Canada’s standard of living is falling behind other advanced economies. We also have the lowest productivity of the developed nations. When you factor in population growth thanks to robust immigration, Canada has negative GDP growth per capita over the last decade and more. These might not be alarm bells ringing for investors, but it certainly points to the possibility that Canadian companies may not be the growth engine of the portfolio if the slipping turns into a longer term slide. Canada is slipping on the Sunday Reads.
This CTV article points to a TD study that shows how the Canadian standard of living is falling behind. It appears that our current “growth” strategy is (much needed) immigration and buying electric vehicle battery jobs. Of course, Canada is experiencing a housing and healthcare crisis as we welcome record numbers of new Canadians. We need an aligned immigration and housing strategy, as a starting point. We need a productivity growth strategy.
All things considered, that doesn’t mean that our stock market will perform poorly. We have many oligopoly (wide moat) sectors that can benefit from immigration and household formation. And Canadian stocks are dirt cheap. The above slippage might reinforce the importance of diversification and looking for growth beyond our borders.
Canadian earnings concerns
And from Scott Barlow at the Globe & Mail, Canadian earnings might continue to struggle …
From the latest readings, softness is starting to creep into Canada’s economy.
I also tweeted (er make that X’d) about the low growth prospects for Canada.
Of note, Our Financial Life raised the issue of U.S. estate taxes for Canadians, when holding significant U.S. assets.
But as you’ll see from that thread, and my reply, holding U.S. assets is really is of no concern for the typical Canadian and you can manage the risk. All said, speak to your accountant to confirm your own situation.
At MoneySense Kyle Prevost looked at the earnings reports from the big tech Magnificent 7, Canadian railways and grocers, plus telcos in the U.S.
One of the subheads was – U.S. tech stocks continue to devour the old world.
Of course, non of the above means we should shy away from Canadian stocks. And we should be careful of that Canadian home bias.
Diversification is key. Canadian stocks offer wonderful current value (and some big dividends). The U.S. might continue to provide very generous growth that also fills in the portfolio holes when we are concentrated in the Canadian market, that is, in financials and resources.
I recently looked at the returns of our U.S. stock portfolio. It continues to outpace the S&P 500. In that post on Cut The Crap Investing, I also offer up 26 U.S. stocks for consideration, taking valuation and growth into account.
Investors should consider international diversification outside of North America as well.
Railway earnings highlights
- Canadian National Railway (CNR/TSX): Earnings per share of $1.76 (versus $1.79 predicted) and revenues of $4.06 billion (vs 4.14 predicted). The railway cut forward guidance due to the effects of wildfires, as well as the West Coast port strike. Shares traded flat, indicating the market had some expectations of the revenue headwinds.
- Canadian Pacific Kansas City Ltd. (CP/TSX): CP’s quarterly earnings press conference was full of self-congratulatory statements by CPKC President and CEO Keith Creel, such as: “This quarter we made history by completing our transformational combination to create the first single-line transnational railroad linking Canada, the United States and Mexico. By uniting the outstanding railroaders at Canadian Pacific and Kansas City Southern to form our new CPKC family, we already are changing the freight rail industry, redrawing the map and delivering on the many benefits of our combined network.”
- Loblaw (L/TSX): In an earnings report sure to attract the ire of grocery shoppers everywhere, Loblaw posted an earnings per share of $1.94 (versus $1.91 predicted) and revenues of $13.7 billion (versus $13.6 billion predicted). Income was up 31% over last year despite president Galen Weston placing much of the blame on “cost increases from big brands.” Despite the profitable news, share prices were down slightly on the day.
The grocers and railways round out the financials, pipelines/utilities/ and telcos in the market-thrashing Canadian Wide Moat Portfolio. I can find no better portfolio model for Canadian stocks. Of course, this is not advice. Please do your own research.
Double trouble for TC Energy?
Of course, there was big news in the Canadian Wide Moat space as TC Energy (TRP.TO) will be split into two companies. TD and BMO analysts downgraded the stock. Scotiabank liked the move and National Bank upgraded the stock.
From a Seeking Alpha post …
The tax-free spinoff separates high-growth areas of gas and power assets – which are expected to grow at a 7% compound annual growth rate through 2026 – from liquids assets, which are expected to grow 2%-3% through 2026 – according to Morningstar.
The stock has been beaten up lately, this latest move has piled on. There is likely very good value in TC Energy. I will investigate the moves and will report on this blog. The yield is ridiculously generous and approaches 8%.
The company has once again committed to modest dividend growth after the split.
I will hold both companies and am looking to add a few shares pre-split.
More Sunday Reads
At My Own Advisor Mark looks at building a moaty portfolio. I love the moats, but keep in mind that shoring up the portfolio for retirement is all about the sector selection.
Defensive sector ETFs for retirement.
At Tawcan, Bob offers his June portfolio update
This year we’re on track to receive over $49,000 in dividend income, assuming no dividend cuts and no changes to our dividend portfolio. While this number is nowhere close to our $60,000 dividend income target that we think we need to sustain our current lifestyle, if we do supplement our dividend income with part time work, I think we will be just fine.
And here’s some more good news on the inflation fight, south of the border.
The soft landing crowd likes to see that tweet/X.
You’ll find a comprehensive earnings wrap at Dividend Hawk, plus the reads of the week.
Here’s the weekly reads, videos and podcasts thanks to Banker on Wheels.
Included in the mix is the top three misconceptions about the 60/40 portfolio.
But that’s not to say that 60/40 is any better than a 40/60 or 90/10 portfolio for investors who need a more conservative or more aggressive portfolio for their goals, time horizon, and risk tolerance. In other words, 60/40 is not the best choice for the average twenty-something with a 60- or 70-year time horizon.
Making the most of semi retirement
At Findependence Hub Jonathan Chevreau looks at the work and life balance and that tricky juggling act in semi retirement.
Whether it applies to blogs or writing assignments, it’s all about managing your workflow, time and energy. The MoneySense column describes how to “buy time” by putting aside money from your day job in order to to later take time off to pursue perhaps unfilled creative aspirations. It’s a question of rationing your time and energy.
Also on the retirement front, Fritz at The Retirement Manifesto looks at 10 lessons from the batter’s box of life. I’m a big fan of baseball and Fritz’s writing and thinking.
Here are the 10 Lessons we can apply from baseball that will help us excel in the batter’s box of life:
- Keep It Fun
- Be Present in The Moment
- Study The Game
- Life Takes Practice
- Learn From Your Strikeouts
- Enjoy The Game
- Give Yourself Time
- Don’t Swing at Every Pitch
- Listen To Your Coach
- Celebrate Your Home Runs
The REIT sector has been beaten up “pretty good”. Mathieu at stocktrades.ca takes a look at the REITs to consider in 2o23.
Dale the brand guy
And here’s my take on the Twitter ‘rebranding’ …
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Hello Dale. I like your baseball analogy. The key to me is keep your focus on what’s important, be humble and take advantage of your opportunities. Thank you Mike