One of the generally accepted wisdoms over the past couple of years has been that the U.S. stock market is where the action is. That’s certainly been true for the “Magnificent 7" stocks this year, but there are signs that strength in leading sectors is periodically redirecting to other names and sectors that have not yet joined the rally. For investors concerned that the U.S. has gone too far, too fast, there are market-beating returns available to those investors willing to step abroad. And one of the easiest steps to take is just over the border with our neighbor to the north, Canada. For the modestly adventurous investor, I think there are quite a few Canadian blue-chip stocks worth a look right now.
Buying Canadian stocks, particularly well-known Canadian blue-chip stocks, is a relatively easy pitch to U.S. investors, in my view, especially to those who live within a day’s drive of the border. It’s a stable, developed economy and an established trading partner. While there are certainly a lot of differences between the U.S. and Canada, the country is friendly both for travel and investment, and many Canadian stocks have considerable exposure to the still-strong U.S. economy.
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With that in mind, here are three Canadian blue-chip stocks that look particularly good right now:
3 Canadian Blue-Chip Stocks
Canadian Blue-Chip Stock #1: Canadian Pacific Kansas City Limited (CP)
Market cap: $69 billion
This North American railway stock is the result of a recent merger between Canadian Pacific and Kansas City Southern, and the combined entity just reported third-quarter revenues of U.S.$2.4 billion, which was up 40% YOY and factors in Kansas City Southern’s revenues in the comparison.
Despite higher revenues, the company missed on net income but struck an optimistic tone looking out to 2024, with President and CEO Keith Creel saying, “I feel good about the synergies [from the April merger of Canadian Pacific and Kansas City Southern] and the ramp-up as we look to next year. I do believe this pricing environment continues to be favorable as I look to next year.”
Shares were trading at all-time highs as recently as August, before the broad market weakness and concerns about short-term consumer demand dragged them into oversold territory last month. A break above the 50-day line would be bullish.
Canadian Blue-Chip Stock #2: Bank of Montreal (BMO)
Market cap: $57 billion
As one of Canada’s richest and oldest banks, Bank of Montreal is one of the safest ways to play a banking recovery. Sales are expected to improve more than 20% this year (though earnings are projected to be essentially flat) before coming back to earth next year (6.6% projected sales growth); the company pays a generous dividend (5.3% yield); and the stock trades at 11 times forward earnings. BMO stock is a rock-solid (and oversold) way to play Canada’s financial recovery.
Canadian Blue-Chip Stock #3: Nutrien (NTR)
Market cap: $27 billion
Nutrien is a Canadian fertilizer company that is the largest producer of potash in the world, and the third-largest producer of nitrogen fertilizer.
Nitrogen fertilizer is made through a combination of natural gas and air, while phosphate and potash are typically mined from the earth, although some commonly used fertilizers—such as monoammonium phosphate (MAP) and diammonium phosphate (DAP)—combine nitrogen with phosphate rock.
It’s also useful to know that nitrogen is the most widely used nutrient, especially in corn and grain crop production, while phosphates and potassium are mostly used in legumes, fruits and vegetables.
Shares took a significant dive earlier this year due to input shortages before rebounding in the late-summer months. But with the stock once again trading near 52-week lows, it’s worth watching for signs of a rebound.
Do you have any Canadian stocks in your portfolio? Tell us about them in the comments below.
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*This post is periodically updated to reflect market conditions.
