When it comes to Canada’s $2.2 trillion stock market, you would think that foreign investors would be lining up to get a piece of the action. However, this is not the case. Despite seeing a record breaking performance this year, investors are looking to the U.S. as a safe haven.
“At times of risk — macro, geopolitics or trade — investors sell assets from other areas and focus on the safety of U.S. equities. Canada, being a small weight in many global benchmarks, is easy to ignore and from an equity point of view is thought of as acting closer to emerging markets, given its resource exposure,” Purpose Investments’ Chief Investment Officer, Greg Taylor, commented.
That’s not to say that compelling investment opportunities can’t be found in the Canadian market. Using TipRanks’ Best Stocks to Buy tool, we were able to pinpoint 3 Canadian names that each boast more than 50% upside potential from the current share price.
If that wasn’t promising enough, each stock has received enough bullish calls over the last three months to give it a “Strong Buy” consensus rating.
Canada Goose (GOOS)
While the luxury outerwear company has seen shares slip 9% year-to-date, some analysts argue that Canada Goose is just getting started on its growth trajectory.
One of the biggest questions on investors’ minds is how the company will maintain sales when a single coat can put you out $1,000. RBC Capital analyst Kate Fitzsimons believes that GOOS has room to expand and gain market share as the company only has 12 stores currently.
Bearing this in mind, the addition of five new stores in China as well as its efforts to expand its product lineup could drive substantial top-line gains. In the next few years, GOOS wants to be known as a three-season brand that offers knitwear, spring wear, lighter-weight down jackets and footwear on top of its heavier coats.
While there have been concerns regarding GOOS’ ability to sustain its strong margins, Fitzsimons is “comfortable with GOOS’s margin expansion story as the Direct mix shift buoys GMs all in, pricing and supply chain efficiencies flow through, and, on the channel front, considering GOOS’s superior productivity levels”. She added, “We see Canada Goose’s premium positioning, technical emphasis, strong and authentic heritage, customer loyalty and seasoned management team as key assets”. As a result, the analyst kept her Buy rating and $57 price target. (To watch Fitzsimons’ track record, click here)
The rest of the Street appears to agree with the analyst. 4 Buy ratings and no Holds or Sells assigned over the last three months add up to a ‘Strong Buy’ analyst consensus. With an average price target of $61.16, the upside potential comes in at about 50%. (See Canada Goose stock analysis on TipRanks)
Village Farms (VFF)
Village Farms started off growing vegetables like cucumbers, peppers, tomatoes and other produce. Now, the company has shifted its focus towards a higher margin industry, cannabis. As part of this shift, VFF entered into a joint partnership with Emerald Health Therapeutics (EMH) that became known as Pure Sunfarms (PSF).
Following the recent receipt of its packaging license to sell cannabis products directly to provincial or territorial wholesalers and authorized private retailers, VFF appears poised to become a major player in the Canadian cannabis space. PSF has proven in its most recent quarter that it leads the market in terms of growing low cost per gram marijuana, with the cost coming in at $0.65 to be exact.
In addition, VFF stands to benefit from the Cannabis 2.0 market, which refers to the legalization of vapes, edibles, beverages and concentrates in Canada. To capitalize on this growing market, it’s building a 25,000 sq. ft. extraction facility at its new Delta 3 location, which could be operational by 2020 depending on license approval.
The company is also gearing up for the hemp CBD opportunity in the U.S., with its first hemp CBD harvest this fall expected to produce about 500,000 pounds of biomass.
All of this contributed to Roth Capital analyst Scott Fortune’s conclusion that VFF “is just beginning to disrupt the Canadian cannabis industry as the low-cost, validated quality price leader with one of the largest greenhouse footprints in production and new capacity coming on line.” With this in mind, the analyst reiterated his Buy rating while raising the price target to $29. This new price target suggests huge upside potential of 249%. (To watch Fortune’s track record, click here)
Similarly, other Wall Street analysts take a bullish approach when it comes to VFF. With 100% Street approval in the last three months, the stock is a ‘Strong Buy’. Not to mention its $32.61 average price target indicates 284% upside potential. (See Village Farms stock analysis on TipRanks)
Trilogy Metals (TMQ)
Trilogy Metals is a development stage base metals company that explores locations throughout the Ambler Mining District in Alaska, U.S. With its key assets including a 100% owned Arctic deposit and Bornite deposit called the Upper Kobuk Mineral Projects (UKMP), TMQ represents a unique opportunity for investors wanting to increase their exposure to copper.
Its flagship high-grade copper development project, Arctic, is located in Alaska which is considered a low-risk jurisdiction. Back in February 2018, the company announced positive PFS results for Arctic, based on a conventional 10,000 tpd truck and shovel, single open pit mine and mill design. With the Alaskan government’s support of the construction of a road which would join Arctic with current infrastructure, TMQ could see an improvement in production efficiency. On top of this, its partnership with NANA, a Regional Native Corporation to ensure all local stakeholders participate in the socio-economic benefits of the project, is an important factor to be considered.
While all of this is promising, Raymond James’ Brian MacArthur points out that TMQ could see significant gains based on its South32 option agreement. South32 can pay around $150 million for half of Trilogy’s assets in Alaska, which could reduce its capital requirements for Arctic.
This prompted MacArthur to initiate his coverage with a Buy and set a CA$3.75 price target. “We believe Trilogy is an attractive base metals development opportunity that offers investors exposure to copper, one of our preferred longer-term commodities, through its flagship Arctic project,” he explained. (To watch MacArthur’s track record, click here)
As only Buy ratings have been assigned in the last three months, TMQ earns a ‘Strong Buy’ consensus rating. Additionally, analysts think that shares could soar 82% over the next twelve months. (See Trilogy Metals stock analysis on TipRanks)