Canadian stocks hit a snag in September, but the TSX Index has been nothing but bullish in October. Once again, the TSX is back up near all-time highs (again) this year. Traditionally, the fourth quarter is pretty good for stocks, so the setup looks decent for the rest of the year.
Despite lots of bearish sentiment, I still think the stock market offers some great opportunities. That is especially true for those willing to be patient and to own stocks as investments for the long term. If you have some capital to deploy, here are three top transportation-focused Canadian stocks that should do very well now and for a decade ahead.
A top Canadian value stock
Last week, Canadian Pacific Railway (TSX: CP)(NYSE: CP) hit a bit of a snag when it reported third-quarter results. Both the top line (revenues) and the bottom line (earnings per share) missed due to weak volumes from Canadian grain shipments and broader supply chain issues.
Despite, this Canadian stock continued to climb actually. CP faced a frustrating quarter, but it can largely be considered a temporary blip. It still maintained its earnings outlook for 2021. Management remained very bullish on its prospects going forward. This is especially true in light of its potential takeover of Kansas City Southern Railway.
Its combined network could be a major solution to some of the broader North American supply chain issues. CP is already one of the best operators in the industry. Give it a North America-wide rail/logistics networks, and it is primed for years of solid earnings-per-share growth ahead.
A top Canadian airline to own for the decade
Keeping supply chain as a theme, Cargojet (TSX: CJT) could be an interesting Canadian stock right now. Under $200 per share, Cargojet trades 5% below a six-month high hit in early September. However, it could have very solid results in the third quarter.
With ports congested and shipping delays across the globe, Cargojet could be an ideal choice for customer looking for chartered expedited bulk deliveries. Certainly, many of its costs have risen due to inflation (fuel and parts), yet it generally passes much of those onto its customers.
Factors like e-commerce and same-day/next-day delivery continue to rise, so this will be a positive tailwind for years ahead. Its expansion into international routes could also be an entirely new growth driver. With an enterprise-to-EBITDA ratio of 16 times, this Canadian stock does not look overly expensive. With a market cap of $3.4 billion, this top airline still has a lot of room to grow ahead.
A top logistics-focused tech stock
If you believe the supply crunch could persist for longer than most hope, Descartes Systems (TSX: DSG)(NASDAQ: DSGX) should be a key beneficiary. It provides cloud-based software solutions that streamline logistics processes for suppliers, shippers, freighters, and couriers. It has been seeing a very strong rise in demand for its products across the supply chain.
Since its services are absolutely essential to operations, the company captures a high (nearly 90%) stream of recurring revenues. In its most recent quarter, revenues, earnings per share, and adjusted EBITDA rose over last year by 25%, 125%, and 35%, respectively. It is enjoying really solid organic growth right now.
This company earns very high margins and produces a lot of free cash flow. It has $128 million of cash available, so it looks primed to invest in new acquisitions as well. Despite a pretty high valuation, it is still one of my favourite Canadian tech stocks for 2021.
