Let me start off by saying that 2020 has been a roller coaster ride of emotions for not only investors but for the entire world population. This was my first experience with a total market crash. I was around for the 2008/09 financial crisis but I was in my early 20’s and didn’t even know what investing was. This year has taught me alot about my investing emotions and how safe our long term style of investing can be. It is great to have an investing partner like Colby to help keep me in check all while minimizing my losses, sticking to my investing plan and averaging down on the companies I truly believe will be good long term investments. Last week Colby and I talked about each doing a list of the top 5 companies we believe will overperform on the TSX and underperform on the TSX. I will admit that I do have some bias as some of these companies I already hold positions in.
My top 5 picks for 2021 in order of who I feel will best outperform the TSX.
1. TransAlta Renewables(RNW)$21.81/Share- So far in 2020 renewable companies have been some of the top performers and biggest gainers. I feel that this trend will carry over into 2021. Transalta has already recovered from the March crash and is currently at its all time high. From the start of this year they are currently up 32.5% and climbing. Just a few days ago they even announced an acquisition of 3 different assets adding up to 303 MW from Transalta Corporation(TA). These are all big reasons as to why I feel they will overperform in 2021.
2. Telus(T)$25.23/Share- I feel that Telus has a long way to run in 2021. They have been breaking into new markets lately and even doing so during the pandemic. Especially getting into telehealth when the last place people seem to want to be right now is a doctors office. With Telus expanding across Canada more and more they are cutting into Bells untouched areas and offering full internet, tv, phone, mobile phone and even security now. My only question is what sector will they get into next?
3.Nutrien(NTR)$61.31/Share- Nutrien has pretty much already recovered from the March crash. It would be hard to leave them off the list considering they are the monopoly on public companies in Canada when it comes to potash, nitrogen and phosphate production for agriculture. Not to mention they sell their products all over the world and even with a global pandemic our population is still growing. Which means more crops will be planted now more then ever.
4.Lightspeed POS Inc(LSPD)$89.68/Share-These guys have had alot of success since their IPO last year and haven’t looked back. They have recovered with ease since March and are even at all time highs which is even over 130% from a year ago(even higher if u bought in March). They are currently reinvesting everything they make into the company(like every single tech company out there). I am not saying they will be the next Shopify(SHOP) but If they can keep the trend going I feel they will have another breakout year in 2021.
5.GFL Environmental Inc(GFL)$37.11/Share- My last pick was a tough choice to make. GFL has been around for quite a while but they have only been public since the beginning of March(yes yes, the crash). I picked them because I look at the other waste management companies and I feel that they are comparable. The other waste management companies though don’t have anywhere near as much room to grow as GFL. Basically GFL started in Canada and is expanding to the US where as all the other waste management companies have started in the US and expanded into Canada. I feel that next year they will have very good growth and I am guessing they will probably have the opportunity to take on more contracts, add trucks, grow facilities and even buy out a smaller company or 2.
My top 5 picks for 2021 in order of who I feel will best underperform the TSX.
1.Air Canada(AC)$22.76/Share- This should come as no surprise, when March hit Air Canada tanked just like everyone else. The only problem is that they aren’t even half way recovered yet. I feel that it will take people a while to get back into regular vacations and even business travel. At the moment even I feel that Air Canada along with US airlines are valued way to high, thats just my opinion though.
2.Vermilion Energy(VET)$5.70/Share- Of course I couldn’t leave an oil and gas company off this list and naturally its the only one i’m invested in. I feel that the Oil and Gas sector will take a while to recover from this. Vermilion has been hit hard like almost all oil and gas companies but they are still down 70% since before Covid hit. They went from paying a monthly dividend up to March, cutting it by 50% in April and then getting rid of it completely. They are bleeding money and need the price of oil to go up significantly in order to at least break even. If I wasn’t already invested in them I would be staying far away.
3.Aurora Cannabis(ACB)$10.60/Share- The Marijuana industry has really failed to take off since legalization in Canada. Aurora has been one of the few companies at the forefront of the negative headlines. From losing their CEO this year and the random groups of layoffs it is hard to get behind a company that did a reverse stock split but had its share price continue to fall. I feel that the majority of cannabis companies will underperform in 2021, not just aurora due to marijuana being more of a luxury item and something people can afford to hold off on while getting back to work.
4.Laurentian Bank(LB)$31.24/Share- Most of the banking in Canada has already recovered including most of the smaller banks. Laurentian Bank seems to be the exception with the fact that it is still down 30% since before March and shows no signs of recovery. With their recent new CEO and shuffling of board members in and out I feel that it will take more time then 2021 has to offer in order for them to start moving positive again.. For those reasons I would suggest looking for someone else who will perform better next year.
5.SmartCentres REIT(SRU.UN)$23.07/Share- It is no secret that REIT’s have come under alot of stress and pressure especially with the recent new, strict lock downs that have been happening across Canada. I feel that this will carry over big time into 2021 with less people going to shopping malls and big box stores. The other area that someone like SmartCentres is into which has been his is office spaces. Companies are finding that its cheaper and more efficient to keep people working from home which in turn will hurt REIT’s in the long run. I am forsure keeping a distant watch on REIT’s and maybe when people start going back to the office to work will I consider getting back into one, but not for now.
This is all just my own personal opinion on who I feel will overperform and underperform when compared to the TSX. Always do your own due diligence and invest wisely. That is all for today and remember everyone, invest in yourself first.
*Disclaimer, all share prices are after market close as of today December 31, 2020. I currently hold positions in Vermilion, Telus, TransAlta and GFL.