5 stocks for post-pandemic results

5 stocks for post-pandemic results

I like ETFs. I also like stocks. More specifically, I like buying stocks when they might be out of favour – such as when a pandemic hits and causes market havoc.

I’ve owned a number of stocks for years and rode pretty much every single one of them through the pandemic. I wrote about how to survive and then thrive after a stock market crash here.

How to get through a stock market crash – and benefit from it

Hybrid investing

As a hybrid investor, I feel I get the best of both worlds: owning a blend of individual stocks and low-cost equity ETFs – for passive, growing income and diversified long-term growth.

With low-cost ETFs as part of my core, I strategically explore. 

I’ve owned a number of dividend paying stocks for years and I will continue to do so, and seek out new opportunities where it makes sense.

You might recall a few weeks back, I shared my top-5 stocks I want to buy more of in 2021.

5 stocks I want to buy in 2021

With more vaccines on the way for this country, our vaccination rollout strategy unfolding (…slowly…) I was thinking about my 5 stocks in that post above and wondering if they would deliver more results than others.

Meaning, did I pick the right ones for post-pandemic results?

Are there other stocks that should deliver results post-pandemic that I might have missed?

Well, to get a few recent, hot takes on some Canadian stocks that could deliver post-pandemic results in the coming quarters I reached to friends at Stocktrades.ca to see what they thought based on their research and assessments.

Here are 5 stocks to buy for post-pandemic results

Manulife Financial (MFC)

I’ve long since owned MFC for a number of years (10+) and will continue to do so.

The guys at Stocktrades.ca feel MFC is poised to go much higher – now is the time to get in.

Mark, the threat of hyperinflation and rising interest rates bodes well for financial stocks. One that is well positioned to take advantage is MFC, one you already own.

Despite being one of the best performing insurance companies through the first few months of 2021, it remains one of the cheapest.

Manulife is trading well below historical and industry averages. As of writing, it is also the only insurance company trading below 10 times earnings and has one of the lowest price-to-book ratios in the industry.

Manulife is a value stock and early signs are pointing to a shift from growth to value. 

This means that Manulife has potentially two tailwinds at its back. The company has also re-established itself as a reliable income stock. It has taken sometime for Manulife to shake the stigma of having to cut the dividend back during the ’08 Financial Crisis. However, it has since returned to growth and has quietly put together a seven-year dividend growth streak. It also has one of the highest 5 year dividend growth rates and with one of the lowest payout ratios in the industry, investors can expect strong dividend growth moving forward.

Given Manulife’s current valuation, it is also likely to outperform peers should rising rates not materialize as expected.

Parkland Fuel (PKI)

I’ve never owned PKI to date but I haven’t ruled it out. I was curious what Dan and Mat thought of PKI and why it’s so high on their current buy list.

Mark, you might want to consider this one for some upside.

Parkland Fuel has been a strong growth stock over the years. Thanks to its torrid base of acquisitions, it has become one of the largest convenience store operator and fuel distributors in North America.

In early March, the company announced year-end results and the impacts from the economic shutdown were clear. Fiscal 2020 revenue dropped by 24% and even fell below 2018 levels. Profitability also cratered as annual earnings per share fell from $2.55 in 2019 to $0.55 this past year.

Not surprisingly, the company’s stock price is still trading at a discount to pre-pandemic levels. The good news, is that Parkland still managed to generate $478 million in cash flows. Furthermore, capital expenditures and acquisitions were fully funded and it managed to extend its dividend growth streak to nine consecutive years.

Expect a strong rebound out of Parkland once the economy is fully re-opened. In Fiscal 2021, it expects to generate adjusted EBITDA of $1.2B based on the assumption of an economic rebound in the second half.

The company’s capital expenditure program and dividend is once again fully funded and it also expects to continue expanding south of the border. Overall, it looks like strong candidate to outperform in the latter half of the year and heading into 2022.

CAE (CAE)

CAE Inc. is a Canadian manufacturer (and world leader) of simulation technologies, modelling technologies and training services to airlines, aircraft manufacturers, healthcare specialists, and defence customers.

I don’t currently own CAE but I have considered it for my taxable account, to take advantage of growth and tax-efficient capital gains.

The guys at Stocktrades.ca really like this one long-term.

Let’s face it, the aerospace industry has been one of the hardest hit during the pandemic. That may also mean it is well positioned to rebound once the economy emerges.

