Top Canadian Stocks for January 2020

We asked our freelance writers to share their top stock picks for the month.

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Chris Liew: ATCO

ATCO (TSX:ACO.X) is a $5.8 billion company that delivers electricity and natural gas to communities throughout Alberta and northern Canada. The company has a rich 70-year history.

ATCO provides diverse products and services in industries such as agriculture, energy, housing, real estate, transportation, and water. The scope and scale of ATCO’s operations are global with operations in more than 100 countries worldwide.

In Chile, the company manufactures workforce housing facilities for the mining industry. ATCO even develops natural gas-fired power plants in Australia. The global operations provide diversification outside of Canada.

ATCO boasts a 3.21% dividend yield, which is decent for a utility stock that can protect your capital and sustain dividend payouts.

Fool contributor Christopher Liew has no position in ATCO.

Ryan Vanzo: Canada Goose Holdings Inc

My top stock for January is Canada Goose Holdings (TSX:GOOS)(NYSE:GOOS). This is one of the most iconic stocks in Canada. In 2019, shares went on sale.

For years, Canada Goose compounded sales and earnings at more than 40% annually. Its globally-recognized jackets created intense customer loyalty and sky-high margins. This summer, management revised its long-term growth forecast, which now calls for sales and earnings growth of 20% to 30%. That’s still impressive, but below historical standards.

In response, shares lost more than 30% of their value, a clear overreaction. The stock is now priced at just 29 times earnings, with international sales still growing at more than 50% per year. This is a high-growth stock at a bargain valuation.

Fool contributor Ryan Vanzo has no position in Canada Goose Holdings Inc

Chen Liu: Yangarra Resources Ltd.

Yangarra (TSXV:YGR) is engaged in the exploration, development, and production of natural gas and oil with operations located in Alberta.

Yangarra is one of a few oil and gas companies that report positive retained earnings ($61 million for fiscal 2018). This is a good sign for investors as it suggests surpluses from previous years have been reinvested to fuel growth.

Even with the hardship experienced by the oil and gas industry in previous years, Yangarra has increased its top-line from $29 million in fiscal 2016 to $135 million in fiscal 2018 (compounded annual growth rate of 67%). The company reported net income of $34 million for fiscal 2018, for a net income margin of 25%.

As natural gas and oil prices rebound in the coming years, investors in Yangarra will be generously rewarded.

Fool contributor Chen Liu owns shares of Yangarra Resources Ltd.

Andrew Walker:  Canadian National Railway Company

Canadian National Railway  (TSX:CNR) (NYSE:CNI) is one of those stocks investors can buy today and sit on for decades.

The company plays a critical role in the functioning of the Canadian and U.S. economies, transporting essential raw materials and finished goods for domestic and international customers.

As economic activity expands, Canadian National Railway benefits.

The business generates solid free cash flow and management does a good job of sharing profits with investors. The board raised the dividend by 18% in 2019 and another healthy increase should be on the way in 2020.

If you are searching for a new addition to your TFSA or RRSP this stock deserves to be on your radar.

Fool contributor Andrew Walker has no position in Canadian National Railway.

Nikhil Kumar: Clarke Inc

Clarke (TSX:CKI) is a Canadian investment holding company controlled by the wealthy Armoyan family of Halifax. The intrinsic value of the company is close to $15 a share, which can be easily calculated based on the market value of assets owned. The stock trades at just $12.25 a share.

Over the last two decades, the company has increased book value at 14% a year, easily outperforming the S&P 500 by five percentage points per year.

Share buybacks, improving operating ratios, a sale of corporate owned assets or a special dividend could unleash value. Clarke Inc’s discount is now at historically high levels.

Fool contributor Nikhil Kumar owns shares of Clarke Inc.

Stephanie Bedard-Chateauneuf: Whitecap Resources

Whitecap Resources (TSX:WCB), a domestic producer of oil and gas, is my top stock for January.

The company has assets primarily in Western Canada. Whitecap pays a monthly dividend of $0.0285 per share, for an attractive yield of 6%.

Although the company’s payout rate seems high at 255%, the CEO of Whitecap said he had no plans to reduce the dividend. In fact, he plans to increase it in the future.

Analysts are optimistic about the Canadian stock, expecting earnings growth of 40% over the next year. For those who are willing to take a little risk, investing in small oil and gas companies like Whitecap could bring you big rewards.

Fool contributor Stephanie Bedard-Chateauneuf has no position in Whitecap Resources Inc.

Renée Gendron: Dollarama Inc

Dollarama (TSX:DOL) has a market capitalization of $14 billion. The company is a dollar store retail chain, has a five-year total return of 127.94% and pays a dividend of 0.39%. I like Dollarama as a buy because the stock has historically hit a low in January when consumer budgets are stretched. The stock has historically performed well in the last three quarters of the year.

The company forecasts sales growth of 3% to 4%. Now is the time to pick up this great stock on the cheap.

Fool contributor Renée Gendron has no position in Dollarama.

David Jagielski: Corus Entertainment Inc.

Corus Entertainment (TSX:CJR.B) is my stock pick for January. The company has earnings coming up this month and a good quarter could help lift the stock back above $6 a share. Although it had a decent year in 2019 rising around 10%, it’s still heavily undervalued. Trading at well under its book value and at just seven times earnings, the stock is worth a lot more than its modest $1.1 million market cap suggests.

Had it not been for Shaw Communications selling its shares in Corus in 2019 and driving the price down, Corus stock could easily be above $7 or even $8 today. With more streaming options now available making cord-cutting more expensive for consumers, it wouldn’t be surprising to see people return to conventional cable services where a stock like Corus could benefit significantly as it would help bring advertisers back as well.

Long term, it’s a great dividend stock and I expect 2020 to be a stronger year for Corus.

Fool contributor David Jagielski owns shares of CORUS ENTERTAINMENT INC., CL.B, NV.

Daniel Da Costa: Equinox Gold Corp

My top stock for January is Equinox Gold (TSX:EQX). Equinox has been on a major rally the last few weeks, after its recent acquisition which further improves its already strong operations.

The company is one of the best positioned stocks in its industry and is a great way to gain leverage and exposure to the price of gold. The price of gold has increased considerably the last six months and is widely expected to continue to grow over the next few years.

Positioning yourself ahead of time will be key, which is why Equinox is my number one stock for January.

Fool contributor Daniel Da Costa owns shares of Equinox Gold.

Mat Litalien: Suncor Energy

Canada’s Oil & Gas industry had a disappointing year. The good news is that sentiment is beginning to change, and 2020 is expected to be a rebound year. With that in mind, my top pick for January is Suncor Energy (TSX:SU)(NYSE:SU).

Oil majors such as Suncor provide less volatility and are better equipped to sustain any prolonged bear market. Suncor is currently trading at 12% discount to its historical price-to-earnings average and it is expected to raise the dividend along with fourth quarter and year-end results. It will mark the 17th consecutive year of dividend growth for the company.

Fool contributor Mat Litalien is long Suncor Energy Inc.

Andrew Button: Enbridge Inc

Enbridge (TSX:ENB)(NYSE:ENB) is without a doubt one of Canada’s top dividend stocks. With a 6.24% dividend yield and an average annual dividend increase of 17%, it has a lot of income potential.

Normally, stocks with yields as high as ENB’s raise the question of sustainability. However, Enbridge’s earnings growth has been even faster than its dividend growth, so its payout appears sustainable. If Enbridge’s Line III replacement and Line V tunnel go ahead as planned, expect more solid results from this stock going forward.

Fool contributor Andrew Button has no position in any of the stocks mentioned

Matt Smith: Parex Resources

Energy markets have become more optimistic since OPEC and Russia agreed to shave another 500,000 barrels daily off their collective output. One driller that is poised to deliver further value, even after rallying by 45% since the start of 2019, is Parex Resources (TSX:PXT). Despite that solid gain Parex is trading at a 36% discount to the net asset value of its oil reserves, highlighting the considerable upside available. Parex recently announced that it had made another oil discovery which will further boost its reserves and net asset value.

Parex is growing its oil production at a steady clip, which when combined with firmer oil and lower costs will give earnings a solid lift. Its appeal is magnified by its rock-solid debt free balance sheet that endows Parex with significant financial flexibility. For these reasons, Parex rally further over the course of 2020.

Fool contributor Matt Smith has no position in any stocks mentioned.

James Watkins-Strand: Stella-Jones Inc.

Investors often consider stocks in the consumer staples sector to be safe investments throughout the market cycle, as these businesses tend to offer stable earnings due to the constant demand for household essentials.

Think of Stella-Jones (TSX:SJ) as an industrial staples stock; the company provides indispensable lumber products (principally railroad ties and utility poles) which need constant replacement in order for core infrastructure to function.

SJ has been growing by yearly acquisitions going all the way back to 2010 and has recently been delivering strong organic growth in its residential lumber and logs & lumber segments.

Dividend-growth investors: check out the company’s 15 consecutive years of payout increases.

Everyone else: 18 consecutive years of growing sales is nothing to sneeze at.

Fool contributor James Watkins-Strand has no position in Stella-Jones Inc.

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.

David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canada Goose Holdings, Canadian National Railway, and Enbridge. The Motley Fool recommends Canadian National Railway.

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