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Before and after legalization, the buzz surrounding Canadian stocks to buy that are associated with the cannabis industry has been electric.
American investors, for probably the first time in the history of Canada, are hot after the next great Canadian stock to buy.
Even here in Canada, the pot action is fast and furious. Everyone is getting into the act. And like the dot.com boom of the late 1990s, if you visit Toronto or Vancouver, you're likely to get a cannabis stock tip from your taxi driver or hotel concierge.
Now, as more of the Canadian cannabis companies get listed on U.S. exchanges, financial advisors on both sides of the border could soon be exhibiting symptoms of FOMO (fear of missing out).
"Large investment firms have kept clients out of marijuana stocks during the lead-up to legalization of the drug for recreational use, but that will have to change if financial advisors want to keep up with the performance of Canada's broad benchmark index," stated Simon Avery in the October 30 edition of the Globe and Mail, Canada's national newspaper.
If you don't want to get left behind, here are seven Canadian stocks to buy that lets you have your cake and eat it too.
Canadian Stocks to Buy: Horizons Marijuana Life Sciences Index ETF (HMLSF)
If you believe that the cannabis industry is at the beginning of a golden age, one in which Canadian licensed producers lead the way on a global stage, then you absolutely must buy the Horizons Marijuana Life Sciences Index ETF (OTCMKTS: HMLSF ), an ETF with CAD$718.4 million in assets.
Eight out of its top 10 holdings are all big players in the Canadian and global cannabis space. Assuming people don't stop using cannabis entirely, it's safe to think that one or more of the companies will strike it rich.
"Investors are recognizing there is a lot less risk investing in an ETF that provides broader, diversified exposure to a new and evolving marketplace," Steve Hawkins, CEO of Horizons ETF Management Canada Inc., the people behind the fund, recently said. "This sector is something different where there is not a lot of expertise in investing in individual securities. It's such a new sector that is so news-driven, and we don't know what is around the corner."
ETFs were designed for precisely this type of situation. You know you don't want to miss out, but you've got no idea who the winners will be.
Canadian Stocks to Buy: Brookfield Asset Management (BAM)
Source: Governor Earl Ray Tomblin via Flickr
Do you own shares in Johnson Controls (NYSE: JCI )?
If you do, the company's about to sell its car battery business to Bruce Flatt and the rest of the investment team from Brookfield Asset Management (NYSE: BAM ) for as much as $14 billion .
Brookfield is one of the world's largest alternative asset managers with more than $285 billion invested in infrastructure, real estate, energy, and private equity assets.
In July 2017, I called Brookfield one of the seven best buy-and-hold "holdings" on Wall Street. Since then it's been up and down like a rollercoaster.
"I included BAM in my list because Flatt and the rest of BAM's employees own significant amounts of stock in each of its various publicly traded affiliates," I wrote at the time. "The reason people invest in Warren Buffett is that he eats his own cooking. So does Bruce Flatt. Brookfield is one company, whether you believe it's a holding company or not, you want to own for the long run."
Since 1998, Brookfield's generated an annualized total return of 19% , significantly higher than the 7% total return for the S&P 500 .
Canadian Stocks to Buy: Canadian Imperial Bank of Commerce (CM)
Source: Ian Muttoo Via Flickr
There are five big Canadian bank stocks. Canadian Imperial Bank of Commerce (NYSE: CM ), or CIBC for short, is the smallest of them.
That said, it's upped its game in a big way since Victor Dodig became CEO in September 2014 . Previously in charge of the bank's wealth management business, Dodig went to work strengthening its business in the U.S.
The bank Dodig inherited was still reeling from writing off billions in U.S. debt from the 2008 financial crisis, the only Canadian bank having to do so. A push back into the U.S. didn't exactly instill confidence in investors. It had become the least credible of the big five Canadian banks.
Despite the concern, CIBC acquired Chicago-based PrivateBancorp in 2017 for $5 billion; it was off to the races.
Now, with 16 consecutive quarters of year over year earnings growth, the bank continues to possess the lowest P/E multiple of the big five, despite all of the progress.
"I think our bank is on the right track," Dodig told the Globe and Mail in September. "When you look at where we've come from, from the financial crisis nine years ago, I'm not so sure that anybody would have predicted that we'd be where we are today."
An underdog to be sure. It's my favorite Canadian bank stock.
