with fuel service stations. ATD operates 12,081 stores (7,863 in North America, 2,708 in Europe and 1,510 internationally).
Instead of simply selling chips and beers, ATD focuses on superior offerings which includes fresh food, private labels and strong product concept offerings.
ATD’s main strength lies in its ability to acquire and integrate convenience stores across the world and shape them almost instantly with its own branding.
ATD is not buying other stores to face the competition or because management needs to follow the parade. In fact, ATD IS the parade. It is the leader in the market and dictates its vision.
18. HEXO Corp.
Hydropotherapy Corp. is by far the riskiest of the bunch.
This Quebec-based pot stock is a licensed marijuana producer. Investors must be prepared for significant volatility with an investment in such a company.
Hydropotherapy recently entered into a 5-year agreement with its home province to supply up to 200,000 kgs worth of cannabis products. It is the largest agreement in the province, outsizing the deals made by Aurora Cannabis and Canopy Growth.
2019 is going to be a banner year for the company as it is poised to significantly increase capacity.
In June, the company is expected complete its 250,000 square foot expansion which will add annual production capacity of 25,000 kgs.
In comparison, the company’s current production capacity is only 3,600 kgs. A second expansion which is expected to be completed by the end year, will bump the company’s annual production to 108,000.
Analysts have an average price target of $7.42, implying 72% upside over the next year.
17. Toromont Industries Ltd.
Toromont Industries Ltd. operates through two business segments: the Equipment Group and CIMCO.
It operates one of the largest Catepillar dealership networks in the country and CIMCO is a market leader in the design, engineering, fabrication and installation of industrial and recreational refrigeration system.
In 2017, the company made several acquisitions which led to the company posting record revenues this past quarter.
Expectations are for the company to post 50% earnings growth through 2019 and its share price is just barely keeping up with these expectations.
As industrial activity ramps up, Toromont’s order bookings and backlogs continue to grow. Analysts have a one year an average price target of $62.75 implying upside of approximately 11% from today’s share price.
16. Badger Daylighting
Falling to number 16 on our list of the best Canadian stocks to buy right now is Badger Daylighting, North America’s leading distributor of non-destructive excavating services.
Badger is somewhat of a contrary pick as the company has struggled over the past couple of years.
Revenues have stagnated and EPS have actually decreased by an annualized 25% over the past two years.
Why include it on a growth list? When analyzing growth companies it is important to look forward and in Badger’s case, the future appears to be bright.
In 2017, its financials have been extremely positive having grown earnings per share by a whopping 57%.
Management expects the momentum to continue into 2019 on the back of improved macroeconomic conditions where they expect to double US business in the next 3 to 5 years and has targeted EBIDTA growth of 15% over the same time period.
Analysts expect the company will grow earnings by 20% in 2019.
15. Constellation Software
Moving down 2 spots on our list of the best Canadian stocks for 2019 is Constellation Software.
Constellation Software specializes in acquiring, managing, and building vertical market software businesses.
The company has been on a tear as of late returning approximately 25% YTD and has averaged a 30% return over the past 3 years.
Furthermore, the company doubled sales to 1.84 billion from 2012 to 2015 and despite this impressive run, the company still has more to give.
Constellation Software has achieved phenomenal returns primarily through roll-up acquisitions. The company is one of those that has largely flown under the radar for retail investors but don’t let its lofty share price turn you away.
Management has proven to be excellent capital allocators and are extremely disciplined in their acquisitions.
Expectations are for 20% earnings growth through 2019.
Dollarama has fallen sharply on our list of the best Canadian stocks for 2019, partly due to poor earnings. However, there is still lots of positive aspects about the company.
Dollarama has been one of Canada’s most impressive growth companies over the past 5 years. Since 2013, the company has grown EPS by an annualized average of 26%.
Likewise, the company’s share price appreciation has been even more impressive with a CAGR of 65% over the same time frame.
The company continues to target a high number of store openings, which will increase its footprint and it has proved capable of shifting its product mix to higher margin items.
As it continues to mature, it is perhaps not realistic to expect it to continue its blistering growth pace but its expected growth rate is still impressive.
Analysts expect earnings to grow by approximately 16% in 2019.
