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Topic: Wealth Management

What Are The Best Canadian Stocks … and Can I Buy and Hold Forever?

what are the best canadian stocks

The best Canadian stocks will have the investment quality your portfolio needs over the long term

There are a variety of reasons why you should add some of the best Canadian stocks to a Successful Investor-style portfolio. Most important, the stocks to buy and hold in your portfolio all have one thing in common: They give you reason to believe they might be worth holding on to indefinitely.

We feel most investors should hold a substantial portion of their investment portfolios in securities from blue chip companies. The best of these stocks should offer good “value”—that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Ideally, they should also have above-average growth prospects, compared to alternative investments.

Invest in your Financial Future for FREE

Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor.

Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.

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Learn how you can find the best Canadian stocks using our Successful Investor guidelines

We believe that high-quality stocks are your best protection in a portfolio, especially given the economic uncertainty tied to the continuing COVID-19 pandemic. To find those stocks, and build a sound portfolio, start with our Successful Investor philosophy:

  1. Invest mainly in high-quality, well-established companies, with a history of earnings if not dividends;
  2. Diversify across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
  3. Downplay or stay out of stocks that are in the broker/media limelight.

“Buy and hold” is a bad way to describe what we recommend. We prefer “buy and watch closely.” But we still think frequent trading is apt to make money only for your broker.

In short, our strategy focuses on the concept of “buy and watch closely.”

Obviously, it is easier to hold high-quality stocks that perform well over time. But we do not recommend that you hold indefinitely.

We advise selling particular stocks when we feel the situation has changed and they no longer qualify as high-quality investments. We also sell if we decide that a stock isn’t as high-quality or well-established as it needs to be to cope with the challenges it faces. Of course, many of our sales are due to a successful takeover of a company’s stock, which generally results in a major profit.

Buy blue chip stocks if you want to add some of the best Canadian stocks to your portfolio

A company with a long-term record of paying dividends is generally one that is most deserving of the “blue chip” label in its traditional sense. Dividends, after all, are much more stable than earnings projections. More important, dividends are impossible to fake—either the company has the cash to pay them or it doesn’t.

The best blue chips offer both capital gains growth potential and regular dividend income. The dividend yield is certainly one of the most concrete indicators of a sound investment. It is the percentage you get when you divide the current yearly dividend payment by the share or unit price of the investment. It’s an indicator we pay especially close attention to when we select stocks to recommend in our investment newsletters.

Keep in mind that when you are buying the best Canadian stocks, you should not expect to pay lower than market prices

For many investors, buying stocks involves a two-part decision. First, they decide which ones to buy, then they decide what price they want to pay. Most want to buy, say, 5% to 10% below current prices.

These investors often explain that they are simply looking to buy stocks like a smart consumer buys a car. However, the stock market is more efficient than the car market, as an economist would put it. To get a lower price on a stock, you have to wait for its price to come down.

If you always try to buy below the market, you’ll always get a “fill” on stocks with hidden flaws. They’ll always come down into your buying range … and they’ll keep on falling.

But you’ll never get to buy the other kind of stock—the kind that keeps going up. They’ll always seem too expensive, and they’ll go on to get even more expensive. But you need a few of these ever-more expensive stocks to offset the losses from those that get cheaper and cheaper.

Download this free report now to find the best stocks to keep in your portfolio.

Bonus Tip: Find out how to place orders with your broker for the best Canadian stocks

When buying stocks, most investors place “market orders” or “limit orders.”  However, which is the better form of order? It’s a decision many investors have to make each time they buy a stock.

When you understand the use of market and limit orders, you can improve the profitability of your stock investments.

For most investors, market orders are a better approach than limit orders.

A market order is an order to buy or sell a specific number of shares at the best price available when you place your order. In contrast to limit orders, market orders are almost always filled within a very short period of time—in minutes, if not seconds.

However, you only learn the price you paid (for a purchase) or received (for a sale) after the order is filled. The market price may change, for or against you, between the time you place the order and when it is filled.

In general, Successful Investors should use market orders when buying or selling widely traded shares. That’s because the market-order risk of occasionally paying too much is more than offset by the limit-order risk of missing out on your best ideas.

What are some of the best Canadian stocks you’ve added to your portfolio? How did you recognize them as good additions?

This article was originally published in 2018 and is regularly updated.


    • Thanks for your question. Canadian bank stocks have long been one of our top choices for growth and income, and we recommend that most Canadian investors should own two or more of the Big Five Canadian bank stocks —Bank of Nova Scotia, Bank of Montreal, CIBC, TD Bank and Royal Bank. That’s in large part because of their importance to Canada’s economy.

    • Depends on what you want. CM has the biggest yield but the stock price moves slowly. TD has a smaller yield but is growing faster. BNS has exposure to many Latin countries and so enables participation in countries other than the US and Canada.

    • TSI Research 

      Thanks for your question. While the article covers some general principles around finding top stocks, you’ll find lots of timely recommendations in our various newsletters.

  • My dad did very well investing in Canadian blue chips, including all 5 of the major banks, BCE, and TRP. He liked the fact that he got a good dividend and capital appreciation.

  • William 

    I like the banks and have owned shares in all of the Canadian big banks plus 2 in the US (JP Morgan and Wells Fargo) for a long time. The income is steady and the growth over time is amazing. I bought most of them in 1986 when the bottom fell out of everything. Shortly after the crash I sold most of my holdings and used the cash to buy the banks and it has worked out very well.

    • TSI Research 

      Thanks….we still see the big-five Canadian banks as buys…as well as those top-quality U.S. bank stocks.

    • TSI Research 

      Thanks for your inquiry. Even if Enbridge had to shut down Line 5, it would cut its annual cash flow by just 5%. Moreover, the extra cash flow from the company’s billions of dollars’ worth of planned new growth projects will help offset that drop.

  • Bill 

    Is CAE still considered one of these “hold forever” stocks ? It used to have a small but rising dividend but no longer seems to want to pay a dividend andis till well below its high of around $ 40.00 Your thoughts please !!

    • TSI Research 

      Thanks for your question. CAE is a buy recommendation of our Successful Investor newsletter. Here’s our latest on the stock:

      CAE INC., $29.65, Toronto symbol CAE, remains a buy for long-term gains.

      The company is a leading maker of flight simulators for commercial and military aircraft. It also operates pilot-training schools in over 35 countries and makes mannequins and other medical-simulators for training health professionals.

      CAE expects the global air travel industry will need 1.3 million new pilots, aircraft maintenance technicians and cabin crew over the next 10 years. That’s due to rising retirement and turnover rates.

      Rebounding travel volumes as countries relax their COVID-19 restrictions are also driving the need for more pilots. CAE expects the number of commercial planes in service will likely rise 39% over the next 10 years, while the number of business jets should increase by 18%.

      These trends are set to spur demand for CAE’s flight simulators and training services. For the fiscal year ending March 31, 2024, improving revenue and savings from a restructuring plan should increase its earnings by about 34% to $1.18 a share. The stock trades at a reasonable 25.1 times that forecast.

      CAE is still a buy.

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