Almost a decade past the Great Recession, many investors have seen their portfolios grow substantially. In many cases, there were contributions in addition to dividends (and capital appreciation) earlier on in the value part of the market and over the past few years in the growth part of the market. As the risk-free rate of return has increased, many value companies have stabilized or decreased in value as a result of becoming less attractive.
As is always the case, investors need to be forward looking when deploying their capital rather than backward looking. Over the next five years, there are a few key areas that will stand out above the rest. Let’s take a look.
In Canada, the most obvious industry to consider is the marijuana industry, which is set to explode, as many recreational users can’t wait to be able to smoke freely and legally. Once the first shoe drops, medical users will not hesitate to take a large bite out of the market. To boot, Canada’s producers are gaining a first-mover advantage over their U.S. counterparts, which will make them substantially more profitable over the long term.
For investors seeking the best way to profit, units of HORIZNS MARIJUNA LF CL A UNT ETF (TSX:HMMJ) are the safest way to go, as the exchange-traded fund represents the entire industry — one that is expected to become very profitable over time.
The next name on the list is none other than Canadian Pacific Railway (TSX:CP)(NYSE:CP), which, given its business, may be in the best possible position to survive higher borrowing costs and two separate Federal elections — both north and south of the border. With a dividend yield that may not seem so generous at this time, the yield may only be the start for investors seeking both total returns and the safety (against large losses) that may be on the horizon.
Given the current situation, the five-year time frame that is set out must take into consideration the high likelihood of a recession during this time; the only question is when it will hit.
The last name to consider is Home Capital Group (TSX:HCG), which facilitates borrowing in the alternative lending space. Essentially, the company has had such as bad run over the past year that the next five years (even with an upcoming recession) will see a large bounce in the share price. Barring the re-initiation of a dividend, the excess cash flows will go to a substantial share buyback or, better yet, a full takeover attempt by famous investor Warren Buffett, who is already a major stakeholder in the company.
With more uncertainty than ever, investors seeking to find high returns over the next five years have many places to look that include the country’s best-known names. Volatility during this time, however, will not be lacking!
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 Ryan Goldsman has no position in any of the stocks mentioned.