Perhaps those estimates may be a little conservative the company has beat expectations in every quarter in 2017 and revised growth margin estimates to the upside back in September which in part helped drive a 25% increase in quarterly EPS in Q3.
13. Magna International
Falling 2 spots but staying on our list of the best Canadian stocks to buy is Magna International.
Magna International is more than an international automobile part supplier; it also designs, develops, manufactures, assembles and engineers automobile parts.
Magna sells to OEMs (original equipment manufacturers) across 26 countries. It offers 86 products that go from seating to roofing systems.
MGA relies on Detroit automakers for about 50% of its sales. The car industry is obviously cyclical, but MGA has been able to show strong growth by adding more products to its catalog.
MGA is a leader in the auto parts industry and this serves it well as many manufacturers tend to concentrate their processes with fewer suppliers offering wider product ranges.
This is exactly where Magna stands in the market. With a market cap of $19.5 billion, MGA is often chosen for its size and its stability.
Car manufacturers are looking for suppliers that will follow them for several years, not just for a short ride.
Stantec drops 2 spots to number 12 on our list of the best Canadian growth stocks for 2019 mainly due to a stagnant period where the company didn’t see much growth.
Stantec provides professional services, such as engineering and architecture services, in the area of infrastructure and facilities for clients in the public and private sectors.
It is the third-ranked North American Design firm and tenth ranked global design firm generating approximately 3 billion in revenues. Over the past five years, the company has grown revenues by an impressive CAGR of 20%.
The company has a clear growth strategy, that of growth through acquisition. Since 1994, the company has made over 120 acquisitions, and the company expects to maintain revenue CAGR of 15% over the medium term (3-5 years).
It expects to achieve this through a combination of organic growth and further acquisitions. Analysts expect earnings to mirror the company’s anticipated revenue growth and expect the company to grow earnings by 37% in 2019.
11. Open Text
Open Text goes from missing the list to number 11 during our update of the best stocks to buy in Canada.
Open Text is the world’s largest enterprise information management (EIM) software and solutions company. This tech leader is a rare combination of growth, income and value.
The company is one of only four Canadian Dividend Aristocrats in the tech sector. Having raised dividends for six consecutive years, it has 15% annual dividend growth rate. This is one of the best dividend growth rates among Aristocrats.
The company can be considered a serial acquirer having closed on more than two dozen acquisitions since 2007. It has grown earnings at a double-digit pace over the past ten years and has returned 543% over the same time frame. This is 54.3% growth annually!
This tech leader is also one of the most undervalued tech companies. It’s forward price-to-earnings, price-to-book and price-to-sales are all below software peers and industry averages.
10. Bank Of Nova Scotia
Bank of Nova Scotia is one of Canada’s Big Five banks and the third largest bank by market capitalization. The bank’s inclusion on our list of excellent buying opportunities is in part because of its recent under performance.
Confused? Let me explain. Canada’s large banks have been the most reliable performers on the TSX. Over the long term, they tend to rise and fall in tandem. Therefore, when one under performs it usually signals a buying opportunity.
Research has shown that if investors where to invest in the worst performing bank of the previous years, they enjoyed returns in excess of 20%! Guess who has been the worst performing bank?
That’s right, Bank of Nova Scotia.
The company has been pursing acquisitions which has negatively impacted them in the short term. An equity raise and one-time acquisition costs have hit the bottom line. On the flip side, these acquisitions will drive both top and bottom line growth. The bank has on the highest growth rates among its peers.
In at number 9 on our list of the top Canadian stocks is Enbridge.
Enbridge operates the longest pipeline in North America. The company recently merged with Spectra to create an energy infrastructure company.
About 2/3 of ENB’s earnings are generated through oil sands (liquid pipelines) distribution while the other 1/3 comes from natural gas transmission.
The company currently has $26 billion worth of projects on the table and another $48 billion in development. Among those projects, there is the Line 3 replacement.
Honestly, I’m not a big fan of the energy sector. In general, commodities are volatile and companies in these industries often post disastrous results during downturns.
However, Enbridge is an exception. After the merger with Spectra, ENB became an oil sands and natural gas behemoth with over $165 billion in infrastructure assets.
