Top Canadian stocks of 2019

A look at the top performers of the TSX Composite index, the top stocks in our coverage universe, and three stocks that are undervalued

Ruth Saldanha 31 December, 2019 | 1:49AM

Forest

2019 has been a good year for Canadian investors. The S&P TSX Composite index has returned 20.63% from a year ago, as of December 16th, and the S&P 500 has returned 20.7% in Canadian dollar terms, for the same period.

As a result, most stocks have performed really well. The top-performing stock in the S&P/TSX Composite index is up a whopping 216.74%. Here’s a look at the five stocks with the highest returns since last year:

Name

Ticker

Industry

Alacer Gold Corp

ASR

Gold

Shopify Inc A

SHOP

Software - Application

Silvercorp Metals Inc

SVM

Silver

Eldorado Gold Corp

ELD

Gold

Ballard Power Systems Inc

BLDP

Specialty Industrial Machinery

Morningstar Direct Data as of 12/17/2019

Of the five, three are in precious metals. This makes sense; gold has had a strong run in 2019, as factors including a weaker dollar, US-Iran tension, global growth fears and a u-turn from the world’s central banks have all worked in the precious metal’s favour. Having said that, we at Morningstar do not recommend investing in gold. As Morningstar Investment Management’s Dan Kemp says, “These commodities have little intrinsic value, returns are governed by the balance of demand and supply together with the degree of speculation present in the market.”

Next, let’s take a look at the best-performing stocks in our coverage universe. The only common stock is Shopify (SHOP), which also was the best performing stock of the first half of 2019.

Name

1-yr Return

Economic Moat

Moat Trend

Morningstar Rating

Price / Fair Value

Shopify Inc A

175.72

Narrow

Stable

1

2.26

Air Canada Class B

96.15

None

Stable

3

0.94

Ceridian HCM Holding Inc

76.47

Narrow

Stable

   

BRP Inc

63.95

Narrow

Stable

3

0.98

Agnico Eagle Mines Ltd

53.39

None

Stable

2

1.29

Power Corporation of Canada

45.84

None

Stable

2

1.17

Kinross Gold Corp

45.71

None

Stable

3

0.98

AGF Management Ltd

45.39

None

Negative

3

0.97

Power Financial Corp

44.09

None

Stable

2

1.24

Thomson Reuters Corp

42.06

Narrow

Stable

1

1.44

Morningstar Direct Data as of 12/17/2019

These returns are pretty impressive. However, they’re all trading 3-stars or below, meaning they’re either fairly valued, or overvalued. So, are there any bargains to be had right now?

Absolutely. Three stocks in our coverage universe are trading at less than half of what we believe is their fair value. And all three are in cannabis:

Name

1-yr Return

Economic Moat

Moat Trend

Morningstar Rating

Price / Fair Value

Aurora Cannabis Inc

-57.78

None

Stable

5

0.29

Curaleaf Holdings Inc

13.99

None

Stable

5

0.38

Canopy Growth Corp

-35.40

None

Stable

5

0.45

Morningstar Direct Data as of 12/17/2019

As Morningstar analyst Kristoffer Inton says, this is definitely the time to buy on dips for Canadian cannabis. However, he cautions that cannabis warrants a long-term view. “In the near term, it's not going to take overnight to open enough stores, to get distribution right and to get the products lined up. So, it won't happen in the next quarter or so. But if an investor is patient and willing to wait, they'll be able to get exposure to a long runway of growth,” he says.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alacer Gold Corp6.00 CAD-4.76
Aurora Cannabis Inc1.97 USD4.23
Ballard Power Systems Inc13.61 CAD13.13
Canopy Growth Corp31.45 CAD10.78
Curaleaf Holdings Inc8.75 CAD2.46
Eldorado Gold Corp9.38 CAD-3.50
Shopify Inc A615.42 CAD3.45
Silvercorp Metals Inc6.93 CAD-2.94

About Author

Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca