The Monthly Gems by Allan Tong

CSU are M&A specialists, growing by buying. Forget the dividend which pays only 0.15%. Also unusual for a tech name is Constellation's low 0.81 beta, but its high share price of $3,600 will be a barrier for some retail investors. Consider this a long-term, Canadian steady eddy, if you can afford it.

 It helps that DOL faces little competition in this country, apart from local Mom & Pop shops. In fact, DOL is aiming for 2,000 locations, as the company has enjoyed 10% annual revenue growth in the last five years. The company has started buying back shares (13.6 million in summer 2023). Another low-beta (0.57) but low-dividend (0.27%) name that rewards investors with the share price increasing. It likely will, but wait for a market pullback before adding shares or entering. Currently, DOL is trading near highs.

The simplest way for Canadian investors to participate is through an ETF. To be blunt, these instruments aren't popular with Canadian investors. The daily volumes of the HXX average 2,250 shares, which actually rank higher than fellow Euro ETFs. As a total return ETF, HXX doesn't pay a yield (no worries about taxes), but it charges a rock-bottom MER of 0.17%. Most importantly, HXX rose 12.9% in Q1 and 23.84% in 2023. HXX is most exposed to France with 43% of its holdings, followed by Germany at 25.6%. Consumer goods and financials make up 40% of HXX. Its top holdings are AMSL, LMVH (Louis Vuitton), Total Energies, Sap and Sanofi.

Not to be confused with Osisko Mining, OR-T is a pure-play royalies streamer in precious metals, and minerals have been hot on the TSX so far this year. OR-T is up nearly 19% or three-fold the Toronto index's performance. As gold makes new highs almost every day, OR continues to shine. It trades just over its NAV, so it's cheap. It pays only a 1.11% dividend, so income investors will stay away

Paying only a 0.78% dividend, BN is attractive for its growth, not income. Since spinning off, BN has risen 25% while BAM has climbed about 48% and the TSX barely 10%. From last December through February, BN has slightly outperformed its cousin, rising over 18%. Aside from declining rates, the societal transition into renewables is not slowing and government investments will continue to fuel Brookfield's infrastructure business. Consider BN a long-term hold.

Dundee is nowhere as large as Barrick, Franco Nevada or Agnico Eagle, which comprise a third of the Canadian materials sector, but it has outperformed it so far in 2024. Dundee shares have rallied 8.5% in this time period while Barrick is down over 16%. Also, Dundee holds more potential upside. Consensus sales estimates are 15% and EPS 28% for the coming year. Dundee's cash flow yield is a comfy 11%. Recently, the company bought Osino Resources to enhance its portfolio of gold operations.

Only last October did Cameco surpass its long-standing peak set in May 2007. Now, money has rushed in and pumped up shares. Also, Cameco's EPS missed two of its last four quarters. True, cash flow is healthy and the PE is 67x, far below its median average of 93.67x. At the end of the day, uranium is a commodity, making it subject to price swings; it started 2024 at US$85.34, topped US$106 in early February and fell back to US$95 to begin March. Further, the hard run-up in CCO shares makes us cautious. Consider this a risky buy or a buy on weakness.

The fast food chain is as ubiquitous as Starbucks or Tim Horton's in Canada, but flies under the radar of Bay Street. Only one analyst covers PZA, but rates it a buy. What's to like? PZA pays a 6.3% dividend yield which the company increased 3.3% three months ago. Its last quarter topped expectations, while it beat EPS in the prior three. Beta is a steady 0.99. During the first nine months of 2023 same-store sales rose 9.8% while EPS climbed 12.4%. Caveats: average daily volumes are only 23,819, and the company has no moat, though it is an established brand with locations everywhere.

In fact, Visa's share has risen from 52.8% in 2007 to 61% in 2022 (based on transaction volume). Mastercard holds 25.5%, down from 28.2% in that period, while AmEx has slipped from 15.6% to 11.3%. AmEx caters to the business class and wealthier clientele. When they spend, AmEx rallies, but if they spend less, then AmEx falters. That sums up AmEx in the past year, and it's currently enjoying the best momentum. If you expect this trend to continue, then buy AmEx. If you want less volatility, an established brand and consistent earnings, then go with Visa.

In fact, Visa's share has risen from 52.8% in 2007 to 61% in 2022 (based on transaction volume). Mastercard holds 25.5%, down from 28.2% in that period, while AmEx has slipped from 15.6% to 11.3%. AmEx caters to the business class and wealthier clientele. When they spend, AmEx rallies, but if they spend less, then AmEx falters. That sums up AmEx in the past year, and it's currently enjoying the best momentum. If you expect this trend to continue, then buy AmEx. If you want less volatility, an established brand and consistent earnings, then go with Visa.

WSP enjoys a backlog of projects and are asset-lite. Its current PE of 45.7x may concern some, since that exceeds the company's five-year average of 40.17x, but has declined from last year. Beta is a stable 0.83 and the company consistently beats earnings. Its EPS has risen 23% annually, compounded over three years. No, WPS won't give you explosive growth like an Nvidia, but it will offer more upside than a Steady Eddy. Not a trade, but a long-term investment.

AI-driven tech

Nvidia and Microsoft are the obvious names in AI and both should be in portfolios, but AMD is a strong number-two behind Nvidia in the category of AI chips. AMD stock rose about half as far as the frontrunner in 2023, but in the last quarter AMD has been gaining momentum, up over 43.4% vs. NVDA's 14.8% and nearly 21% vs. 3.5% in December. Fundamentals and performance are sound. AMD beat its last four quarters. The company boasts that its new MI300X chip can outperform Nvidia's and targets $2 billion in sales in 2024.

Canadian dividends

It's no secret that rising interest rates punished dividend stocks in 2023, but the dynamic is already reversing. Telus shares have jumped over 7% since the late-October market bottom though still lost nearly 10% over 2023. That's an accomplishment of sorts, given that its EPS slid 62% in the past year. Still, Telus' retains a safe 6.38% dividend yield and investor sentiment towards the entire sector is now positive. Analysts clock in at 13 buys, two overweights and two holds, with a price target of $27.03, a fair move from its Dec. 29 close of $23.58. Another tailwing is strong immigration flowing into Canada, which means more customers for the telcos. Even if Telus falls short of that projection, investors are collecting a tidy dividend. Another one to consider in this space is BCE.

American healthcare

As noted, 2023 was unkind to healthcare stocks, but UNH shed only 1%, thanks to a rebound in Q4. UNH remains America's biggest health insurer. It beat its last four quarters, trades at a safe 0.62 beta as well as a 22.85x PE, which is historically in-line. Earlier in 2023, the stock took a hit when the company noted that post-Covid the U.S. was seeing a rebound in elective surgeries, which would increase medical costs and cut into UNH's margins. However, this is a passing concern. View UNH in the long-term. Its shares have climbed 144% in five years and the projectory has been largely up, though the last two years have been bumpy. As we exit post-Covid, Wall Street expect UNH to resume its climb. Analysts signal 20 buys, one overweight, five holds and one sell with a price target of $594.61, nearly 13% higher than its last close of $526.47. Go long on UNH.

This trend accounted for KO's price drop to $52.89 in early October, but it's noteworthy that shares recovered quickly even as the wider S&P continued to slide. Entering December, KO shares have climbed $6 from that low, sandwiched between their 50- and 200-day moving averages. Further, its PE of 23.38x trades below its five-year average of 28.24x at a stable 0.59 beta, while the company has beaten its last three quarters.