The coronavirus pandemic and related economic fallout has impacted many Canadian stocks. The most affected are airlines, retailers, and entertainment venues. The TSX plunged sharply when the mid-March 2020 stock market crash hit. Even after the latest market rally, the S&P/TSX Composite is still down by 13% for the year to date. Economists are tipping that the recession sparked by the pandemic will be the worst downturn since the Great Depression. Despite this weighing on the outlook for stocks, some are poised to perform. Here are three top TSX-listed Canadian stocks that will perform in the current harsh operating environment.
Leading Canadian airline
Cargojet (TSX:CJT) has gained an impressive 32% since the start of 2020, despite the gloomy outlook for stocks. The airline, which is Canada’s number one overnight freight carrier, has experienced a significant lift in demand for its services since the coronavirus pandemic was declared. Urgent medical supplies and a sharp uptick in internet sales caused demand for Cargojet’s services to spike.
There is every likelihood that demand will continue to grow. The pandemic appears to be the inflection point for internet retailers. Government measures to control the spread of the coronavirus, including social distancing and shuttering non-essential services, have caused retail internet sales to soar. Amazon.com reported a 26% year-over-year spike in first-quarter sales revenue, which it attributes to home-bound customers being forced to shop online.
Cargojet forms an important part of the logistical chain for internet retailers. The freight carrier is implementing measures to ensure it can meet the increased transportation volumes. Those additional volumes will give Cargojet’s earnings an immediate lift.
Global internet sales platform
Canadian e-commerce platform provider Shopify (TSX:SHOP)(NYSE:SHOP) has gained a stunning 71% for the year to date. This is despite the coronavirus pandemic, related economic fallout, and a sharply lower TSX after the March market crash. This can be attributed to the increase in online sales because of consumers being forced to stay at home except for essential activities.
That will follow a stunning 47% year-over-year increase in fourth-quarter 2019 revenue, and 37% higher subscriptions revenue driven by more merchants joining the Shopify platform. Worldwide e-commerce sales are expected to expand by a notable 55% between now and 2023 to US$6.5 trillion.
Shopify, as one of the world’s largest and rapidly growing e-commerce platforms, will secure a significant portion of that growth. The sudden growth of online sales will further bolster Shopify’s market share.
Shopify is also taking measures to strengthen its operations during the coronavirus pandemic. These include extending its 90-day free trial and a $200 million commitment to expand Shopify Capital into core geographic markets.
Even after suspending its 2020 guidance, it appears that Shopify will perform better than expected.
Top industrial REIT
Another industry to benefit from the rise of internet shopping and the momentum initiated by the push to online shopping is industrial REITs. One Canadian stock that stands out is WPT Industrial REIT (TSX:WIR.U), which is attractively valued after losing 18% since the start of 2020.
As a result, WPT is trading at a 19% discount to its value, highlighting the potential upside available and why now is the time to buy.
Despite not requiring a brick-and-mortar presence like traditional retailers, online stores require large logistical operations to manage inventory and deliver customer purchases. Rapidly growing online sales and e-commerce have triggered a significant increase in demand for industrial real estate.
A lack of investment in that segment coupled with rising demand has created a supply shortage. This is pushing asset values and rents higher. That will act as a powerful long-term tailwind for WPT Industrial. The REIT’s purchase of a US$730 million logistics property portfolio will boost short-term earnings. WPT also boosted its liquidity, expanding its existing credit facility by US$600 million.
WPT’s impressive occupancy rate of 99% at the end of 2019 and weighted average lease term of 4.9 years ensures the stability of its earnings. The REIT counts among its top 10 tenants several e-commerce businesses including Amazon. That will ensure that its earnings grow, as internet retailing expands at a solid clip.
While waiting for WPT to rally, you will be rewarded by its distribution yielding 6.6%.
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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.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Matt Smith has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, CARGOJET INC., Shopify, and Shopify and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon.