10 Cheap Canadian Stocks

Some of the biggest names up North are on sale

Andrew Willis 13 January, 2021 | 4:38AM
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Aphria logo on smartphone

Despite the optimistic opening to the new year on the market, many quality Canadian names have been left in the dust by trendy U.S. technology stocks – and bitcoin. But strong companies up North tend to stick around and get their time in the spotlight.

Big names make up those offering the biggest discounts this year, based on our fair value estimates (FVEs). Cannabis stocks may be the best deals, but are more uncertain, and do not have any major competitive advantage. The other names on sale offer less uncertainty and an ability to fend off rivals, as measured by our economic moat ratings.  

Only one company has a wide economic moat – Enbridge (ENB), meaning we expect its competitive advantages to last more than 20 years. Two others have a narrow economic moat – CI Financial (CIX) and TC Energy (TRP), which means they can fend off rivals for 10 years. The stocks provide opportunities for exposure to potential rebounds in financial and energy sectors, with a competitive advantage to lean on.

  Economic Moat   Moat Trend Star Rating Price/Fair Value 

Aurora Cannabis Inc (ACB)
 None Stable 4 0.38

Gran Tierra Energy Inc (GTE)
 None Negative 3 0.69

SNC-Lavalin Group Inc (SNC)
 None Stable 4 0.70

Aphria Inc (APHA)
 None Stable 4 0.71

Enbridge Inc (ENB)
 Wide Stable 4 0.72

CI Financial Corp (CIX)
 Narrow Negative 4 0.79

TC Energy Corp (TRP)
 Narrow Stable 4 0.79

Inter Pipeline Ltd (IPL)
 None Stable 4 0.81

Cenovus Energy Inc (CVE)
 None Positive 3 0.81

George Weston Ltd (WN)
 None Stable 4 0.83

Source: Morningstar Direct, as of January 6, 2021

Names like Enbridge (ENB) have suffered from an energy sector that may be underestimated by a market increasingly focused on renewable energy and electric vehicles. “Despite a recent rally, the stock remains highly undervalued,” says Senior Equity Analyst, Joe Gemino. “Enbridge is trading in 4-star territory and remains one of our top picks in the Canadian energy sector. We think the market is mistaken to price Enbridge as if oil prices will remain weak forever.”

With the changing times, increased clarity on a new U.S. administration and pathway to cannabis legalization has sector director Kristoffer Inton reminding investors that Canadian cannabis companies like Aurora (ACB) and Aphria (APHA) offer upside potential tied to the Canadian market. “They would have to acquire or build a presence in the U.S. Meanwhile, U.S. producers like Curaleaf (CURA) and Green Thumb (GTII) continue to build a strong competitive position.”

The last company to make the list may come as a surprise that it’s undervalued considering the consistent level of business throughout the pandemic. George Weston Ltd (WN) saw “robust occupancy levels” across properties like Loblaws, says equity analyst Nicholas Johnson, but it was offset by a downturn in demand at breadmaker Weston Foods, as foodservice (20% of normalized sales) also weighed. Still, Johnson says that recent financial results amidst the “havoc” from the pandemic “should be commended for their mundaneness,” praising a steady, no frills, performance.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Aurora Cannabis Inc5.74 USD-2.71Rating
Cenovus Energy Inc25.06 CAD-0.99
CI Financial Corp14.32 CAD0.85Rating
Enbridge Inc35.12 USD-0.71Rating
George Weston Ltd189.32 CAD-1.33Rating
Gran Tierra Energy Inc13.33 CAD-0.45
SNC-Lavalin Group Inc57.83 CAD-0.28Rating
TC Energy Corp38.75 USD-0.49Rating
Tilray Brands Inc1.70 USD-2.86Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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