Canada's Great Companies

[KCLarkin]

I did an A-Z search for all Canadian stocks I consider "investment grade" in Canada (criteria below). I found 47 companies worth further investigation:

 

Royalty:

LULU

BYD.TO

ATD-B.TO

DOL.TO

CSU.TO

 

Nobility:

CCL-B.TO

MTY.TO

GIL.TO

QSR.TO

GIB-A.TO

BMO.TO

CM.TO

BNS.TO

OTEX.TO

CTC-A.TO

SJ.TO

RCH.TO

TD.TO

SAP.TO

RY.TO

TIH.TO

T.TO

ENGH.TO

WPK.TO

X.TO

CP.TO

CNR.TO

BCE.TO

STN.TO

RCI-B.TO

MRU.TO

RBA.TO

 

Jesters

GOOS.TO

RX.V

CGY.TO

AND.TO

SIS.TO

DSG.TO

CIGI.TO

ATZ.TO

PBH.TO

GUD.TO

BAM-A.TO

FSV.TO

JWEL.TO

SHOP.TO

KXS.TO

REAL.TO

TOI.V

 

Criteria:

Royalty - long history of >15% EPS growth. World class returns.

Nobility - long history of steady growth

Jesters - More speculative companies. Growth companies, small caps, shorter history, less earnings stability.

 

Excludes:

Oil & Gas

Mining

Cyclicals (auto, airlines especially)

Pipelines (some of these are probably worthy of nobility status)

Utilities

REITs and income trusts

Financials (except Big 5 banks)

Most small caps (looking for companies with predictable earnings)

Most companies on the venture exchange

Marijuana stocks

Biotechs (these are almost always dumpster fires in Canada)

 

h/t to Shalab who started a similar thread here:

https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/great-canada-based-companies/

 

My list is meant to be more comprehensive, but also excludes many of the commodity and cyclical companies discussed on Shalab's thread.

 

 

 

Edited April 5, 2021 by KCLarkin

[petec]

RBA.

[KCLarkin]

Are there any great companies I missed? There were a few stocks on the bubble (QIS, Loblaw's, Enbridge, insurers) that didn't make the cut. I turned up only two companies that I wasn't familiar with:

 

Jamieson Wellness - Leader in vitamins and other natural products

Andlauer Healthcare - Leader in healthcare distribution and logistics

[KCLarkin]

RBA.

 

I excluded due to modest cyclicality, but probably deserves a spot. Added.

[longlake95]

TFII - Transforce. Best of breed in a mediocre industry. Great outsider CEO.

[KCLarkin]

Attached are the stocks still down at least 20% from 52 week highs. A few potential opportunities on that list:

 

MTY -64%. A collection of third tier franchise restaurants, with a heavy tilt to mall food courts. Legendary CEO recently retired. Seems like a pass to me.

GIL -63%. Low cost producer of t-shirts etc. Imprintables market is dead due to bans on large gatherings. Very interesting.

Big 5 banks.

Canadian Tire -37%. Don't love it, but it is very cheap and very close to an essential service in Canada.

Colliers -37%. Commercial real estate. I'm not too familiar with it, but I know it has fans here.

 

 

[KCLarkin]

TFII - Transforce. Best of breed in a mediocre industry. Great outsider CEO.

 

Agree with your assessment, but earnings are too lumpy.

[SharperDingaan]

You might want to re-think the purpose of this list.

Simply because a great many of Canada's best companies are private, and at least as big as some of those on this list. Obvious omissions are Irving Oil, McCains, Power Corp, Portland Holdings, Mannix, Jim Patterson Group, etc. You buy the shares of their major suppliers, or you work for them.

 

SD

 

[KCLarkin]

You might want to re-think the purpose of this list.

Simply because a great many of Canada's best companies are private, and at least as big as some of those on this list. Obvious omissions are Irving Oil, McCains, Power Corp, Portland Holdings, Mannix, Jim Patterson Group, etc. You buy the shares of their major suppliers, or you work for them.

 

I'm only looking for publicly traded companies. Not a fan of Canada's public conglomerates. I made a small exception for BAM, but it is in the speculative pile.

[clutch]

KEG-UN.TO. Although it's real murky what the future holds for the restaurant business.

[mranski]

Good list, thanks. There was a Jan 20/2018 post by shalab Titled Great Canada based companies which had some discussion also.

[KCLarkin]

KEG-UN.TO. Although it's real murky what the future holds for the restaurant business.

 

Strong aversion to income trusts. The restaurant trusts (AW, BP, pizza pizza) are interesting but I didn’t see anything good enough to overcome my aversion. Would rather just own QSR.

 

For those interested in income, a separate list of REITs, income trusts, utilities, and pipelines would be interesting. But not my area of expertise.

 

 

 

[beerbaron]

Richelieu Hardware fits my list of great companies.

 

BeerBaron

[Cigarbutt]

Richelieu Hardware fits my list of great companies.

BeerBaron

Not much being said here about RCH although it was included in the list above.

In October 2009, you had mentioned:

I own Richelieu as well I think it has even more value then what people think. The management is great and has proved that it is focused and risk averse. It is determined to add new SKUs every year, they have 55 000 SKUs right now. I see that as their moat, no other supplier could come up with 55 000 SKUs in a short period and not being a drag on inventories and operations. They can just buy other distributors for their client base, implement their software and increase the returns almost immediately with all the new SKUs added. The bonus...as said in the last conference call, they can change their pricing overnight (except with special accounts). At one point RCH represented 25% of my portfolio, I would not sell those shares for a short term profit, this is no cigar butts.

