We’re just a week into July, and things are heating up — not only the temperatures, but also the stocks. After rising 1.29% last week, the TSX Index closed out one of its best rallies of the year–including a particularly large jump on Tuesday.
With the loonie rising and the battered financial sector making a comeback, Canada’s economy appears to be on the upswing. However, not all stocks benefit from these trends equally. As we’re about to see, the rising dollar in particular can actually be a negative for a number of TSX components. Regardless, there are many stocks set to profit from the trends we’re seeing now. The following are just three of the most notable.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is Canada’s fastest-growing bank. Because of its U.S. retail business, which is growing at 29% year over year as well as its TD Ameritrade investment, the bank has upside that other Canadian banks can’t match.
Like other bank stocks, TD rose significantly last week–possibly due to an encouraging housing report. On the other hand, TD’s reported income could take a hit from a stronger Canadian dollar, as much of the company’s growth comes from its U.S. business. That will be one factor to watch going forward.
Air Canada (TSX:AC)(TSX:ACB) has been one of the best-performing TSX stocks over the past three years, rising over 300% in that period. If you’d picked this stock at its absolute bottom in 2009 or 2012 and held onto today, you’d have pocketed a return in the vicinity of 4000% (with perfect timing of course).
AC’s incredible bull run shows no signs of slowing down. Up 58% year to date, it’s crushing the TSX index and taking no prisoners. As Fool contributor Joey Frenette pointed out, AC will benefit from a stronger loonie, as it would encourage Canadians to do more international travel. That said, this stock’s incredible run hasn’t depended on a strong dollar, as it rose even when CAD was trending down.
Alimentation Couche-Tard (TSX:ATD.B) is a major convenience store company best known for its Circle K stores. Circle K is rapidly taking over the gas station convenience store market in Canada, and even penetrating parts of the States. The company’s rapid expansion mirrors Dollarama in its early days, in which an upstart store began gobbling up market share across the country in short order.
The company’s frothy growth hasn’t overburdened its balance sheet, as it has $21 billion in assets to just $6.6 billion in interest-bearing debt, and its revenue growth continues to outpace growth in liabilities.
Alimentation Couche-Tard stock is a dividend payer, and while the yield is low at 0.6%, it could well increase. This is a company that grew revenue at 21% year-over-year in its most recent 40 week period, so there is potential for many dividend hikes going forward.
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Fool contributor Andrew Button owns shares of TORONTO-DOMINION BANK. Alimentation Couche-Tard is a recommendation of Stock Advisor Canada.