In the digital age, investment horizons have shrunk considerably for the average investor. A “long-term time horizon” may be defined as long as a year or two, but the real long term for us value-conscious Foolish investors is five, 10, or even 20 years. If possible, we, like Warren Buffett, wish we could hold onto great Canadian stocks for life. In the age of profound technological disruption, where tech-leveraging new entrants are eroding the moats of the incumbents, though, it’s important to continue to do your homework after you’ve purchased a stock to see if your original investment thesis still holds.
In this piece, we’ll have a look at three great Canadian stocks that I believe have moats that are wide enough to protect their share of economic profits over the next five years at the minimum. Moreover, I also think that each name could gain ground over the next few years, thanks in part to brilliant management teams with proven track records of success.
Canadian Tire: A remarkably resilient year for the iconic retailer
Canadian Tire doesn’t get the respect it deserves. The iconic Canadian retailer got battered back in February and March during the coronavirus panic. Many investors likely discounted the firm’s resilience and its rock-solid balance sheet, which remains head and shoulders above most other retailers after almost a year of the new normal.
With a robust e-commerce platform that had a chance to flex its muscles in the first wave, I think Canadian Tire is going to come out of this pandemic in a position of profound digital strength. Moreover, as shopping malls get rid of restrictions in a post-pandemic environment, Canadian Tire, I believe, could be one of the few retailers capable of firing on all cylinders with its omnichannel presence.
Shares of Canadian Tire have blasted off above their 2020 pre-pandemic highs and is on the cusp of a breakout past 2018 all-time highs. The incredible managers are worth paying a premium for and think the stock has way more room to run, given the stock is still cheap at 0.7 times sales and 2.5 times book value.
I’d say Canadian Tire is among the biggest of surprises of 2020. The big-league retailer is back, and it’s just getting started.
Telus: A high-yield Canadian stock that could surge
Telus is another firm that’s been managing well through this pandemic-plagued year. The telecoms have taken a hit to the chin amid the pandemic, as demand for mobile data has been weak, as people quarantined themselves to prevent the spread of the deadly COVID-19. Once the pandemic ends, Telus and its telecom peers, I believe, will recovery very sharply, as demand for mobile data (and the next-gen of 5G tech) looks to take off.
Moreover, Telus’s international spin-off could create major long-term value for shareholders. With a lack of any depreciating media assets, a proven track record for customer satisfaction, consistently high marks in network quality, a 5G boom on the horizon, and one of the most pandemic-resilient operations in the Canadian telecom scene, Telus stock deserves to be back at its all-time high.
Come 2021, I think Telus will make a run for $30. And its dividend (currently yielding just shy of 5%) will stand to compress, as investors flock into a name that I think is best equipped to defend its turf from competitive pressures over the next five years.
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 TELUS CORPORATION.