Canadian Stocks to Buy: Lululemon (LULU)
Trading at a forward P/E of 34 despite a 12% correction in Lululemon (NASDAQ: LULU ) stock in October, the Canadian apparel success is priced for success.
You shouldn't worry if you own LULU stock. It will be back in the $160s as soon as it delivers third-quarter results December 4 after the close of trading.
Longtime InvestorPlace advisor Louis Navellier is a big believer in Lululemon. And so am I.
"The fact that the consumer is back in the U.S. That means LULU is seeing its regular customer base buying more stuff and its aspiring customer base having enough to splurge on an occasional piece of clothing now," Navellier stated October 19. "What's more, it's also opening up new lines in dance-inspired activewear and new sports bras…. And, there's also talk of expanding the men's line of Lululemon clothing."
If Under Armour (NYSE: UAA ) can jump more than 25% after a Q3 profit, imagine what Lululemon can do with a big one.
Anywhere under $145, LULU stock is a full-on buy.
Canadian Stocks to Buy: Ritchie Bros. Auctioneers (RBA)
If you were a shareholder of Ritchie Bros. Auctioneers (NYSE: RBA ) at the beginning of 2018 - it's the world's largest auctioneer of used industrial equipment - and I told you you'd have a total return of 14% heading into the final two months of the year, I'm pretty sure you would have taken it.
Over the past decade, Ritchie Bros. has averaged an annualized total return of 8%; over the past five, it's 13%, suggesting 2018's been a good year for the Vancouver-based company.
Just this past weekend, Ritchie Bros. held a live auction in Edmonton that attracted more than 10,000 bidders from over 46 countries that bought $89 million of equipment of four days - 66% of it bought online, 90% by Canadians.
"Attendance was up year over year as demand for equipment across North America continues, resulting in strong prices in last week's Edmonton auction," said Trent Vandenberghe, Regional Sales Manager, Ritchie Bros. "Companies across industry sectors are taking advantage by converting their idle assets into cash, while buyers are filling their equipment needs with good clean machines for winter work."
In good times and bad, Ritchie Bros. is the company North American buyers and sellers turn. In its latest quarter, revenues and adjusted earnings were up 22% and 25% respectively year over year.
Business is more than good.
Canadian Stocks to Buy: Shopify (SHOP)
Source: Shopify via Flickr
As investors are aware, Canada is in the midst of a cannabis gold rush, where companies big and small are putting their claim on the estimated $7-10 billion CAD in annual sales to be generated by legalization.
Shopify (NYSE: SHOP ), who was already helping companies of all sizes run their e-commerce platforms - Kylie Jenner's cosmetics empire is a big one - is now helping some of Canada's provinces sell pot online.
That right there suggests the Shopify naysayers shouldn't be so convinced Shopify is a get-rich-quick scheme .
The problem for many investors is that the valuation is too precious.
"I really like the story and I love what they're doing," Andrew Pink, a portfolio manager with LDIC Inc. recently told BNN Bloomberg. "I love the idea that they've got this massive list of companies where they can do the e-commerce platform for virtually any business. It's just an amazing story. The problem is that it trades at seven times next year's revenue."
If you're planning to hold for 2-3 years, $135 isn't a terrible price to pay for one of Canada's biggest tech stories. If you're looking for a quick return, you might want to look elsewhere.
Canadian Stocks to Buy: Canopy Growth (CGC)
While the Canadian Marijuana Index has Canopy Growth (NYSE: CGC ) in third place regarding market cap, there is no question in my mind that it's the number one stock to buy in this emerging sector.
First, it's got a solid partner - Constellation Brands (NYSE: STZ ) owns 38% of the company and could ultimately control it through the exercise of warrants - who is ready to take it to the next level while also developing an excellent cannabis-infused drink partnership.
If you want to be a global player in the cannabis sector you've got to have deep pockets, and more importantly, partners who understand scaling distribution. It's critical.
The second is CEO Bruce Linton .
He's figured out that the medical side of the business, although less glamorous, is where a significant amount of global growth will come. As a result, he's hiring as many smart individuals as he can get his hands on, to legitimize the product and its uses.
I'm not suggesting other companies like Aphria (OTCMKTS: APHQF ) aren't doing a good job - CEO Vic Neufeld is top notch - but Canopy Growth is the gold standard.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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