Scotiabank Just Updated Its Top 30 Canadian Stock Picks — Here Are My Favourite 3!

Sleep Country Canada Holdings Inc. (TSX:ZZZ) and Metro Inc. (TSX:MRU) are two Scotiabank-approved value stocks that look ripe to outperform.

| More on:
analyze data

Image source: Getty Images

Bank of Nova Scotia — or Scotiabank — recently updated its top 30 Canadian stock picks to buy amid this pandemic-plagued environment. There were some ample value names that stayed on the list, as Scotiabank strategist Jean-Michel Gauthier is of the belief that value stocks could be major winners in a Joe Biden presidency.

Betting on a Joe Biden-driven return to value

At the time of writing, we’re in Day Two of ballot counting. Biden and the Democrats hold a commanding lead over President Trump, as America awaits results from various states, including the likes of Arizona and Nevada, where the race is still too close to call. Should Biden be announced as President of the United States, either tonight or tomorrow, we could realistically see the big growth-to-value rotation that many pundits have been calling for of late.

I think Gauthier is right on the money in that value could be the place to be going into year’s end. While there are some growth stocks on Scotiabank’s top 30 list, a vast majority are deep value plays that could face immense upside in a Biden-driven return to value.

The three picks that I thought stood out most were Sleep Country Canada (TSX:ZZZ), Metro (TSX:MRU), and Northland Power (TSX:NPI).

Sleep Country

It’s time to stop hitting the snooze button on shares of Sleep Country.

In a prior piece, I touted Sleep Country as one of my top value plays and noted the likelihood that a severe economic downturn had already been baked into the stock. Since collapsing in February and March, ZZZ stock has been unstoppable, with shares nearly tripling from their March trough to the October peak.

Sleep Country stock has since pulled back modestly amid the latest bout of October volatility — a perfect opportunity to load up on the mattress giant that’s still a country mile away (~45%) from its 2017 all-time highs.

Despite the recent run, however, shares remain dirt-cheap at 2.7 times book value and 1.2 times sales. Sleep Country is a consumer discretionary poised to continue melting up and leading value’s upward charge as the economy slowly heals from this unprecedented crisis.


Metro is a grocery top dog I’ve been pounding the table on in recent months. The company has a margin edge over almost all of its grocery peers that can’t seem to get an operational advantage with the razor-thin margins to be had in the grocery space. Metro’s margin edge is a testament to its incredible management that’s worth paying up for.

At the time of writing, Metro is within a percentage point of hitting its all-time high reached back in late September. Shares are currently up 20% year-to-date (YTD) and look poised to continue roaring higher, even in the face of a second wave of coronavirus cases.

Metro may not appear cheap at 20.9 times trailing earnings and 13.3 times cash flow. Given the calibre of business you’re getting and the tough environment that lies ahead, however, it becomes more apparent that Metro stock is well worth every penny of its premium price tag versus some of its less-than-stellar peers. It’s the best of the pack and that’s likely a major reason why Scotiabank remains relatively bullish on the name.


Finally, we have the green energy stock that bounced like a coiled spring in 2020, after years of consolidation. I urged investors to load up on what I thought was one of the cheapest renewable energy plays on the TSX a few years back. With shares now up over 60% year to date, Northland is no longer the same bargain it used to be. But it’s still relatively cheap versus many of its peers in the space.

The secular tailwinds faced by the renewable stocks are profound and investors have already begun to recognize this. With Northland Power shares trading at 6.7 times book value and 8.4 times cash flow, the name is still attractive compared to the low-risk growth that’s to be expected.

However, with a mere 2.8% yield, many investors may be more inclined to go with one of Northland’s peers which sport yields well above the 5% mark. If you seek value and not income, though, I’d say Northland is among the best renewables for your buck.

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.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

2 Blue-Chip Stocks Every New Canadian Investor Should Own

Canadian blue-chip stocks such as Toronto-Dominion Bank have the ability to deliver market-beating returns to investors in 2022 and beyond.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

3 Canadian Dividend Stocks to Buy Hand Over Fist

These three Canadian dividend stocks each offer a unique opportunity, making them some of the best investments to buy at…

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Retirement Wealth: 2 Oversold Canadian Stocks to Buy Now and Own for Decades

These industry-leading dividend stocks look cheap right now and have increased their distributions annually for decades.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Dividend Stocks

2 of the Safest TSX Stocks Right Now

The stock market is heading towards a crash. Investors are seeking the safety of dividends, and these two stocks provide…

Read more »

Payday ringed on a calendar
Dividend Stocks

Want Monthly Passive Income? Try These TSX Dividend Payers

In need of extra cash? These dividend stocks offer passive income each month, and you can pick them up cheap…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Want Safe Passive Income? Here Are 2 TSX Dividend Aristocrats for New Investors

Need some safe passive income? TSX Dividend Aristocrats like Fortis (TSX:FTS) are ideal stocks for new investors to hold in…

Read more »

grow dividends
Dividend Stocks

2 Cheap TSX Dividend Stocks to Buy Now

These top TSX dividend stocks now offer 6% yields.

Read more »

Piggy bank next to a financial report
Bank Stocks

Got $500? Create Passive Income of $500 in Just 33 Years

Only have a bit of cash to invest? By investing in the right stock, you could make $500 in annual…

Read more »