Diversify Your Portfolio With These 3 Stocks

Need to diversify your portfolio? If so, consider buying Linamar Corporation (TSX:LNR), National Bank of Canada (TSX:NA), and MTY Food Group Inc. (TSX:MTY).

| More on:
The Motley Fool

One of the keys to success in investing is staying diversified, because it reduces your risk by minimizing your exposure to a single industry and allows you to benefit from the growth trends in several industries. With this in mind, let’s take a look at three stocks from three different industries that you could buy right now.

1. Linamar Corporation

Linamar Corporation (TSX:LNR) is one of the leading manufacturers of powertrain system solutions for the automotive, energy, and industrial markets.

At today’s levels, its stock trades at just 8.8 times fiscal 2015’s estimated earnings per share of $6.56 and only 7.5 times fiscal 2016’s estimated earnings per share of $7.72, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 12.5 and its industry average multiple of 23.8.

With the multiples above, its estimated 6.6% long-term earnings growth rate, and the high volatility in the market in mind, I think Linamar’s stock could consistently trade at a fair multiple of at least 10, which would place its shares upwards of $77 by the conclusion of fiscal 2016, representing upside of over 32% from current levels.

Also, the company pays a quarterly dividend of $0.10 per share, or $0.40 per share annually, which gives its stock a 0.7% yield.

2. National Bank of Canada

National Bank of Canada (TSX:NA) is the sixth-largest bank in Canada with approximately $216.1 billion in total assets.

At today’s levels, its stock trades at just 7.8 times fiscal 2016’s estimated earnings per share of $4.76 and a mere 7.4 times fiscal 2017’s estimated earnings per share of $5.04, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 10.1 and its industry average multiple of 13.1.

With the multiples above, its estimated 7.1% long-term earnings growth rate, and the high volatility in the market in mind, I think National Bank’s stock could consistently trade at a fair multiple of at least 10, which would place its shares upwards of $50 by the conclusion of fiscal 2017, representing upside of over 34% from current levels.

In addition, the company pays a quarterly dividend of $0.54 per share, or $2.16 per share annually, which gives its stock a bountiful 5.8% yield.

3. MTY Food Group Inc.

MTY Food Group Inc. (TSX:MTY) is one the largest franchisers of restaurants in Canada, and its portfolio of brands include Thai Express, Country Style, Extreme Pita, La Cremiere, and Tiki Ming.

At today’s levels, its stock trades at just 19.3 times fiscal 2015’s estimated earnings per share of $1.60 and only 18.7 times fiscal 2016’s estimated earnings per share of $1.65, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 21.1 and its industry average multiple of 35.8.

With the multiples above, its estimated 3.1% earnings growth rate in fiscal 2016, and the high volatility in the market in mind, I think MTY’s stock could consistently trade at a fair multiple of at least 22, which would place its shares upwards of $36 by the conclusion of fiscal 2016, representing upside of over 16% from current levels.

Also, the company pays a quarterly dividend of $0.115 per share, or $0.46 per share annually, which gives its stock a 1.5% yield.

Should you diversify your portfolio with one of these stocks?

Linamar, National Bank of Canada, and MTY Food Group are three of the most attractive long-term investment options in their respective industries, and all have the added benefit of dividends. Foolish investors should take a closer look at each and consider initiating positions in at least one of them in the very near future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. The Motley Fool owns shares of MTY Food Group. MTY Food Group is a recommendation of Stock Advisor Canada.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »