This week’s newsletter will be more of an annual recap, as I imagine the last thing you want to do over the holiday period is analyze or think about stocks.
Instead, I’ll touch on some major events that happened here at Stocktrades Premium regarding the companies we follow. I will also cover my portfolio results overall.
Next week, however, we’ll be right back into action, as our 2025 Canadian Foundational Stocks will be released!
2024 in review
As I write this, the S&P 500 is up 24%, the NASDAQ 31%, and the TSX 17.7%.
It has been an exceptional year in the equity markets. In fact, 2023/2024 is likely to be only the fifth time since the Second World War that the S&P 500 has put up 2 consecutive 20%+ annual returns.
I would likely call 2024 a “speculation” year as valuations grow larger. During speculative years, we’ve witnessed the Foundational Stocks lag here at Premium while the Bull List stocks excel, which is precisely what has happened.
My own portfolio
I finished the year with around 31% returns, give or take the few trading days we have left in 2024.
It was a noteworthy year for me. Could I have earned more chasing highly speculative options south of the border that have had remarkable results? Maybe.
However, if 2021 and 2022 were any indicator, it is difficult to time when the bottom will fall out of that end of the market. Retraction is certainly a “when,” not “if” situation within those securities.
I do feel bad for newer investors, as these types of stocks are often the ones they construct a large portion of their portfolios with, primarily because they are the ones that the financial media focuses on in an effort to drive clicks and views.
Many criticized my small-cap holdings throughout 2022/2023, stating they were dead money and not worthy of investment. I took the opposite position on many of these holdings, accumulating them during their most hated times.
Alaris Equity Partners, Well Health, Savaria, Aritzia, and even Equitable Bank to an extent. All of them have contributed massively to the large outperformance of my portfolio in 2024.
Cryptocurrency no doubt had a bit of an impact as well. Starting out with a 4% position, I had more than doubled that position since my first additions in 2021. I trimmed back earlier this year, but the torrent pace of growth has led Bitcoin to be a near 8% position inside my portfolio again.
Will I trim? It’s certainly tempting, but at this point in time, I’m going to let my crypto winner win, and accept the large volatility that will come with that.
What I’ll be doing in 2025
For many of you, ever since I released my portfolio to Stocktrades Premium, you’ve known me to do one thing: Deposit money weekly, utilize half of that money to buy USD, and then dollar cost average into my holdings.
Or, in specific opportunities, go heavier on individual purchases due to valuations that I believe are attractive for long-term purchases.
However, as the Canadian dollar continues to fall, stock valuations continue to get richer south of the border and the Canadian economy continues to struggle, it is no doubt becoming more and more attractive to build up a bit of a cash position at this point.
I haven’t necessarily been in a rush to purchase equities. This is why you see a 3%~ cash position inside of my portfolio at the moment (now 8% due to some short-term shuffling of cash around accounts in the new year).
I plan to keep a bit more dry powder (cash) on hand in 2025. Enough to be able to pull the trigger on opportunities I see or, in the situation of a market correction, have some capital to deploy among cheaper valuations.
Make no mistake about it, however, I’m not going to be hoarding large amounts of cash waiting for a market correction.
As I always say, when it comes to timing the market, there are two possible options: You either get lucky, or you end up being wrong.
But don’t be surprised to see me hovering around 5-8% cash in 2025, with all of it being allocated to USD and CAD treasury bills, waiting to deploy into the market at strategic opportunities.
Let’s dig into how the particular lists did here at Premium this year.
Growth Bull List
Of the 13 stocks on the Growth Bull List this year, 7 outperformed the S&P 500, and 8 outperformed the TSX Index.
On average (taking in the combined returns of all Bull List stocks and dividing that by the 13 stocks on the list), the average returns of the Growth Bull List for 2024 sat at 27.6%. This is a 3.5%~ beat in terms of the S&P 500 and a 10%+ beat on the TSX Index.
Considering that 11 of the 13 stocks on this list are Canadian listed, it makes it even more impressive that it was able to top the returns of the S&P 500.
The Winners
Aritzia (TSE:ATZ)
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Aritzia returned 95.3% on the year, nearly doubling in price as inventory concerns subsided, and the company returned to outsized growth south of the border.
I am really impressed by this company and happy I continued to add to my position throughout the bear market in 2022 and 2023.
I don’t want to say the company’s growth here in Canada is “exhausted,” but make no mistake about it, this is a holding I own for the company’s outsized growth south of the border.
And considering the United States has 10x the population and a much healthier consumer, I’m still bullish.
Have a look at the chart below, which highlights the company’s US versus Canadian revenue. In August of 2020, the company earned $58.1M in the US. Fast forward to today, and they’ve earned $345M, a 494% increase. Canadian revenue, on the other hand, has barely doubled.
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I continue to hold, with no plans to sell.
Well Health (TSE:WELL)
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What a year for Well Health. This has been a company featured on the Bull List for many years but faced some extremely negative sentiment as a high-growth stock that lacked profitability.
That all changed in 2024, with the company’s heavy acquisition strategy during the pandemic finally paying off. The stock is up just shy of 84% this year.
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The company made numerous improvements to its guidance in 2024, and 2025 is shaping up to be a relatively big year for Well Health. Profitability has been a big concern for the company this year. But as you can see by the chart above, there are some notable improvements to free cash flow generation.
Patience has paid off at this point, and I’m still fairly bullish on the company. With a market cap of only $2B~, this company has a lot of runway in Canada and the United States as a digital health provider, along with its network of physical clinics.
The Losers
BRP Inc (TSE:DOO)
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It’s been a tough year for BRP, a company that I own and I believe is top quality. The stock was the worst-performing company on the Growth Bull List this year, with losses of 22%~.
The economic drawdown, high inflation, and higher financing rates caused a significant slowdown in the popularity of its recreational vehicles.
However, history has shown that with cyclical stocks, often the best times to buy are the bottoms of economic troughs. It’s difficult to add to companies like this at the bottom while the market is pushing 25%+ YTD returns. But, if we’re looking at this with a long-term approach, we can certainly see the value in a company like BRP.
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The company is now trading at nearly 29x earnings. And for many, they’d view this as expensive. However, cyclical stocks tend to work in the reverse of what you’d believe. With cyclical stocks, often high P/Es are the best time to buy, while low P/Es can signal somewhat of an economic top.
Either way, I remain bullish on BRP in 2025 and plan to continue to add to my position.
Dividend Bull List
Out of the 11 stocks on the Dividend Bull List this year, 6 outperformed the S&P 500, and 9 outperformed the Toronto Stock Exchange.
Overall, the average return from the list in 2024, if you had reinvested the dividends, would be 24.2%. Considering the only US-based stock on this list is Visa, I’d more so be benchmarking the Dividend Bull List to the TSX Index. And in this instance, it was a significant beat over and above the TSX.
The Good
Brookfield Asset Management (TSE:BAM)
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It has been a heck of a year for the Brookfield organization overall. Although Brookfield Renewables has struggled, the asset management spinoff BAM and the newly formed Brookfield Corporation have more than made up for it.
I want to highlight arguably the most important key performance indicator for Brookfield Asset Management, which is its fee-bearing capital. Essentially, this is the pool of assets Brookfield manages that is subject to management or performance fees.
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The company has compounded its fee-bearing capital at a 14%~ CAGR since 2019 and continues to grow it at an exceptional pace today.
It’s not all that surprising that the company returned nearly 55% in 2024 and is positioned to execute in 2025 as well. Although the value gap has likely closed, buying this asset manager at fair prices is still an attractive proposition.
TMX Group (TSE:X)
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Interestingly enough, TMX Group is the longest-standing Dividend Bull List stock today. It has been highlighted for years here, and continues to excel with 41% returns in 2024. Over the last 3 years, the company has returned nearly 90%, highlighting its dominance in the Canadian space.
I’ve attached a chart of the company’s market-related revenue below, which would be things like options, equities, and clearing transactions revenue. We can see that the bear market hit the company pretty hard in 2022, but it’s recovering in a big way and is currently benefitting significantly from the bullish equity markets.
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The company’s market share is dominant, and its moat is wide, which is why I expect TMX Group to remain on the Dividend Bull List for years to come.
The Bad
Allied Properties REIT (TSE:AP.UN)
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Allied Properties was the only stock on the Dividend Bull list to post negative total returns in 2024. What looked like a discounted office REIT play is starting to test investors’ patience, and for good reason.
Falling rates have not helped REITs as much as I had expected, and the office space hasn’t witnessed as large of a recovery as I expected due to the much weaker-than-expected Canadian economy.
That said, the distribution is still well covered and relatively attractive for those who want high levels of income. I believe that Allied is discounted enough at this point that the company has a realistic possibility of returning its yield and a relatively flat to slightly increasing share price, which could possibly mean 11%~ returns annually.
Obviously, nothing is guaranteed, but the company’s FFO generation and the return in terms of popularity when it comes to REITs could help push this one to those levels.
Patience is key here, in my opinion.
Our Foundational Stocks
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2024 marked a relatively rare situation in terms of our Canadian Foundational Stocks in the fact that unless they have a relatively strong finish to the year after I send this, they will underperform the market for the first time since we’ve released them.
The underperformance will be relatively small, and considering the overall alpha this list has provided members for half a decade, I’m not too worried.
I’d consider 2024 somewhat of a “speculative” year where the markets are very much risk-on. In situations like this, I expect fundamentals to go out the window to a certain extent. As a result, not many investors have time for boring, defensive stocks.
That is what we said in 2020 for a company like Loblaw. Fast forward to now, and it’s realized 200%~ in terms of total returns.
It seems a tad unfair to criticize the Foundational Stock list as well, considering it returned 17%~ in 2025. The Foundational Stock List is one of the cornerstones of Stocktrades Premium and will continue to be for many years.
That said, there were a few companies that struggled in 2024. 2025 will see the largest changes to the Foundational Stocks we’ve ever published.
So much has changed in 2024, from the emergence of artificial intelligence, a Republican party win, and the large-scale struggles of the Canadian economy as a whole.
