How to Optimize Your Canadian Investments for the Year Ahead

2025 could see a shift in sector performances as interest rates fall. You can optimize your investments by selling the rally and buying the dip.

Puja Tayal

Puja Tayal has been writing for Motley Fool Canada since 2020. Her love for writing inspired her to start a college newsletter. With a Bachelors's degree in Finance and Accounting and CFA Level 1, Puja strives to transform stock discussions into breakfast table chats through her articles. A movie buff and a finance geek, Puja weaves superheroes, cartoons, and novels to tell you a story touching different aspects of investing, from portfolio and tax planning to retirement savings. Follow her on Twitter for more stories.

Published February 19, 2025 8:30 pm EST

2025 could see a structural shift in Canadian stocks as the Bank of Canada cuts interest rates to boost consumption. The government has also reduced immigration targets to ease house prices. Moreover, Trump tariffs could create short-term tensions in export-led sectors, especially automotive.

Canadian Red maple leaves seamless wallpaper pattern — Source: Getty Images

How to optimize Canadian investments for 2025

Navigating these macroeconomic factors, you can optimize your Canadian investments for the year ahead by rebalancing your portfolio. Trump tariffs have been paused for 30 days, but if they do come into effect, the Canadian economy could face a slowdown. Even if the tariffs are scrapped altogether, you could use the opportunity to book profits on stocks that have rallied and invest in low-volatility stocks to preserve those profits.

Canadian investments to book profits

Shopify (TSX: SHOP) and BlackBerry (TSX: BB) stocks have reached their 52-week highs as the companies showed improvement in earnings.

Shopify

In the case of Shopify, the fourth quarter is seasonally strong, as it includes the Black Friday and Cyber Monday sales. The e-commerce platform reported its highest quarterly net profit of US$1.29 billion in the fourth quarter of 2024 and sustained annual revenue growth of 26%. It has also achieved a level where it sustained positive free cash flow for nine consecutive quarters.

These milestones drove Shopify’s stock price up 68% since October 2024 to its 52-week high of $183. Now is a good time to sell this stock as it could see a seasonal dip of 18-25% in March and April. Depending on the consumption trend, the decline could extend to August before recovering in September. Since the interest rates are falling, the 2025 seasonal dip should not last long, provided everything else remains constant.

You could consider booking profits and buying the stock later in July at the dip.

BlackBerry

BlackBerry is another stock trading near its 52-week high after the company posted its first free cash flow in years. The management has sold its Cylance business as it was generating about $50 million in negative earnings before interest, taxes, depreciation, and amortization (EBITDA) annually. The company will now have two businesses: its QNX software and its Security Communications business, which generate positive EBITDA. However, the company has yet to generate net profit.

Investors seem to have overreacted to the positive free cash flow as the stock is trading at 37 times its forward earnings per share and 5.6 times its sales per share despite a dip in revenue. The automotive sales could see tepid growth if Trump tariffs are implemented, putting the QNX royalty revenue on the back burner.

If you purchased the stock below $4, now is a good time to book profits before weakness in automotive pulls down the stock price.

Canadian investments that preserve profits

You could use the profit bookings from the above stocks and preserve them in the dividend-paying Telus (TSX: T) and lock in a 7.45% annual yield. The company also grows its dividend by 7% annually. Now is a good time to buy this stock while it trades near its pandemic-low.

The telecom sector could see a recovery this year with interest rate cuts reducing their interest expense on high debt. Moreover, Telus could benefit from the 5G opportunity which will open doors for various service offerings, including cybersecurity, cloud, and digital services. The stock is set to rise to its average trading price of $28, representing a 30% upside potential.

You could also consider investing in the resilient growth stock Descartes Systems (TSX: DSG), which has a five-year compounded annual growth rate of 20%. The company is in a net cash position and is growing its revenue by an average annual rate of 18%. Its supply chain management solutions of customs and global trade intelligence could see a surge in demand amid Trump tariffs. The stock could see a short-term correction followed by a strong rally in the second half.