In this piece, we will take a look at the 12 most profitable Canadian stocks. If you want to skip our overview of the Canadian economy, then you can take a look at the 5 Most Profitable Canadian Stocks.
Canada is one of the most prosperous nations in the world. The Canadian economy is worth $2.1 trillion, with the country benefiting from its close trade ties to the U.S. which is its only neighbor that is not a territory ruled by other nations. Canada is also quite rich in natural resources, and it exports gold, oil, and wood in copious amounts to earn foreign exchange on the global market.
These exports though also make Canada dependent to an extent on global economic conditions. Demand for mined products fluctuates according to economic output since these materials are used in industrial products, transportation, energy generation, and construction - all sectors that benefit during a growing economy. As a result, the Canadian economy has been struggling as of late - a dilemma that has been exacerbated by extremely high inflation.
In fact, 2022 was the worst year for four decades when it came to inflation in Canada. Canadian consumer price index (CPI) rose to a 40 year high of 6.8% in 2022, on the back of high gasoline prices and a growing housing crisis as more immigrants flock to the country. The Canadian statistics agency explains that this inflation was partly the result of high import prices. According to it, nearly half of the inflation was due to higher import prices. These prices rose just as the U.S.dollar was knocking other currencies out of the park last year on the back of rapid interest rate hikes by the Federal Reserve. A weaker currency means that domestic consumers have to pay more local currency units per dollar for their imports, which naturally leads to higher prices for the products.
To combat inflation, the Bank of Canada - Canada's central bank - has also had to raise interest rates just like the Fed has done across the border. Interest rates in Canada sit at 5% for a 22 year high that has seen mortgage costs soar across the country and exacerbate its twin inflationary and housing crisis. After a large number of migrants, particularly from Hong Kong, flocked to Canada and either started buying pricey homes or looking at lodging for rent, home prices in the country have locked thousands out of the housing market. Just like interest rates, housing and rent prices are also setting new records in Canada. Data from the Canadian rental platform Rentals.ca shows that the average rent in Canada stood at a whopping $2,174 in November as it dropped by just 0.2% over October's reading of $2,178. The highest rents were in Vancouver, British Columbia where a one and two bedroom apartment charged average rents of $2,866 and $3,834, respectively.
Similarly, just like in the U.S., debate in Canada is also raging about when the Bank of Canada will start to reduce interest rates. Ironically, investor bets that a slow global economy will lead to interest rate cuts have led to bond yields falling and the Toronto stock market rallying by nearly double digit percentages. While this is good on its own, these also lead to looser capital conditions and have led to speculation that the loosening can encourage the Canadian Central Bank to keep rates higher for longer. However, the bank is facing several problems that make cutting rates sooner, difficult. One such problem is a seven year low productivity rate, which stood at 2016 levels in September. If productivity is low, then employers have to pay for more hours, which increases labor costs that end up feeding inflation.
As for the GDP, the Canadian economy shrank by 1.1% in the third quarter, a development that surprised analysts and economists. The economy managed to avoid a recession because the data for Q2 was revised to show a 1.4% growth as opposed to a 0.2% decline. Had this not been the case, then Canada would have officially entered a recession as September 2023 ended, which would have been the last thing that the Bank of Canada would have wanted as the pressure to cut rates would have grown and risked inflation rising while the economy was slowing. Officially, this is called stagflation, and it makes a country's economic prospects quite precarious.
So, as Canadians look to end 2024 on a positive note, we decided to make a list of the most profitable Canadian companies. The top three most profitable Canadian companies are The Toronto-Dominion Bank (NYSE:TD), Manulife Financial Corporation (NYSE:MFC), and Royal Bank of Canada (NYSE:RY).
12 Most Profitable Canadian Stocks
Our Methodology
To make our list of the most profitable Canadian stocks, we ranked all Canadian stocks that trade on the NASDAQ and NYSE exchanges by their trailing twelve month net income and picked out the top Canadian stocks with the highest net income.
Sun Life Financial Inc. (NYSE:SLF) is a health, disability, care, and other insurance products provider headquartered in Toronto, Canada. Even though the firm has beaten analyst EPS estimates in all four of its latest quarters, analysts have rated the stock as Hold on average.
