Despite the doubters, Canada is still a great country to bet on. The S&P/TSX Composite Index has lagged global benchmarks, because it’s been weighed down by resource companies, which have been in a bear market since 2014. When you strip out oil and gas stocks, the TSX has actually done quite well.
In 2020, some high-quality TSX stocks are prepared to make another run. These companies are often overlooked by analysts and large institutions, but everyday investors can capitalize on today’s mispricings. If you want to succeed in 2020 with high-upside Canadian stocks, this list is for you.
The expectations game
For years following its IPO, the company was increasing sales and profits by more than 40% per year. In 2019, management revised its long-term growth guidance to between 20% and 30% annually. The reset in expectations caused the stock to drop by half from its highs.
High expectations forced shares to become overpriced. Today, low expectations are creating the opposite effect.
At 28 times forward earnings, this stock is too cheap to ignore, especially considering international sales are still growing at more than 50% per year. As the investment narrative shifts to international potential, expect the stock to rebound in 2020.
Cannabis is turning
HEXO (TSX:HEXO)(NYSE:HEXO) stock was crushed during the 2019 marijuana bear market. Last April, it was a multi-billion-dollar company. Today, it’s valued at just $430 million. This looks like a fantastic opportunity for long-term investors.
Instead of attacking the cannabis space itself, HEXO has focused on finding partners with existing brands that consumers already know and love. For example, it has a deal with Molson Coors Canada to co-create cannabis beverages. Their first product should hit Canadian shelves this month.
The company hopes to replicate these partnerships in other emerging categories, including medicines, sleep aids, cosmetics, edibles, and more. This strategy takes time to build steam, but HEXO’s early partnership with Molson validates the model.
Long term, this is one of the only cannabis stocks capable of targeting every pot opportunity available. The pullback offers a chance to get in at bargain prices.
Ignore the crowd
Over the next decade, electric cars are prepared to take over the roads. Although environmental regulations may spur some adoption, the long-term story is about economics. As battery prices fall, electric vehicles will be cheaper to produce and maintain than those with internal combustion engines. When including fuel savings, the choice will be easy for every car shopper.
To take advantage, millions of investors have chosen Tesla. That may or may not be a good pick, but there are other options that don’t have an Elon Musk premium factored in.
Lithium Americas (TSX:LAC)(NYSE:LAC) is a perfect example. As its name suggests, Lithium Americas owns mines that produce lithium, a critical component for electric vehicle batteries. As electric car demand goes exponential, so will demand for lithium.
The company’s Argentina mine is expected to produce 40,000 tonnes of battery-grade lithium per year, with a project life of 40 years. If you discount the value of the mine back at a 10% discount rate, it has a present value of $1.3 billion.
Lithium America owns a 50% interest in the project, so this mine alone has a value to the company of around $650 million. With a market cap of just $420 million, the upside math is clear.
The company is expected to approach first production by the end of 2020. Don’t be surprised to see the discount narrow as the months elapse.
David Gardner owns shares of Tesla. Tom Gardner owns shares of Tesla. The Motley Fool owns shares of and recommends Canada Goose Holdings and Tesla. The Motley Fool recommends HEXO. and HEXO. Fool contributor Ryan Vanzo has no position in any stocks mentioned.
Afterpay delays vote on $29 billion buyout as Square awaits Spain’s nod
Afterpay Ltd will delay a shareholder meet to approve Square Inc’s $29-billion buyout of the Australian buy now, pay later leader, as the Jack Dorsey-led payment company awaits regulatory nod in Spain.
The investor meet was set for Dec. 6, but Afterpay said it would likely take place next year as Square, which has rebranded itself to Block Inc, is likely to get an approval from the Bank of Spain only in mid-January.
The delay is unlikely to impact the completion of Australia‘s biggest deal, which is set for the first quarter of 2022, Afterpay said.
“We continue to believe the risks of the transaction closing are minimal,” RBC Capital Markets analyst Chami Ratnapala said in a brief client note.
Meanwhile, Twitter Inc co-founder Dorsey is expected to focus on Square after stepping down as chief executive of the social media platform as it looks to expand beyond its payment business and into new technologies like blockchain.
Afterpay shares fell more than 6%, far underperforming the broader Australian market, tracking Square’s 6.6% drop overnight in U.S. market on worries over the Omicron variant.
(Reporting by Nikhil Kurian, Sameer Manekar and Indranil Sarkar in Bengaluru; Editing by Anil D’Silva, Rashmi Aich and Arun Koyyur)
Canada Goose under fresh fire in China over no-return policies
China’s top consumer protection organisation has warned Canada Goose Holdings Inc against “bullying” customers in China with its return policies, just three months after the winterwear brand was fined for false advertising.
The premium down jacket manufacturer has been a hot topic on Chinese social media in recent days over its handling of a case involving a customer who wanted a refund of her purchases amounting to 11,400 yuan ($1,790.17) after finding quality issues.
She said she was told by Canada Goose that all products sold at its retail stores in mainland China were strictly non-refundable, according to her account which went viral online.
State-backed media such as the Global Times newspaper later cited Canada Goose as denying that it had a no-refund policy and that all products sold at its retail stores in mainland China were refundable in line with Chinese laws. The company did not respond to Reuters’ request for comment.
That has not failed to quell criticism of the brand.
“No brand has any privileges in front of consumers,” the government-backed China Consumer Association (CCA) said in an opinion piece posted on its website on Thursday morning.
“If you don’t do what you say, regard yourself as a big brand, behave arrogantly and in a superior way, adopt discriminatory policies, be condescending and bully customers, you will for sure lose the trust of consumers and be abandoned by the market,” the CCA said.
Representatives of the brand were summoned for talks on Wednesday by the Shanghai Consumer Council to explain its refund policy in China.
The dressing down of Canada Goose comes as tension between China and Western countries has fuelled patriotism and driven some shoppers to turn to home-grown labels.
Canada Goose was also fined 450,000 yuan in September in China for “misleading” consumers in its ads.
($1 = 6.3681 Chinese yuan renminbi)
(Reporting by Sophie Yu, Brenda Goh; Editing by Kim Coghill)
Apple tells suppliers demand for iPhone 13 lineup has weakened – Bloomberg News
Apple Inc has told its component suppliers that demand for the iPhone 13 lineup has slowed, Bloomberg News reported on Wednesday, citing people familiar with the matter, signaling that some consumers have decided against trying to get the hard-to-find item.
(Reporting by Maria Ponnezhath in Bengaluru; Editing by Arun Koyyur)
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