Same old story but now they have 110k SKUs and have doubled their sales. It is reasonable to expect doubling of sales within the next 10 years (US expansion) and a significant variable in the equation is the price that the market will offer when they use free cash flow to buy back shares. Another consideration is the CEO who may be difficult to replicate.

[KCLarkin]

Richelieu Hardware fits my list of great companies.

BeerBaron

Not much being said here about RCH although it was included in the list above.

In October 2009, you had mentioned:

I own Richelieu as well I think it has even more value then what people think. The management is great and has proved that it is focused and risk averse. It is determined to add new SKUs every year, they have 55 000 SKUs right now. I see that as their moat, no other supplier could come up with 55 000 SKUs in a short period and not being a drag on inventories and operations. They can just buy other distributors for their client base, implement their software and increase the returns almost immediately with all the new SKUs added. The bonus...as said in the last conference call, they can change their pricing overnight (except with special accounts). At one point RCH represented 25% of my portfolio, I would not sell those shares for a short term profit, this is no cigar butts.

Same old story but now they have 110k SKUs and have doubled their sales. It is reasonable to expect doubling of sales within the next 10 years (US expansion) and a significant variable in the equation is the price that the market will offer when they use free cash flow to buy back shares. Another consideration is the CEO who may be difficult to replicate.

 

Thanks for the summary! I'm not too familiar with RCH. Maybe door knobs are too boring? This does look a very good business (I like boring).

[beerbaron]

Richelieu Hardware fits my list of great companies.

BeerBaron

Not much being said here about RCH although it was included in the list above.

In October 2009, you had mentioned:

I own Richelieu as well I think it has even more value then what people think. The management is great and has proved that it is focused and risk averse. It is determined to add new SKUs every year, they have 55 000 SKUs right now. I see that as their moat, no other supplier could come up with 55 000 SKUs in a short period and not being a drag on inventories and operations. They can just buy other distributors for their client base, implement their software and increase the returns almost immediately with all the new SKUs added. The bonus...as said in the last conference call, they can change their pricing overnight (except with special accounts). At one point RCH represented 25% of my portfolio, I would not sell those shares for a short term profit, this is no cigar butts.

Same old story but now they have 110k SKUs and have doubled their sales. It is reasonable to expect doubling of sales within the next 10 years (US expansion) and a significant variable in the equation is the price that the market will offer when they use free cash flow to buy back shares. Another consideration is the CEO who may be difficult to replicate.

 

Well, I never tough someone would quote me from 2009! Not sure how you manage to find that one in memory lane but my theory did not change on this one, although it did not perform like a rocket, it's been a steady train going in the same direction. I sleep well with that one.

 

BeerBaron

[KCLarkin]

MTY results less bad than I expected. They are hoping to be cash flow neutral by Q3. I haven't looked at debt covenants yet, but this might be worth a speculative bet. Still down 66% from 52 week high.

[samwise]

MTY results less bad than I expected. They are hoping to be cash flow neutral by Q3. I haven't looked at debt covenants yet, but this might be worth a speculative bet. Still down 66% from 52 week high.

 

Do you like the business though? I thought it was better when they focused on food courts in Canada, with no leverage. If you owned half the food court, you had a monopoly, almost. Now they sell pizza in US street side stores. Not the same business.

[KCLarkin]

MTY results less bad than I expected. They are hoping to be cash flow neutral by Q3. I haven't looked at debt covenants yet, but this might be worth a speculative bet. Still down 66% from 52 week high.

 

Do you like the business though? I thought it was better when they focused on food courts in Canada, with no leverage. If you owned half the food court, you had a monopoly, almost. Now they sell pizza in US street side stores. Not the same business.

 

There is a thread here:

https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/mty-mty-food-group/msg408105/#msg408105

 

I sold after the Kahala acquisition with similar concerns to yours (I was wrong). For me, MTY was a jockey bet and Ma has retired, so I don't follow closely anymore. Quick serve restaurants will rebound quickly. Food courts won't. I own Domino's and QSR in size, so not buying MTY.

 

But any stock down 66% with a track record like MTY seems like a speculative opportunity.

 

 

[MarioP]

MTY results less bad than I expected. They are hoping to be cash flow neutral by Q3. I haven't looked at debt covenants yet, but this might be worth a speculative bet. Still down 66% from 52 week high.

 

Do you like the business though? I thought it was better when they focused on food courts in Canada, with no leverage. If you owned half the food court, you had a monopoly, almost. Now they sell pizza in US street side stores. Not the same business.

 

I didn’t liked it too but it is probably what save them right now.

[Xerxes]

I owned Couche Tard for some years now.

Even went their AGM in Laval last Sept.

 

Full alignment with the owner.

[jasonchin]

DOO.TO

[KCLarkin]

DOO.TO

 

It is too cyclical for me, but probably deserves a spot on the speculative list.

[jasonchin]

DOO.TO

 

It is too cyclical for me, but probably deserves a spot on the speculative list.

 

Another one to monitor in BAD.TO. In a fragmented industry however, the largest. It has a fairly good ROE. Can be a stable long-term hold.