Canada’s Best Brands: They’re Perfect for Your Portfolio

If you’re stuck for investing ideas this holiday season, there’s no easier solution than to put your money into companies such as WestJet Airlines Ltd. (TSX:WJA), one of Canada’s best brands.

Roger Ibbotson and colleagues wrote a 2010 paper for the Financial Analysts Journal that showed 75% of a typical mutual fund’s price performance over different lengths of time was caused by the general movement of the market with the remaining 25% split between asset allocation and stock selection.

What does that mean for the average investor?

You’d better be in the market at all times, because no matter what asset classes you choose to invest in or stocks you pick, if you’re not in the market when it’s moving higher, as has generally been the case since early 2009, you’re missing out in a big way.

As we enter the holiday homestretch, many of us are struggling to find the perfect gift for the loved ones on our list. Like choosing presents to buy, sometimes it’s difficult to identify the right stocks to put in your portfolio.

Are you stuck for ideas this holiday season? I suggest you consider investing in Canada’s best brands—a list of 25 companies that Canadian Business magazine has identified as heads above the rest.

This year’s list includes 18 public companies.

Canada’s best brands 2017

Company Five-Year 

Annualized Total Return

Company Five-Year 

Annualized Total Return

Bank of Nova Scotia 

(TSX:BNS)(NYSE:BNS)

7.9% BRP Inc. 

(TSX:DOO)

N/A
Quebecor, Inc. (TSX:QBR.B) 18.0% Jean Coutu Group PJC Inc. (TSX:PJC.A) 12.6%
Cineplex Inc.

(TSX:CGX)

16.7% Toronto-Dominion Bank 

(TSX:TD)(NYSE:TD)

15.1%
Great-West Lifeco Inc. (TSX:GWO) 16.0% Saputo Inc. 

(TSX:SAP)

19.8%
Lowe’s Companies, Inc. (NYSE:LOW) 26.2% IMAX Corporation (NYSE:IMAX) 9.2%
Metro, Inc. 

(TSX:MRU)

19.2% Loblaw Companies Limited 

(TSX:L)

14.7%
Telus Corporation (TSX:T)(NYSE:TU) 12.7% Canadian Tire Corporation Limited (TSX:CTC.A) 18.2%
Bank of Montreal (TSX:BMO)(NYSE:BMO) 14.8% Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) N/A
Empire Company Limited 

(TSX:EMP.A)

-0.02% WestJet Airlines Ltd. (TSX:WJA) 18.3%

Source: Morningstar.ca

Up and down both columns, there are some outstanding five-year returns. With an average five-year return of 15%, Canada’s best brands’ performance equaled that of the S&P 500 Total Return Index and handily beat the S&P/TSX Composite Total Return Index by 665 basis points.

Both BRP and Restaurant Brands International were not included in the performance figures for Canada’s best brands because they’ve been public companies for less than five years. However, I wouldn’t hesitate to add both to the mix because they’re both delivering good results.

Rules of engagement

The simplest thing to do here is to buy all 18 stocks in equal-weighted positions and then rebalance at the beginning of 2018 and every January thereafter. That way you push off any capital gains to the following tax year. Conversely, you’ll want to sell the losses in early December to offset against the gains generated at the beginning of the year.

With the exception of IMAX and Lowe’s, Canada’s best brands all trade on the TSX. If you don’t want to deal with the currency issues, a possible alternative to owning both stocks in a U.S. dollar account is to buy the equivalent of two positions in the Vanguard US Total Market Index ETF (TSX:VUN), which tracks the entire U.S. stock market. It holds both Lowe’s and IMAX, and while it hasn’t traded for five years, its three-year annualized total return is 17.7% with a low 0.16% management-expense ratio.

If you’re worried about diversification, don’t be. You’ve got at least five sectors represented, including three of Canada’s big banks and three of Canada’s top grocery stores. You have to eat, and you have to bank, so owning these companies long term makes sense.

Energy stocks, which make up a big part of the TSX, are also missing, so you might consider adding a couple of positions (rounding it up to 20) in a broad-based energy ETF, such as BMO S&P/TSX Equal Weight Oil & Gas Index ETF (TSX:ZEO).

And with that, you’re good to go.

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 Will Ashworth has no position in any stocks mentioned. David Gardner owns shares of Lowe's. The Motley Fool owns shares of IMAX and RESTAURANT BRANDS INTERNATIONAL INC.

More on Investing

question marks written reminders tickets
Tech Stocks

Nvidia’s Historic Stock Split: Will Investors See Bigger Gains?

Nvidia's (NASDAQ:NVDA) record 10:1 stock split entices many investors in several important ways. But some myths aren't technically correct.

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Retirement

Retirees: 2 TSX Dividend Stocks That Have Raised Payouts Annually for Decades

These stocks offer high yields and should continue to raise their payouts.

Read more »

TFSA and coins
Investing

5 Canadian Stocks With a Real Chance of Tripling Your TFSA’s Value

TFSA balances can triple in value with five Canadian stocks that have delivered outsized gains in recent years.

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

Want $1 Million in Retirement? 3 Stocks to Buy Now and Hold for Decades

Growth stocks such as Docebo and Celsius Holdings should help you generate outsized gains in the upcoming decade.

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Should Investors Buy the Correction in Lundin Mining Stock?

Lundin (TSX:LUN) stock has fallen by 10% in the last few weeks, but so has the price of copper. Coincidence?…

Read more »

Metals and Mining Stocks

Best Stocks to Buy in May 2024: TSX Materials Sector

A TSX materials sector ETF could help investors gain cheap diversified exposure to the hot sector's stocks – so will…

Read more »

man is enthralled with a movie in a theater
Investing

Should You Buy Cineplex While it’s Below $9?

With analysts expecting a significant recovery in the second half of 2024, is this the last chance to buy Cineplex…

Read more »