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3 Stocks to Buy As the Canadian Dollar Rises

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In the spring of 2019, I’d discussed how investors should act with a low Canadian dollar. A lot can change in a year. Now, in early August, the Canadian dollar has surged while the U.S. greenback has slid in the face of domestic and global pressures. A year ago, the U.S. economy looked very strong. The COVID-19 pandemic has ravaged global trade and activity, and there are few countries that have been as hard hit as Canada’s southern neighbour.

Today, I want to look at three stocks that are worth adding as the Canadian dollar continues to show strength in the face of its U.S. counterpart.

A strong Canadian dollar has meant good things for gold stocks

The weakening U.S. dollar has led to a momentous summer for gold. Investors saw the yellow metal surge to record highs. It was trading above the $2,050 mark at the time of this writing.

Barrick Gold is one of the largest gold producers in the world. A strong Canadian dollar has historically meant a weak U.S. dollar. With that, the spot price of gold and Barrick Gold should benefit. That has certainly been the case so far this year. Shares of Barrick have climbed 63% in 2020 as of close on August 6.

Miners are set to rake in profits on the back of gold’s incredible run in 2020. Barrick and its peers are still worth scooping up in the middle of the summer.

This stock is defying expectations in this climate

In the article linked above, I’d discussed how this stock has had an advantage with a low Canadian dollar. Stella-Jones (TSX:SJ) is a producer, marketer, and seller of pressure treated wood products. It exports many of its top products, including utility poles, to the United States. This means that a high Canadian dollar has the potential to weigh on its business.

Stella-Jones stock has increased 20% month-over-month as of close on August 6. The company released its second quarter 2020 results on August 5. EBITDA surged 20% year-over-year to a record $120 million. Meanwhile, net income climbed to $69 million or $1.02 per share.

Shares of Stella-Jones still offer a favourable price-to-earnings ratio of 16 and a price-to-book value of 2.0. This is a rare company that has thrived in the face of this pandemic. Moreover, Stella-Jones boasts an excellent balance sheet.

One company that will benefit from a stronger Canadian dollar on the ground

Many top Canadian retailers rely on imports south of the border to stock their shelves. In this case, a high Canadian dollar can help to boost their operating costs. Dollarama is one top TSX stock that should benefit from this environment. I’d recommended that investors scoop up Dollarama at a discount to start the year. Its shares have climbed 12% in 2020 so far.

In the first quarter of the 2021 fiscal year, Dollarama achieved sales growth of 2%. The company kept its doors largely open during the pandemic as it offers essential services to its customer base.

Still, investors should expect a stronger showing as the economy reopens. I’m bullish on Dollarama, especially with a high Canadian dollar.

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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

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