“Population growth will not translate into a sudden 20% jump in the value of your stocks. You won’t realize the impact, but in the long run, we think a lot of Canadian companies that do the bulk of their business here are definitely going to benefit,” says Barry Schwartz, Chief investments at Baskin Wealth Management in Toronto, in an interview.
Sebastien McMahon, strategist at Industrial Alliance, points out that these days Canadian stocks, at 13 times earnings, are selling for less than US stocks, at more than 18 times earnings.
He expects sectors like telecommunications companies, grocers and banks to see their customer base grow year after year.
“The wireless market continues to grow in Canada and the main driver of this expansion is immigration,” corroborates Caroline Audet, Senior Manager, Media Relations, BCE. This offers free SIM cards to newcomers on select Air Canada inbound international flights.
“Telcos is a mature and consolidated industry,” says McMahon. He is going to give himself cell phone contracts en masse and people need to have these services. These companies are efficient and have good profitability. When there is volume coming in, these are companies that can give good returns to shareholders. »
“With strong demographics,” he adds of grocers, “these businesses are going to be able to do well, even if they’re selling near their peak right now. These are companies that will deliver growth to investors. »
Of course, it is difficult to determine which company will be the big winner in a given sector.
On the subject of supermarkets, Mr. Schwartz expresses reservations about Loblaws, which is more likely to close stores than to open new ones, unlike Walmart and Costco, which are eating into its market share.
In banking, the National Bank is concentrated in Quebec, which isolates it from the Toronto market which attracts the largest contingent of newcomers. TD, for its part, is more exposed to the banking reality of the United States, which is less regulated and more fragile than in Canada.
A sector that is unanimous among our two experts is residential real estate.
“Apartment-focused real estate investment trusts stand to be one of the main beneficiaries of this underlying trend,” Schwartz believes. We are thinking here of Minto Apartment REIT, CAPREIT and Boardwalk, the latter two present in Quebec. “In most Canadian cities, there is already virtually no availability. Rents go up with tenant turnover,” says Schwartz.
In the immediate term, REITs (real estate investment trusts) face higher interest rates, which puts downward pressure on share prices. In the case of Minto, its price has gone from $24.55 in July 2021 to $14.83 these days.
Mr. McMahon has a soft spot for forestry companies.
As a strategist, McMahon does not make stock recommendations. For the purposes of discussion, West Fraser, Canfor, Interfor are TSX-listed loggers, for example. These stocks are currently selling near their 52-week lows as the market fears a recession in 2023.
“It seems obvious to me that demographics will act as a tailwind that will last for years,” says Schwartz. I have a feeling the rising tide is going to lift a lot of boats: the banking industry, property owners, carriers like railroads. »
Schwartz also believes that mainstream retailers like Dollarama and Canadian Tire and non-service restaurants like Restaurants Brands International (owner of Tim Hortons and Burger King, among others) will stand out. In the case of industrial brewers, like Molson Coors, it’s not nearly so certain.
“People like to stick to the taste they know. The reason Tim Hortons does so well is because coffee is ubiquitous, inexpensive, and seems to appeal to a lot of people for its convenience. Beer consumption is, as you know, in freefall, due to the many competing products and cannabis. Molson Coors needs to focus on cutting costs and thinking about ways to increase profits. But sales growth will be hard to come by for the big brewers. »
The Canadian boss of the brewer has a completely different reading. “Among new Canadians, there are many who consume less or no alcohol, we have to position our portfolio accordingly. The overinvestment in Heineken 0.0 benefits the international Heineken brand, but it will allow the non-alcoholic beer segment to grow faster,” said Frederic Landtmeters on the sidelines of an event held on June 2.