As its cash flow is predictable, management expects to drive a 10-12% dividend annual growth rate through 2024.
Between January and November 2017, the stock lost almost 20% and now pays over 6.5% yield.
8. Intact Financial
Intact Financial is one of Canada’s lesser known insurance companies. The company specializes in P&C insurance offering a range of car, home, and business insurance products.
As with a good portion of the TSX, Intact’s share price has struggled this year. However, this presents a great buying opportunity as the company’s share price has not kept up with its anticipating earnings growth.
Its PEG ratio is 0.80 and a PEG ratio lower than 1 typically means a company is trading at a discount to their growth rate and can be considered undervalued.
The company has targeted net operating income growth of 10% annually and its most recent OneBeacon acquisition is also expected to add to operating income upon closing. Analysts agree as they expect the company to grow earnings by 31% in 2019.
With a current P/E of 16.7 and a dividend yield of 2.9% that is growing at an annualized rate of 10%, Intact Financial is well positioned to reward investors.
7. Aurora Cannabis
As a result, the company has the largest funded production capacity in the industry (750,000 kgs). Although the company has paid handsomely for this production, no one is better positioned to step up should demand for recreational cannabis be larger than expected.
As the largest producer, it is fitting that the company has signed supply agreements with the majority of provinces. With recreational sales going into effect October 17, Aurora will see a significant bump to its top line.
Likewise, its producer status has large beverage companies circling the company. A deal with a major beverage company is likely and will certainly propel the stock higher.
6. GoEasy Limited
Goeasy is a full-service provider of goods and alternative financial services. It operates in two segments: easyfinancial and easyhome.
Although easyhome has been profitable and continues to grow, the company’s real growth prospects are found within its easyfinancial portfolio.
Over the past year it has made strategic decisions to enter the Quebec market and to enter a new financial lending sector.
Previously, the company was focused on unsecured loans of $500-$15,000. Recently, goeasy expanded product offerings to unsecured loans of $15,000-$30,000, an $18 billion market.
The company is on its way to becoming a Dividend Aristocrat as it recently raised dividends by 25%, its fourth consecutive year of dividend raises. The company is expected to grow earnings by 58% through 2019.
Trading at a forward P/E of 17.0, the company is cheap.
5. CGI Group Inc
CGI Group is Canada’s largest technology outsourcing company.
It is deeply embedded in government agencies across North America and Europe. The company has a growth through acquisition model.
It completed its largest acquisition in its history with its UK-based Logica acquisition back in 2012.
Now, years later, the company has reduced its debt and is positioned to make another transformative acquisition.
CGI has an impressive track record. It’s has rewarded investors with a compound annual growth rate (CAGR) of approximately 28% over the past five years. Year-to-date, it has bucked the overall market downtrend and its share price has returned 13%.
The company has ambitious growth plans and it expects to double in size over the 5-7 years based on 2016 financial results. It has one of the best management teams in the industry and we have no doubt it will achieve its stated growth targets.
4. Parkland Fuel Company
Falling a spot to number 4 on our list of the best companies to buy stocks in is Parkland Fuel.
Parkland Fuel Corporation distributes and markets fuels and lubricants. The Company delivers refined fuels and other petroleum products to motorists, businesses, consumers, and wholesale customers.
It is Canada’s largest and one of North America’s fastest independent marketers of fuel and petroleum products. The company is one of the lone bright spots on the TSX and has returned a healthy 16% YTD and about 22% since we first brought it to your attention back in October and the company is expected to ramp up earnings.
In 2017, Parkland has grown sales by approximately 52% and analysts expect Parkland’s earnings to grow 37% in 2019.
The company’s growth is primarily driven through acquisitions as is evident by its most recent purchase of Chevron Canada’s Downstream fuel business which makes them the exclusive distributor of Chevron-branded fuels.
The deal, which closed in October is expected to accelerate cash flow by 30% and add an additional $50 million to EBITDA. This acquisition, which complements its earlier acquisition of CST brands from Alimentation Couche-Tard has rapidly expanded the company’s assets and footprint. Next year should be a monster year for the company.
3. Canada Goose
Moving up to number three on our list of the best up and coming stocks to buy is Canada Goose.