By the end of this year's third quarter, 12 out of the 910 hedge funds part of Insider Monkey's database had held a stake in Sun Life Financial Inc. (NYSE:SLF). Out of these, the biggest shareholder was Brad Dunkley and Blair Levinsky's Waratah Capital Advisors due to its $11.3 million stake.
Just like The Manulife Financial Corporation (NYSE:MFC), Toronto-Dominion Bank (NYSE:TD), and Royal Bank of Canada (NYSE:RY), Sun Life Financial Inc. (NYSE:SLF) is a highly profitable Canadian stock.
Cenovus Energy Inc. (NYSE:CVE) is a Canadian oil and gas company with operations in both the U.S. and Canada. The firm's U.S.operations posted strong growth in its third quarter, with production growing by 25% annually. Its shares are rated Strong Buy on average.
As Q3 2023 ended, 41 out of the 910 hedge funds surveyed by Insider Monkey had bought and owned the firm's shares. Cenovus Energy Inc. (NYSE:CVE)'s largest hedge fund investor is John Armitage's Egerton Capital Limited as it owns $466 million worth of shares.
Canadian Imperial Bank of Commerce (NYSE:CM) is a diversified Canadian bank that caters to the needs of both retail and institutional clients. The firm was out with some great news for investors in December 2023 when it increased its dividend to C$0.90 for a 6.4% yield.
Insider Monkey scoured through 910 hedge funds for their September quarter of 2023 shareholdings and found seven Canadian Imperial Bank of Commerce (NYSE:CM) shareholders. Joseph Sirdevan's Galibier Capital Management was the firm's biggest shareholder among these courtesy of its $30.7 million investment.
Canadian National Railway Company (NYSE:CNI), as the name suggests, is a rail company. It expanded its presence in the U.S. in December 2023 after announcing an acquisition of a rail company in Iowa with tracks that connect to its rail network.
During September 2023, 39 out of the 910 hedge funds profiled by Insider Monkey had invested in the firm. Canadian National Railway Company (NYSE:CNI)'s largest hedge fund investor is Michael Larson's Bill & Melinda Gates Foundation Trust as it owns 54.8 million shares that are worth $5.9 billion.
Imperial Oil Limited (NYSE:IMO) is a Canadian oil and gas exploration and production company with operations in several links of the oil supply chain. These days, its investors are wary about new emissions regulations unveiled by the Canadian government that could end up affecting Imperial Oil Limited (NYSE:IMO)'s operations.
As of 2023's third quarter, 25 out of the 910 hedge funds covered by Insider Monkey's research had bought a stake in Imperial Oil Limited (NYSE:IMO). Jean-Marie Eveillard's First Eagle Investment Management was the biggest shareholder as it owned $1.3 billion worth of shares.
Bank of Montreal (NYSE:BMO) is a Canadian bank set up in 1817 and headquartered in Montreal, Canada. Despite high interest rates, it has struggled quite a bit on the financial front as of late since it has missed analyst EPS estimates in three out of its four latest quarters.
By the end of this year's third quarter, ten out of the 910 hedge funds surveyed by Insider Monkey were the bank's investors. Bank of Montreal (NYSE:BMO)'s largest investor among these is Brad Dunkley and Blair Levinsky's Waratah Capital Advisors due to its $24.9 million investment.
The Bank of Nova Scotia (NYSE:BNS) is a global Canadian bank with operations in Canada, the U.S., Mexico, and other countries. Its fourth fiscal quarter results were a troublesome bunch as the firm missed analyst EPS estimates on the back of higher credit loss provisions in a tough economy.
During Q3 2023, 11 out of the 910 hedge funds part of Insider Monkey's database had invested in The Bank of Nova Scotia (NYSE:BNS). John Overdeck and David Siegel's Two Sigma Advisors was the bank's biggest shareholder due to its $25.2 million stake.
The Toronto-Dominion Bank (NYSE:TD), The Bank of Nova Scotia (NYSE:BNS), Manulife Financial Corporation (NYSE:MFC), and Royal Bank of Canada (NYSE:RY) are some of the most profitable Canadian stocks.
