Robert McWhirter, President, Selective Asset Management
Focus: Canadian dividend stocks
Top picks: AtkinsRealis, Maple Leaf Foods, OceanaGold
MARKET OUTLOOK:
Year to date the U.S. dollar has declined about 10 per cent, signalling the potential start of a secular U.S. dollar decline.
The non-partisan Congressional Budget Office projects the recent U.S. “budget bill” adds nearly US$4 trillion to the estimated $36-trillion federal debt. Bond investors are particularly concerned by the failure to trim the $1.3-trillion annual federal deficit. Will this lead to higher U.S 30-year bond yields causing U.S. mortgage rates to rise?
Foreign investors appear to be hedging the currency aspect of their U.S. bond and equity investments causing further downward pressure on the U.S. dollar.
Gold was up 27 per cent in 2024 and is up 27 per cent year to date. Several central banks continue to reduce their U.S. dollar holdings and are buying gold.
The record free cash flow being produced by gold companies is attractive to generalist investors. Commodities appear to be starting a new uptrend providing support for the S&P/TSX composite index.
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TOP PICKS:
AtkinsRealis (ATRL TSX)
$99.50 share price
$17.3 billion market cap
ATRL is a world-class engineering services and nuclear company with offices around the world.
- Trailing year-over-year sales and free cash flow growth per share: 13%/157%
- Earnings surprise: 7%
- Three-month estimate revision: 6%
- ROIC: FCF/capital: 7.4% (7X greater than typical TSX stock)
- 2025/2026 P/E: 32X/25X
- 2025/2026 EPS growth estimates: 39%/27%
- 2025/2026 P/E to estimated EPS growth: 0.8X/0.9X (less than 1X is viewed as attractive)
Maple Leaf Foods (MFI TSX)
$28.65 share price
MFI is a leading protein company that responsibly produces food products. It employs approximately 13,500 people and does business primarily in Canada, the U.S. and Asia.
- Trailing year-over-year sales and free cash flow growth per share: 8%/100+%
- Earnings surprise: 17%
- Three-month estimate revision: 15 %
- ROIC: FCF/capital: 8.5% (8X greater than typical TSX stock)
- 2025/2026 P/E: 17X/14X
- 2025/2026 EPS growth estimates: 109%/18%
- 2025/2026 P/E to estimated EPS growth: 0.2X/0.8X (less than 1X is viewed as attractive)
OceanaGold (OGC TSX)
$19.36 share price
$4.4 billion market cap
OGC is an intermediate gold and copper producer. It has four operating mines: in South Carolina, the Philippines and New Zealand.
- Trailing year-over-year sales and free cash flow growth per share: 44%/108%
- Earnings surprise: 18%
- Three-month estimate revision: 19%
- ROIC: FCF/capital: 30% (29X greater than typical TSX stock)
- 2025/2026 P/E: 8.3X/5.7X
- 2025/2026 EPS growth estimates: 98% /46%
- 2025/2026 P/E to estimated EPS growth: 0.1X/0.1X (less than 1X is viewed as attractive)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ATRL TSX | N | N | N |
| MFI TSX | N | N | N |
| OGC TSX | Y | Y | Y |