Canada Goose is one of Canada’s most recent IPOs and has been an incredibly successful one. The company, which began trading on the TSX on March 17 2017 has returned 126% to shareholders.
Canada Goose is quickly becoming one of Canada’s most prestigious brands and has turned the parka into a must-have fashion item.
What is particularly attractive about the company is that its parkas are becoming a status symbol worldwide. As such, the company has recently announced it is opening flagship stores in Boston and Tokyo, further expanding its worldwide footprint.
Furthermore, the company has recently began to focus on selling direct to consumers online, which will positively impact sales volumes and result in higher margins. According to Canada Goose, jackets sold online earn 2 to 4 times more operating income.
With continued expansion and a direct to consumer focus, the company is expected to grow earnings by 25% in 2019.
2. Canopy Growth Corporation
Steady at number 2 spot for the best investment in 2019 is Canopy Growth.
We called Canopy growth early in our top cannabis stocks list and top growth stock articles, at around $12.
Canopy Growth, outside of having one of the most recognizable tickers on the TSX, is well positioned to take advantage of Canada’s impending legalization of marijuana. Quite simply, the company is in the business of producing and selling legal marijuana in the Canadian market.
It is difficult to evaluate a company such as this on fundamentals.
Although the cannabis industry has struggled during the first report of earnings after legalizaton, Canopy has fared better than most.
The company continues to strike deals on a weekly basis and is the best positioned company in the industry. Although it is operating at a loss, this is quite normal for high growth companies.
That being said, analysts expect the company to post their first profits in 2019
Stocktrades best stock to buy for growth in 2019 is Shopify.
Shopify has been one of Canada’s most successful IPO’s in recent years returning almost 400% since its May 29 2015 listing on the TSX. Shopify is best classified as a cloud-based, multi-channel commerce platform.
This platform is used by over half a million businesses in over 175 countries. Since 2012, they have experienced 74% annual merchant growth and major brands such as Canadian Tire, P&G, GE, and Tesla use their product.
Despite the huge growth over the past few years, the company still has room to run. To put it into perspective, their current 500K customer base pales in comparison to the approximately 50 million small to medium size businesses across Canada, the U.S. and Europe.
Also many larger businesses such as the ones listed above that are recognizing the value of Shopify’s platform. Yep, they currently operate at a loss, but analysts also expect the company to post a profit in 2019.
We’d like to thank a contributor for helping find these up and coming stocks
All of the write-ups on those stocks are his. We consider Mikes program at Dividend Stocks Rock one of the best tools around for picking dividend stocks and building a rock solid portfolio. We highly suggest you check out his website.
Are these good stocks to invest in? What can I expect to see investing in these stocks?
You can expect to see these stocks flourish in 2017 and beyond due to strong fundamentals indicating they are on the up and up.
However, you can expect to see a decent amount of volatility in these stocks until they have become further established.
That being said, the most profitable strategy when purchasing these stocks is a buy and hold method, unless fundamentals have changed.
Should I be looking at dividend stocks or growth stocks?
This is a question that gets asked a lot in the investing world, and the answer really depends on you.
There are benefits and downfalls to both investment strategies and more often than not the best situation you can put yourself in is to have a blend of the two. A combination of stocks from this list and our top dividend stocks in Canada list can create a great foundation for your investment portfolio.
How risky is growth investing?
The idea behind growth investing and finding the best stocks to buy is looking for companies who are expected to increase their earnings in the upcoming years. The key word in that sentence is expected.
Growth investing is much riskier than income(dividend) investing and even value investing.
Because you are essentially betting on the future and not the present, the increased volatility can create large swings in your portfolio. This is why it is essential to have a combination of stocks in your portfolio that balance out your risk to a comfortable level.
Growth stocks can be difficult to find.
Finding the best Canadian stocks for 2019 requires extensive research and patience as too many incorrect decisions can have a detrimental effect on your portfolio.
If you’re just getting started and don’t quite know how to get involved in the stock market, check out our article on how to buy stocks.
So what stocks are you investing in in 2019 for growth? What do you consider the best stocks to buy on the TSX? Let us know if you agree with us in the comments below! If you have any other suggestions, feel free to throw them in the comments section as well and we will review your submission!