11 STOCKS TO BUY IN TRUMPLAND

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One of the overriding beliefs among strategists, analysts and investors since Donald Trump’s election victory — is that companies with U.S. exposure should benefit from his proposed fiscal stimulus plans.

Tax cuts — corporate and individual — infrastructure spending, a lighter regulatory touch, and just plain old making American “great again” should all help to kickstart the economy and, in turn, boost revenue and earnings for companies doing most of htheir business in the U.S. of A.

Capital Ideas Research set out to find Canadian companies with large U.S. exposure and came up with a CIBC World Markets report naming 11 Canadian companies “that have good positive leverage to a weak Canadian dollar.”

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FADE THE CANADA TRADE

One of the conclusions from the report,
written by analysts Ian de Verteuil, and Shahzaib Merwat, is that it’s time to “fade the Canada trade.”

“In the past five cycles of Canadian dollar weakness (typically lasting 24 months), the S&P/TSX lagged the S&P 500 even in local currency terms by more than 10 per cent — obviously much worse in Canadian dollar terms,” the report states.

“Canadian investors are better served by moving more assets into the U.S. market,” the analysts say.

CIBC’S STOCK PICKS FOR U.S. EXPOSURE 

Here are some TSX-listed names with U.S. exposure that CIBC’s analysts have identified that could boost your returns.

  • Sun Life Financial (SLF)
  • Canadian Natural Resources (CNQ)
  • Suncor Energy (SU)
  • Agnico Eagle Mines (AEM)
  • Milestone Apartments REIT (MST.UN)
  • CGI Group (CGI)
  • Fortis Inc. (FTS)
  • Boyd Group Income Fund (BYD.UN)
  • DH Corp. (DH)
  • Enghouse Systems (ENGH)
  • First Service Corp. (FSV)

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AVOID COMPANIES REPORTING EARNINGS IN U.S. DOLLARS

“In reality, reporting in U.S. dollars seems to offer no benefits to stock price moves in a weak Canadian dollar environment – and one could argue that it results in companies losing, even when they should, in theory, be winning.” CIBC says.

Why is that?

“First, a U.S. dollar reporter with significant Canadian operations will likely have weaker reported earnings trends when the U.S. dollar is strong. The second factor is that U.S. investors dislike Canadian-based stocks and Canadian earnings in an environment of a strong U.S. dollar,” the report says.

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CHOOSE COMPANIES REPORTING EARNINGS IN LOONIES

CIBC concludes: “What this means to us is that Canadian investors should really focus on TSX companies with large U.S dollar revenues, but which report in Canadian dollars. These provide the most torque,” the analysts say.

Here are some quick takes from CIBC on some of the U.S. exposed Canadian companies on its favourites list:

Boyd Group “reports earnings in Canadian dollars but has more than 90 per cent of its revenues in the U.S. It stands out as one of the best plays on a weak CAD/USD exchange rate.”

Canadian Natural and Suncor. “These energy companies have very high transaction leverage (U.S. dollar revenues and Canadian dollar costs).”

“A weak Canadian dollar will continue to favour the insurers, given their somewhat greater U.S. presence. Sun Life particularly stands out at close to 50 per cent.”

“Technology companies have greater revenue diversification relative to the other sectors. Names that have reasonable exposure and that report in Canadian dollars are DH Corp. (DH-T), Enghouse (ENGH-T) and CGI Group. ”

“As one would expect, the Real Estate sector has good matching of expenses and revenues, so that translation of profits is the major exposure. The unique names are Milestone and FirstService.”

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