The Monthly Gems by Allan Tong

WCP has a book value yield of 104.9% and an earnings yield of 12.8%, both good, while it pays a 7.8% dividend yield based on a decent 53.65% payout ratio, and trades at a low 6.88x PE. Compare that to CNQ's 15.33x and Suncor's 11.6x. The street likes the deal, giving WCP an average price target of $13.36, or 42% higher, based on six buys and one hold. Obviously, the street gives the merger a thumbs up, with three analysts assigning an average price target of $13.00, including one upgrade.

A month ago, SAP reported its full-year earnings, and EPS of €2.68 beat expectations, but was down from €3.24 in FY 2023. Revenues of €34.2b were 9.5% higher from FY 2023. The main driver was the cloud. In 2024, its cloud backlog leapt 43% year-over-year to €63.3 billion while cloud revenues jumped 25% to €17.1 billion. This included a 33% increase in cloud ERP suite revenues. In terms of AI, SAP has incorporated over 1,300 skills into AI co-pilot which automates 80% of the most-used user activities. 

Well, Cogeco has. It boasts an earnings yield of 30.6%, which places it in the top 10% among global peers, while its book value yield of 146.1% put it in the top 20%. True, its 5.91% dividend yield is smaller than its Canadian competitors, but is safe at a 42.5% payout ratio and growing 10% annually--twice as fast as the others--thanks to strong cash flow. Further, CCA trades at a 6.67x PE, compared to Telus' 30.2x, Rogers' 12.4x and BCE's 179x. Cash flow is one reason why CCA has outpaced its peers in the past year, with shares up nearly 15%, while the Big Three have lost ground, with Rogers and BCE both sinking 30%.

Shares are down after the company reported in mid-February, even though its numbers were strong. EPS rose 31% on 13% revenue growth in Q4-2024 and beat, though revenue missed. Consolidated net revenue climbed 13% over the year, driven by ad revenues rising 10.6%, thanks to growth in search advertising and near-14% growth in YouTube ads. Meanwhile, Google Cloud enjoyed 30% revenue growth, bettering 26% from a year earlier, but slowing from 35% in Q3-2024.

Is copper the new gold? I don't know about that, but EVs, wind and solar power, and data centres need copper and copper, particularly, is booming. RBC Capital Markets forecasts global copper demand to grow 2.9% this year, with most of that coming outside China, which is expected to increase its copper demand by only 1%. Teck Resources (we're discussing the more-liquid TECK.B on the TSX) is well-positioned to take advantage of this set-up, since TECK primarily mines copper.

A safer bet in minerals is RIO, which trades at 11.37x earnings. It mines not only copper, but also aluminum, diamonds, gold and particularly iron ore. Also attractive is its solid 6.59% dividend yield, far higher than Teck's 0.84%, for example. Rio is a favourite of Stockchaser Michael O'Reilly who likes the company's growing cash reserves, declining debt and 20% return on equity.

You can start buying Enbridge now,. ENB has rallied over 38% in the past year, outpacing even Royal Bank and nearly doubling the pace of the TSX. Enbridge currently trades at 21.77x PE, compared to around 16x a year ago, but nowhere near the post-Covid peak of 38.62x on March 31, 2023.

Can a stock that's rallied 36% in the past year be considered a dark horse? IBM can. It outpaced the higher-profile Apple, which climbed 25.5% in the last 12 months and Alphabet by 3%. What is IBM doing right? Software. It's shed its old identity as a stodgy hardware company and tilted hard into software. True, shares dipped last October when they missed their numbers in the consulting segment, but shares jumped this week from $228 to $258 after they reported.

Despite its expected growth, National remains cheap. It trades at 12.16x PE, compared to TD's 17.6x and Royal's 15.82x. True, NA's 3.13% dividend yield falls short of, say, BMO's 4.62%, but the projected growth makes up for this. Another plus is that National has no exposure to office real estate in the U.S., and only 8% exposure in commercial real estate there. Most of the bank's assets and operations lie in Canada. NA-T is a buy and hold.

This is no income stock at a 0.25% dividend yield, and currently DOL shares are only $12.50 below highs of $152.97. Also, the PE of 35.88x is historically stretched. DOL traded at 30.3x to end 2022 and 31.3x three years ago. However, as Stockchaser Trevor Rose notes, Dollarama is a fine long-term hold. With volatility likely in January, pick this one up on a 5-10% pullback when its valuation normalizes.

The company's market cap more than doubled to US$74.64 billion in 2024 and it currently trades at a 32.3x PE, twice as high as it was in late September 2023. With that, earnings keep climbing, from US$3.01 billion in 2022, to US$6.5 billion in 2023 and a projected US$7.57 billion this year. Q3 earnings rose 13% and sales 19%, though the company slightly missed earnings due to a one-time charge and higher costs. This is a momentum name, but like the overall market, the pace of IBKR's growth will likely slow in 2025, though there remains upside. Again, this is no income stock, paying a dividend of only 0.56%.

After a flat first half to 2024, back-to-back earnings beats in July and October lifted ISRG shares from the low-$400s to the mid-$500s by the fall. The last two quarterly reports stressed that an increasing number of surgeries within the U.S. and internationally is the key driver. For instance, the company's October reported said that procedures rose 18%, beating estimates of 17.1%. The quarter before, this number climbed 14% in the U.S. and 22% abroad.

Its PE sank to 34.4x after that report, close to its median average of 33.94x. Its quarter was far from a disaster, so the sell-off was an over-reaction. Year-over-year earnings actually rose 10% and sales 16%, while Azure revenues jumped 32%. MSFT pays a 0.77% dividend, so you're not buying this for income. This is one to hold long term.

Shares are basically flat over the past year do some quarterly misses, but its PE has fallen to 22.34x, below its 24.06x, making it an attractive entry point. It pays a moderate 1.72x dividend because the company is investing in expansion, which should bolster top and bottom lines in future quarters and reinforce the company's prominence in this healthy space.

Fortis currently pays 4.09% and will raise that by 4.2%. The dark days of interest rate hikes are over, and the expected cuts are certainly working in Fortis' favour. A favourite of Stockchaser Trevor Rose and much of Bay Street, Fortis trades at 18.88x PE which is below its median average of 19.77x. This despite shares rallying 5.5% over the past three months.