My 3 Favourite Canadian Stocks to Buy in July 2023

Thinking about what Canadian stocks to buy this summer? Here’s a stock for the long term, one for income, and a great stock for growth/value.

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With the S&P/TSX Composite Index up over 2% in 2023, it has been just an okay year for Canadian stocks. However, there has been a broad divergence between the performance of technology stocks and the rest of the market (like commodities, financials, real estate, and transport).

Fortunately, in every type of market, there are opportunities to add to great Canadian stocks. Here are three favourite Canadian stocks I’m eyeing right now.

CPKC: A long-term winner with long-term growth

Canadian Pacific Kansas City Railroad (TSX:CP) makes for an attractive summer stock. Canadian railroads are not exciting businesses. However, they are incredibly profitable and generally very good long-term investments.

Given its recent acquisition of Kansas City Southern Railroad, this company could grow at twice the pace of its competitors. On-shoring and near-shoring are massive trends in North America. That will be very beneficial for CPKC, which has the only singular rail network that connects Canada, America, and Mexico. This network should provide a massive competitive and growth advantage for decades ahead.

As a master of precision scheduled railroading, CPKC has consistently been one of the most profitable railroads over the past decade. Its stock is up 318% in that time. Right now, management has a target to double earnings per share over the next five years.

With a price-to-earnings (P/E) ratio of 24, this stock is pricey compared to peers and to its historical average. Should the stock pull back on economic concerns or slowing volumes, it would be an extremely good buying opportunity.

HOM.UN: An undervalued REIT trades for cents on the dollar

If you are looking for a cheap stock that generates income, BSR Real Estate Investment Trust (TSX:HOM.U) is a great Canadian stock to consider this summer.

While BSR is listed in Canada, it operates a portfolio of 31 garden-style apartment complexes exclusively in Texas, Oklahoma, and Arkansas. These are attractive, amenity-rich communities with affordable rents that cater to young families and professionals.

There are plenty of reasons to like this stock today. First, it is a bargain. It trades at a nearly 40% discount to its net asset value (NAV). That means if it were to sell its entire portfolio in the private market, it would likely get a price that is significantly higher than it is being valued as a stock.

Second, the REIT is positioned in some of the highest economic and population growth regions in the United States. High interest rates and high construction costs are likely to dampen apartment supply. That should help keep rental rates growing in these regions.

BSR trades with a nice, sustainable 3.95% dividend. It has been buying back a lot of stock recently. If you are looking for great assets at a bargain price, this is one Canadian stock to bet on this summer.

CGY: A Canadian growth stock at a nice price

If you are looking for another cheap Canadian stock that has been growing at a good rate, Calian Group (TSX:CGY) should be on your radar. Calian operates a conglomerate of businesses that include healthcare, defence training, satellite hardware/software, and cybersecurity. The company has very stable government contracts. However, it has also been expanding services to the private market.

For the past five years, Calian has grown revenues and normalized earnings per share, respectively, by an average of 16% and 14% per year. This stock trades for only 14 times earnings. It has a cash-rich balance sheet and no net debt.

It just announced a very attractive deal to buy a satellite communications business in Hawaii. Given its great balance sheet, there could be more deals to come. More deals mean more growth and more opportunities for investors to profit.

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 Robin Brown has positions in BSR Real Estate Investment Trust and Calian Group. The Motley Fool recommends BSR Real Estate Investment Trust, Calian Group, and Canadian Pacific Kansas City. The Motley Fool has a disclosure policy.

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