Despite the fears of increasing bond yields, the Canadian equity markets continue to rise, with the S&P/TSX Composite Index hitting a new all-time high on Monday. Higher oil prices and Statistics Canada’s announcement that Canada had posted a trade surplus in January appear to have improved investors’ sentiments, driving equity markets higher. Amid rising investors’ confidence, here are three top Canadian stocks that you can buy right now for superior returns.
Canadian Natural Resources
Supply constraints and the expectation of rising oil demand amid improvement in economic activities have pushed oil prices to pre-pandemic levels. Higher oil prices could benefit oil-producing companies, such as Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ). Last week, the company reported its fourth-quarter earnings, which outperformed analysts’ expectations.
Further, the company’s management expects to make a capital investment of $3.2 billion this year, increasing its oil production by 61,000 BOE/d from its 2020 levels. Further, the management hopes to generate $4.9-$5.4 billion of free cash flow this year, provided WTI crude trades around $57 per barrel. So, the company’s growth prospects look healthy. Given its healthy growth prospects and an attractive dividend yield of 4.9%, I believe the upward momentum in Canadian Natural Resources could continue.
The pandemic-infused travel restrictions have severely dented passenger airline companies, including Air Canada (TSX:AC). However, the company has witnessed strong buying since the beginning of last month, as investors hope that the government would soon announce a financial package for the aviation industry. The optimism has led the company’s stock price to rise close to 40%. Despite the rise, the company still trades over 44% lower than its all-time high.
The widespread distribution of vaccines could prompt governments to lift restrictions, boosting Air Canada’s financials. The Canadian government hopes to make the vaccine available to everyone by September this year. Also, Canadian citizens are sitting on huge capital, which they had saved for an emergency. Amid the improvement in economic activities and falling unemployment rate, Canadians could spend their savings on travel and leisure, benefiting Air Canada.
Further, the company’s cargo business is growing at a healthier rate since its launch in March 2020. The company’s management has also taken several initiatives, such as reducing its capacity and headcount, to lower its losses in the coming quarters. So, I believe Air Canada could deliver superior returns over the next two to three years.
The cannabis stocks have witnessed a substantial pullback in the last few days amid speculative trading fears. Canopy Growth (TSX:WEED)(NYSE:CGC), one of the largest cannabis companies in the world, is currently trading 45.3% lower than its 52-week high. The selloff provides an excellent buying opportunity, given the growth prospects that the cannabis sector offers and the company’s growth initiatives.
Amid increased legalization, the U.S. cannabis market could expand in the coming years. With Democrats taking control of both Senate and House, pro-cannabis bills could soon become laws. Further, Canopy Growth’s management focuses on expanding its operations in its core markets, such as Canada, the U.S., and Germany.
Meanwhile, Canopy Growth’s management has provided a promising outlook for the next three years, with its top line expected to grow at a CAGR of 40-50%. The management also hopes to report positive adjusted EBITDA in the second half of fiscal 2022 while improving its EBITDA margin to 20% by fiscal 2024.
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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.
Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.