3 Ways to Invest in Canada
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
During the recession, Canada showed its resiliency and strong economy by being able to stabilize losses with economic stimulus plans. That kept companies' heads above water, and continued strength in the banking sector showed the nation was on the right track.
But the Toronto Stock Exchange hasn't reflected much of that strength, and buying opportunities are still out there. The TSX is at around 12,500 points, yet the major exchange was over 14,000 before the recession.
The reason for the slow recovery on the TSX, despite improved consumer data, is a general lack of confidence among investors, many of whom are more comfortable putting their money alongside U.S. firms. However, several Canadian companies could be on the verge of spiking. All of these are listed on the TSX, but as noted in the following tickers, two can be found on the New York Stock Exchange.
Vermillion Energy continues to grow profits
Vermillion Energy (NYSE: VET) has nearly doubled revenue in the last four years and it appears nothing can stop it from further growth. The firm's operating expenses have been kept in check and this allowed it to have a profit margin of nearly 19%. Vermillion looks to be operating much better than its Canadian oil and gas counterparts. In general, the profit margins of its competitors declined last year.
The company also offers a dividend of 4.72%. That sizable sum shows strength and confidence of management in the business. Vermillion also acquired some of ZaZa Energy's assets for $85.8 million last December. This yields further confidence Vermillion is in a strong financial position and able to grow.
Cervus Equipment is solid all around
Canadian-only listed Cervus Equipment's (TSX: CVL) earnings per share are above the industry average and actually jumped by more than 18% last year. That's a sign that many of its recent acquisitions are paying off.
Cervus bought an additional 18.6% interest in the Australian John Deere dealer, Windmill. That bring's Cervus' total ownership to over 53%. The firm's focus on growing internationally, through acquisitions, is a sign of financial health. However, these deals have hurt its bottom line as its profit margin is just over 3%.
Manulife Financial looks undervalued
With a P/E of 32.9, investors have high hopes for Manulife Financial (NYSE: MFC), believing that the firm will rake in profits. The company is Canada's largest insurer by market cap, and with a price to book ratio at 1.4, looks undervalued compared to its peers. Furthermore, with the aging baby boomers population, life insurance is likely to spike.
The company is also increasing market share in the growing retirement market as this segment poses tremendous growth potential. I also like the firm's strong distribution and brand, as it caters to Japan and various other parts of Asia. In fact, the firm has experienced a moderate growth rate in that market over the last several years. Considering these factors, and given the attractive price at Manulife, the company looks to be a solid place to put your money.
In a nutshell
All these companies have stellar growth potential, and they could be your ticket to getting in on the Canadian economy, before the TSX, and most of the companies associated with it, take off. According to TD Economics, the TSX won't be down for much longer, as the nation is set to prosper from a sturdier domestic housing market and increasing economic momentum in the United States. After all, confidence in Canada is often backed by a strong U.S. recovery, and as some already know, that nation is ready to launch.
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Phillip Woolgar owns shares of Vermillion Energy. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!