High returns are the Holy Grail for capital gains investors and dividend portfolio owners alike. The following stocks have decent long-range predictions, and display a spread of stats that should satisfy even the most stringent of investors looking for high-performance stocks on the TSX index to buy and hold for the mid- to long-term. From capital goods to software, let’s see what’s in today’s mystery portfolio.
Which stocks are in the selection?
Adding a solid Canadian energy stock like Enbridge (TSX:ENB)(NYSE:ENB) to a portfolio adds both growth (see a projected five-year return of 20.17%) and defensiveness, while with an expected total return over half a decade of 300.28%, Savaria (TSX:SIS) is the hidden gem your high-growth portfolio needs, especially if it’s a little light on healthcare stocks.
One of the TSX index’s top tech stocks, OpenText (TSX:OTEX)(NYSE:OTEX) is looking at total expected five-year returns of 96.22%. Its 30.3% expected annual growth in earnings for the next one to three years gives passive incomes investors interested in a dividend yield of 1.62% further reason to buy.
Valuation is a little high, as might be expected for a tech stock, with a P/E of 38.4 times earnings and P/B of 2.6 times book, while red flags are waving in its level of debt compared to net worth (which has risen in the last five years from 39.4% to 69.1%), and the fact that insiders have only sold shares in the last three months with some pretty solid inside selling over the past year as a whole.
Investing in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) could increase an input by 32.76% over five years, and while that isn’t the kind of percentage that would have a high-growth investor salivating, it’s a defensive play that would add backbone to a portfolio.
With five-year returns of 24.15%, Lundin Mining (TSX:LUN) may not have the kind of swing that other miners do, but its size, position in the market, and payment of dividends make it a strong defensive addition to a long-range portfolio.
What would these five stocks make after five years?
Holding all five stocks as a group would lead, over five years, to a capital gain of 39.9%, a dividend income of 17.4%, and a total return of 57.2%. While higher returns can certainly be had on the TSX index, the five stocks chosen could add pre-diversified defensives to a portfolio along with positive gains and a decent all-round dividend yield.
With a beta of 1.14 relative to the market, a five-stock pick like the one above would even out the volatility of such stocks as Lundin Mining, with its own beta of 2.12; in short, such a selection would follow the TSX index fairly closely. It’s evenly diversified across five different industries, with no single industry making up more than 20% of the whole.
The bottom line
As a group, this selection of stocks isn’t bad value, with an overall P/E of 25.2 times earnings and a P/B ratio of 1.9. Its growth in earnings is 25.7%, which for five stocks pulled from different industries isn’t bad. Its overall health isn’t spectacular, at 51.94%, but it’s next to impossible to tick all the boxes with a diversified portfolio and that figure is arguably only 11.94% into the over 40% danger zone.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Open Text. Enbridge, Bank of Nova Scotia, and Open Text are recommendations of Stock Advisor Canada. Bank of Nova Scotia, OpenText and Enbridge are recommendations of Stock Advisor Canada.