Did you know that some of the world’s best investors are buying Canadian stocks hand over fist?
Yes, it’s true.
From billionaire shareholders to hedge fund managers, many ‘super investors’ are into Canadian stocks.
In this article, I will explore three of the TSX stocks billionaires are buying, starting with a familiar name.
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CN Railway
The Canadian National Railway (TSX: CNR) is a Canadian railroad stock owned by Bill Gates’ investment firm Cascade Investment. Cascade is managed on behalf of Gates by Michael Larson.
Why does Larson like CNR stock so much?
One thing he might like about it is the fact that it has an “economic moat.” An economic moat is a durable competitive advantage that makes a company vital and necessary to its customers. In CNR’s case, that “moat” is its vast rail network. CN Railway is the only North American railway that touches three coasts. This access gives it advantages in long-distance shipping (particularly shipping routes that go from Western Canada to the Southeastern United States). As a result, CN Railway is unlikely to be replaced or undercut by a competitor any time soon.
Brookfield
Brookfield (TSX: BN) is a company that was created when Brookfield Asset Management (TSX: BAM) was restructured. Brookfield was owned by top value investor Mohnish Pabrai before it was spun off.
The situation with Brookfield and Brookfield Asset Management is somewhat difficult to explain. At one point, both of these companies were a single company called ‘Brookfield Asset Management.’ This company included an asset management business and various interests in other companies. Earlier this month, BAM spun off its asset management business, which retained the ticker symbol ‘BAM,’ while the parent company gained a new ticker symbol, ‘BN.’
Brookfield has a number of holdings in different investment funds, as well as some direct ownership stakes in businesses. It has grown its portfolio value by about 16% per year over the last decade. It is owned by value investors like Pabrai, and even has legendary bond investor Howard Marks on its team. Going purely by the track records of the people who own it and work for it, Brookfield looks like a winner.
Canadian Pacific Railway
Canadian Pacific Railway (TSX: CP) is another Canadian railroad stock with a major billionaire backer: Bill Ackman.
Ackman won a shareholder battle to replace CP’s CEO with a new executive, Hunter Harrison, who helped the railroad achieve better operating efficiency. In the decade since Harrison took over, CP has grown its revenue by 4% per year, net income by 15% per year, and book value by 22% per year. Today, CP is a little pricey, trading at 27 times earnings and 10.1 times sales. However, it’s still a great company.
Foolish takeaway
Canadian markets may not get as much press as their American counterparts, but that doesn’t mean they’re without big fans. In addition to the ‘super investors’ who own the stocks above, there’s also Warren Buffett, who has intermittently owned Suncor Energy and other Canadian names. Billionaire endorsement does not automatically mean that the stocks named above are slam-dunk buys, but it does suggest that Canada is a market worth being in.
