Investors banking on retail sales numbers to continue to show strength through the Christmas holiday shopping season certainly have plenty to hang their hats on. Retail spending continued to move higher during the Thanksgiving period in the U.S., with e-commerce sales surging at a double-digit pace, far outpacing growth seen in traditional bricks and mortar retail.
That said, I think a number of top Canadian companies can benefit from these underlying trends. Here are three of the top names on my watch list right now.
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Shopify
It should come as no surprise to readers, given my pre-amble about e-commerce sales surging, that I’d discuss Shopify (TSX: SHOP) as a top Canadian growth stock to consider right now.
Shopify’s underlying business model revolves around charging transaction fees for sales that come through its platform, above a certain threshold. Accordingly, the more gross merchandise volume changes hands, the greater Shopify’s profitability. And given the company’s increasing focus on larger companies, this mix shift has improved Shopify’s margins materially.
I’d expect to see greater improvement on the company’s bottom line, as e-commerce trends continue to point in the right direction. Investors thinking long-term should certainly consider Shopify as a core portfolio holding, at least within the growth portion of their portfolios.
I’ve said it before, and I’ll say it again – Shopify is a top TFSA stock I think is worth buying before the end of the year, particularly for those investors who believe that this bull market rally can continue.
Spin Master
In terms of world-class toy companies with some impressive intellectual property, Spin Master (TSX: TOY) is among the leading children’s entertainment companies I think investors may want to at least consider, particularly after this stock’s performance in recent years (chart below).
Shares of Spin Master have been spinning lower, with this recent tumult tied to margin concerns and slowing growth. The company’s core IP includes a portfolio I’d say is world-class. Anchored by children’s favourites Paw Patrol and plenty of other similar programs, Spin Master has turned to toys, movies, shows and a range of entertainment options for children.
Now, with the rise of other very popular children’s trends, including K-Pop Demon Hunters and others, investors are largely looking to other toy makers for growth. Big U.S. retailers have also seen an uptick in recent years, taking away some of the luster from this once-shining star in this sector.
I think that at 8 times forward earnings, Spin Master could be among the most undervalued Canadian stocks in the market right now. So, for those looking to tilt their portfolio toward value, this would be my pick for the holiday season.
SmartCentres REIT
On the real estate front, real estate investment trust (REIT) SmartCentres REIT (TSX: SRU.UN) continues to be one of my top picks for investors looking to create passive income from growth in the retail sector.
The company’s world-class portfolio of commercial real estate, mostly leased to top-notch retailers, has seen considerable growth in recent years. Adding on a number of properties in attractive Canadian markets, SmartCentres has been able to pick up these top-tier properties at a discount, given all the turmoil seen in the commercial real estate sector in recent years.
With Walmart as the company’s key anchor tenant for the vast majority of its locations, I’d argue that SmartCentres’ underlying net income growth profile and occupancy rates are among the best in class. Accordingly, with a 7.2% dividend (I’d argue is well-covered), and plenty of growth to come down the pike, this is a top holiday-themed stock I think is worth buying here.
