After a volatile few weeks, Canadian equity markets have rebounded sharply, with the S&P/TSX Composite Index hitting a new high yesterday following supportive comments from U.S. Federal Reserve officials on potential interest rate cuts. With this recent upswing, the benchmark index is now up 25.5% year-to-date. However, elevated valuations and concerns about a possible AI-driven bubble remain key risks.
Given this backdrop, I believe investors should aim to balance their portfolios with a mix of growth, defensive, and dividend stocks to achieve strong returns while keeping risk in check. Here are my three top picks.
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Celestica
Celestica (TSX: CLS) has been one of the best-performing stocks this year, delivering returns of more than 245%. Strong quarterly results and meaningful exposure to the fast-growing artificial intelligence (AI) market have fuelled the electronics manufacturing services company’s sharp rally. With this surge, its NTM price-to-sales and NTM price-to-earnings multiples have risen to 2.5 and 42.6, respectively. While the valuation appears elevated, I believe it remains justified given the company’s robust growth outlook.
As hyperscalers ramp up investment in AI-ready data centres to support accelerating AI adoption, demand for high-performance computing equipment continues to soar. Celestica is capitalizing on this trend by developing advanced switches, storage systems, and other innovative products that address its customers’ evolving needs and strengthen its competitive positioning.
Following its strong third-quarter results, management has raised its 2025 outlook and issued a bullish 2026 forecast. The revised 2025 guidance calls for revenue and adjusted EPS growth of 26.4% and 52.1%, respectively. For 2026, management expects revenue and adjusted EPS to rise 65.8% and 11.3%, respectively, from 2024 levels.
With its accelerating growth trajectory and favourable industry tailwinds, I expect Celestica’s stock price to continue climbing, making it an attractive buy at current levels.
Dollarama
Second on my list is Dollarama (TSX: DOL), a defensive stock with strong growth potential. Thanks to its efficient direct sourcing model and streamlined logistics network, the retailer offers a wide range of consumer products at attractive price points, enabling it to deliver solid same-store sales growth regardless of broader economic conditions.
Dollarama aims to expand its Canadian store base from 1,665 to 2,200 and its Australian footprint from 395 to 700 locations by fiscal 2034. Given its capital-efficient model, rapid sales ramp-up, short payback period, and low maintenance capex, this expansion should drive both revenue and profit growth. The company also owns a 60.1% stake in Dollarcity, which operates 658 stores across five Latin American countries. Dollarcity’s contribution to Dollarama’s earnings could rise as it works toward increasing its store count to 1,050 by fiscal 2031 – and as Dollarama retains the option to expand its stake to 70% by 2027.
Given its strong fundamentals and robust growth outlook, Dollarama stands out as an excellent defensive investment at current levels.
Fortis
Third on my list is Fortis (TSX: FTS), a high-quality dividend stock that has increased its payout for an impressive 52 consecutive years. The company operates regulated utility assets, with most of its business focused on low-risk transmission and distribution of electricity and natural gas. This structure provides stable, predictable cash flows regardless of economic conditions, supporting its consistent dividend growth. At present, Fortis offers a solid dividend yield of 3.5%.
The company is also steadily expanding its operations. It has already deployed $4.2 billion in capital investments this year and is on track to meet its $5.6 billion target. Looking ahead, Fortis plans to invest $28.8 billion from 2026 to 2030, which is expected to grow its rate base at an annualized 7% to $57.9 billion. Management intends to fund roughly 70% of this investment through internally generated cash and secondary offerings, helping keep leverage under control.
Supported by this growth strategy, Fortis expects to raise its dividend by 4–6% annually through 2030, making it a compelling long-term buy for income-oriented investors.
