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Ken Fisher for Forbes - Why Canada Is a Buy

June 11, 2013 | About:
Holly LaFon

Holly LaFon

249 followers
Some people consider hedge funds to be the smart money on Wall Street. But recent moves by a few notable fund managers have me wondering whether the group shouldn’t be considered the new greater fools of the market.

I’m talking about hedge hogs as haters of Canada, largely because the recession never decimated it like most other places. A growing number of funds are betting that Canada’s commodity-based economy is headed for a fall. The hedgies won’t own Canada, but if you are a contrarian investor like me, you should.

I not only recommend buying select Canadian stocks, but you might also pick up some “2-4s” (cases of beer, eh?) and poutine (Québécois french fries) to celebrate our largest trading partner’s coming independence day, called Canada Day and celebrated on July 1.

Below are some of my favorite stock ideas from the great white north. My guess is that a few years down the road you may be selling these stocks to hedge fund buyers at much higher prices.

Toronto-based Manulife Financial (MFC, 16)(MFC) should shine when long-term interest rates rise. It sure suffered as they fell—clipping both revenue and the stock price. The firm caught the full force of the bear market’s downside without the benefit of the bullish upside in the recovery. Now it’s cheap at nine times my 2013 earnings estimate and 90% of annual revenue, with a 3.2 % dividend yield.

Manulife serves more than 20% of all Canadians, with broad-based insurance, asset management and annuities. Americans know its John Hancock arm. The icing on the cake is a substantial and growing business in Asia.

Thomson Reuters (TRI) is a big player in financial data, but is it a Canadian company or an American one? That depends on whom you ask. Although headquartered in Manhattan, Canadians call it Canadian, being majority—owned by the Thomson family’s Woodbridge Co. of Canada.

The company spans 100 countries, with 60,000 employees providing vital info and data to firms and decision makers everywhere. It’s the closest thing that trades on a stock exchange to Michael Bloomberg‘s monster money machine. Thomson is also cheaper than most competitors at 13 times my 2013 earnings estimate. It has a 3.8 % dividend yield.

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