The TSX Composite Index has booked a pretty modest gain for the year so far. Up 5.3% year to date, it is far behind the S&P 500, which is up 10.4% already. The TSX has a higher dividend yield than the S&P 500 does, which makes up for the lag in the price return somewhat. Still, Canada’s main stock market index is lagging this year.
That doesn’t mean that individual Canadian stocks aren’t doing well though. Far from it! There are many individual Canadian stocks that are outperforming the broader index this year – in some cases, even outperforming U.S. stocks. In this article, I will explore three Canadian stocks that are crushing the TSX in 2024.
Shopify
Shopify Inc (TSX:SHOP) has been one of the TSX’s best performing stocks in 2024. For the year, it’s up 8.8%, compared to the 5.3% gain the TSX as a whole has booked. Shopify is gaining due to a combination of positive sentiment toward technology stocks and developments in its own business. Technology stocks in general are benefitting from the hype surrounding generative AI, which is seen as having the potential to automate many tasks and save companies money. Shopify, being a technology stock, is rising with its sector. The e-commerce platform also has some company-specific factors working in its favour. It is growing pretty rapidly, with revenue up 24% and free cash flow (FCF) up 395%. “Free cash flow” is an all-cash way of measuring profit that ignores things like depreciation and unrealized stock market gains.
Brookfield
Brookfield Corp (TSX:BN) is yet another stock that is quietly crushing the TSX this year. Up 9.8% year to date, it is far ahead of the TSX’s 5.3% gain.
Brookfield is a stock that stands to gain a lot from interest rate cuts. The alternative investment manager has a lot of debt, much of which is variable rate. If interest rates go down, then BN will benefit from lower rates on its debt, which will reduce its interest expenses. A lot of Brookfield’s debt is real estate debt tied to specific properties, which means that it doesn’t affect the company’s corporate-level solvency. Nevertheless, the interest expenses that come from this debt are very real, and interest must be paid in order for Brookfield to maintain its credibility with lenders.
Brookfield is expected to have a pretty good year this year. Earnings are expected to grow 30% and return on equity (ROE) is expected to grow 39%, thanks to interest rate cuts and other factors. These high expectations may be somewhat baked into BN’s stock price today. Still it’s a great company.
CN Railway
The Canadian National Railway (TSX:CNR) is a final stock that is beating the TSX this year, up 7.2% to the index’s 5.3%. CN Railway performed better than the average railroad in the trailing 12-month period. In that time, the company’s revenue declined, but only slightly, and its earnings grew 14.6%. By contrast, Berkshire Hathaway’s BNSF saw both revenue and earnings decline significantly.
Rail shipments were down across the industry these last 12 months. Some reasons include a decline in imports, crew shortages, and bad weather. The industry’s weakness in 2023 was peculiar because the economy as a whole was strong – usually you expect rail to be closely tied to the state of the overall economy. Nevertheless, CN Railway is one of the best in its class, and it probably will do well going forward.