Unlike some of the airline pure plays, CAE managed to stay the course without having to materially impact its balance sheet. While total debt obligations have increased, the company’s current debt-to-equity (DE) ratio of 0.88 is below where it was before the pandemic began. The company’s exposure to training regulated requirements have enabled it to offset some of the negative impacts to the civil aviation industry.

This doesn’t mean it hasn’t had its challenges. Revenue and backlog dropped by 26% and 20% respectively last quarter. Backlog is being impacted by contract delays and outright cancellations as a result of the pandemic.

It is important to note, there is still a ways to go longer term. CAE management “expects the COVID-19 pandemic to continue to have a significant negative impact on its performance relative to pre-pandemic levels”.

Despite this, CAE is expected to exit the year ending March 30, 2021 with positive free cash flow. For the most part, many in the aerospace industry are bleeding cash. Once the economy opens up, CAE will be well positioned to resume the strong growth trend it experienced from 2016 through early 2020.

Alimentation Couche-Tard (ATD.B)

Mark, we know you own Alimentation Couche-Tard and you already have it on your list of stocks to buy more of in 2021 – so let’s get right into it!

ATD.B is a rare combination of both blue-chip stability and strong growth. A $10,000 investment in the company just 10 years ago would have you sitting on just over $100,000 in total capital, dividends included.

This is a compound annual growth rate of 26.02% on your money over a 10 year timeframe, which is something most investors simply dream of.

Couche-Tard has had a rough 2020 and early 2021 as fuel sales are impacting the company’s top line significantly. In fact, on a year over year basis the company saw a 41% dip in fuel sales in the United States and Europe, and a 33% dip in Canada. Overall, revenue was down 27% year over year.

It’s not hard to figure out why this dip is happening; people simply aren’t traveling. But it is also not hard to figure out that this will be temporary as well, as the world will eventually get back to normal.

Despite the hardships, Couche-Tard continued to grow its bottom line by double digits in 2020 and will likely rebound to providing double digit top and bottom-line growth for the foreseeable future.

How quickly it rebounds depends solely on vaccination efforts worldwide, as further shutdowns and travel restrictions could impact them in 2021 as well. But in our opinion, its current valuation is pricing in a harsh 2021 anyways.

Strangely enough, this company still has not recovered from a panic sell off due to an acquisition of French grocer Carrefour that didn’t go through.

In terms of price to earnings, price to book and price to free cash flow, Couche-Tard is trading at a significant discount to its 3, 5 and 10-year median averages.

Canadian Natural Resources (CNQ)

I owned CNQ many years ago but sold it back in 2014 and never looked back – I invested in more pipelines like Enbridge and TC Energy instead.

That said, I continue to keep just Suncor (SU) as my hedge for future, higher (?) oil prices but you never know. This sector is just so cyclical. I don’t own many stocks in this sector for that reason.

In fact, to prove that point in 2013, I highlighted CNQ was a stock to buy then.

Is what is old new again when it comes to CNQ?

Yes, to answer your question Mark!

Just to make it clear before I start, I (Mat) am fairly bearish on the oil and gas sector as a whole. However, there is no question that Canadian oil producers are ripe for a short term re-opening play.

Like you in some ways, I owned Canada’s major producers for a long time, and they provided abysmal returns for me. I am not a huge fan of how easily oil can be manipulated, and it is not somewhere I want to park my money for the long haul.

But for someone looking to time the economic cycle we are about to be in in terms of inflation and the surge in demand for oil as travel returns and restriction eases, I cannot think of a better play than Canadian Natural Resources.

Canadian Natural is, in my opinion, Canada’s best oil producer. The company is profitable at anything above $30 WTI and is one of the best free cash flow generators in the country.

Lots are analyzing this company based of 2020 numbers, which is the wrong way to go about things in my opinion. In 2019, it averaged just under 1.1 million barrels a day of production and has over 11 billion barrels in probable reserves.

Its dividend looks suspect right now, accounting for more than 450% of 2020 earnings and 110% of 2020 free cash flow, but if we look forward to 2021 estimates, Canadian Natural’s payout ratio is expected to be just over 50%.

While a producer like Suncor slashed its dividend just a month into the pandemic, Canadian Natural recently hiked its dividend by 10.6% in early March, highlighting that Canadian Natural’s dividend is in no risk of being cut.

The first catalyst for this company will be the increase in demand in late 2021 and 2022 as the pandemic eases. The second catalyst will be the inflationary environment we are heading towards. Commodity prices tend to rise as inflation rears its head, so this provides somewhat of a hedge.

And the third and final catalyst will be 2021 earnings. We can expect these companies to post, compared to 2020, outstanding earnings. Most major producers here are in for a big rebound, and although some of that is already included in current stock prices, there may be more upside.

If an investor finds more promise in a company like Suncor or Imperial Oil, that’s perfectly fine. I’d just tend to look towards what I believe to be the best-in-class producer, CNQ.

Thanks Mat and Dan – the team from Stocktrades.ca – great to get your take on what you’re reading and seeing for value in the Canadian dividend stock space.

When it comes to my plan, I’m going to stay the course. I know, boring right?

I will continue to hold the same stocks I’ve held for years (in some cases for a decade+) and other than buying some of the stocks or low-cost ETFs on my watch list in 2021 – that’s about it.

Again, you can find many of my holdings on this Dividends page – updated routinely.

You can see some of my favourite low-cost ETFs to invest in here.

For further reading, you can see what Mat and I discussed previously when it comes to selling any stock after a dividend cut – looking at you Suncor!

I hope to have Mat or Dan or both on the site again for future collaborations and thoughts about any value plays in the Canadian market.

Disclosure:

I own MFC and ATD.B at the time of this post and have done so, for years. I may or may not to take a position in other companies listed above. If I do though, I’ll likely let you know since this site is about what I own and why…

For Mat and Dan, they also own MFC and ATD.B above. Dan also owns PKI. I’ll let them answer any reader comments to share their own stock investing plans!

For readers that might be interested in learning more, what to invest in, why and when, I have an affiliate with Stocktrades.ca. They are offering a Premium membership at 30% off backed up by their 30-day 100% money back guarantee. 

If for whatever reason, this membership is not an ideal fit, you can cancel within the first 30 days. Your wish is their command. 

Get Stocktrades.ca Premium for Stock Screeners June 2020

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

21 Responses to "5 stocks for post-pandemic results"

  1. Morning Mark;
    Owned PWF which got merged to POW the other year. Have had them for several years (2012)
    Owned PKI but sold at $31 a couple of years ago. Regretted that after they went up to $40 so I bought back in at $25 last year. Looking to unload above $40 fairly soon this year. Superior to Couchetard in my view, better divs. Will hold till I like the selling price and re-deploy money in to something else. Not hurting as it is paying me close to 5%
    Have owned CAE and MFN in the past.
    I am heavy in to oil with IPL being my largest holding. Also have ENB, BP, KMI, KEY, OKE, PPL, SPB
    Although the EV market will increase significantly over the next few years oil will be around for quite some time so I figure I have the time to get my divs and slowly diminish my holdings over time.
    For those who want to get rid of oil ASAP please look at the labeling of your clothes (unless you are a nudist, not recommended in our climate). If it has plastic, (nylon, rayon, etc, etc,) you can thank the oil/gas industry. How many things are we willing to forgo to get rid of the plastics industry (oil/gas). Look at everything on you, what you use everyday plus all that nice packaging (too much) at the grocery store and you can see why oil is actually a necessity to our current way of life. So I figure I have plenty of time as I am retired now. My horizon is not as long as a twenty year old.

    RICARDO

    Reply
    1. Always enjoy your comments. I just own MFC and ATD.B on the list. I have considered CAE for my taxable account for growth. Not buying yet.

      I don’t see oil going anywhere, anytime soon – maybe just less over time as in decades!
      Mark

      Reply
  2. Hey Mark, I’m wondering if you agree with this hyperinflation thesis for Manulife. Hyperinflation is defined as a monthly inflation rate that exceeds 50%. I’m thinking the StockTrade.ca folks mean high inflation, not hyperinflation. Even if we’re talking high inflation, I don’t see how it can be sustained for very long with the current state of govt and household balance sheets. For this reason, I don’t like insurance companies. I’m not saying insurance will be unprofitable. I think these businesses will continue to raise their rates to improve profitability, but they face a significant headwind in the long-term where interest rates will stay low.

    I do agree with the cases made for the other stocks (including ATD.B which I own). I’ve stayed away from oil stocks because oil prices can be impacted by an OPEC supply shock. So far OPEC has been playing nice in 2021. Still, I don’t feel comfortable with businesses that are subject to this kind of cartel risk. I have heard an oil bull thesis which suggests we will have higher oil prices for the next few years, but I find the challenge here is that you will eventually have to sell to make some reasonable total returns. Do you agree that oil stocks are now only good for buy & sell strategies or do you think oil stocks can be buy & hold for the long-term?

    Reply
    1. I personally don’t see hyperinflation happening. I would have to let Mat and Dan discuss what they mean or think – don’t want to speak for them!

      I see banks, insurance companies are more continuing to rate fees, premiums, and rates to keep shareholders happy. That’s why I’m an owner of these companies and have been for the big-6 banks and 3-top lifecos in Canada for more than a decade. I will continue to be a shareholder of all of them unless something significant changes my mind.

      I struggle with the O&G sector, I find it very cyclical. I own the pipelines in Canada = ENB and TRP. I figure those oil and gas tollroads are enough. And just a bit of SU. That’s really it and no big intentions to own more.

      I favour more renewables now since I want our planet to be a better place: AQN, INE, BEPC, CPX and others are near the top of my list.

      Reply
    2. Hey Mich. I actually did a video on ATD and CNQ a week or so ago, and I reiterate the exact same thing you say at the bottom of this comment. As I mentioned in the write up, I’m bearish on the oil and gas sector long term, but there is no questioning it is a cyclical option for those who are looking to ride out a year or two of rising commodity prices and then sell.

      I do not believe these stocks can be held for the long term, the commodity is too volatile and easily manipulated. If we look to the past decade, dividends included, CNQ is the only one to achieve a positive return.

      Reply
  3. Mark, MFC? No way, SLF better. Quality mgt (ie. unlike MFC who said ‘no we won’t cut the dividend’ and then did exactly that, SLF didn’t cut in ‘08/‘09)….while current CEO to retire later this yr, new coming CEO has been w SLF and part of the history of good mgt.

    Atd….I,can’t own a company that sells tobacco.

    CNQ….really? All the talk about exploding EV production, I personally don’t think direct investment in an oil co makes sense over the long term in retirement.

    ….stick w the relatively boring (but good quality mgt) like BMO, FTS, T, TRP, SLF.

    Wish you all the best. Jim

    Reply
      1. Ok Mark, ENB wasn’t on the list here, but since you mentioned it….have to say based on my interactions w indigenous groups, ENB ‘in real life’ (not on their own documents) have dealt relatively poorly w First Nations. Sure a high dividend in ENB, but between poor indigenous relations and comparatively higher oil spill frequency to trp, would go w trp. I wonder if a consideration of these types of screens or reviews might be considered in the future in helping to make a determination on what dividend paying CO’s to hold (in addition to some ranking of company management (like the example above of mfc vs. slf).

        Wish you all the best, Jim

        Reply
    1. Hey there. Keep in mind, the first sentence of our CNQ writeup:

      “Just to make it clear before I start, I (Mat) am fairly bearish on the oil and gas sector as a whole. However, there is no question that Canadian oil producers are ripe for a short term re-opening play.”

      I agree with you on the EV part, it’s exactly why long term we don’t like the industry. But, those looking to take advantage of a rising commodity because of reopening (and although I don’t agree with cyclical shifts, it is a very popular investment strategy) CNQ makes a very strong case.

      Reply
    1. I like reits for my non registered account. I own rit. Went down the food chain abit for return of capital income box 42. Ax.un plz.un prv.un dir.un nhf.un. Utilities I like cu ta. Owned pki for almost 20 yrs with spb. For some Las Vegas spice, Try some twm. Just a little. At one time cnq was a penny stock like 10 cents. And that’s before all the splits. I believe a alberta junior blind pool. Remember them. Rob

      Reply
  4. Great information today. Do you have any thoughts on Power Corporation? It holds Manulife Financial Corporation (MFC) and a few others and offers a better dividend rate than owning MFC directly.

    Reply
    1. I believe POW holds GWO, not MFC.

      Both POW and GWO have underperformed for the last ten years I believe. But the valuation right now is pretty cheap.

      I have begun to buy MFC for a while, and bought more today. Already wanted to buy, more confident after reading this post. CAE also on my watch list but somehow never pulled the trigger. Didn’t hear PKI before. I also have CNQ and quite a lot of ATD.B.

      Reply
      1. Yes, I think Gerry was thinking of GWO. I linked to the POW org. chart.

        All good – mistakes happen!

        I’ve owned MFC for years and will continue to do so. I also like SLF in this insurance space. CAE should deliver over time but I’ve been buying more ATD.B since I think it could pop in the coming years and likely a healthy 5-10% dividend increase coming soon.

        I hear what Mat and Dan are saying about PKI but I think I’ll stick with my pipelines like ENB and TRP for oil and gas plays.

        Reply

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