Stock Picks for January 2025

Today is January 13th, 2025 and it’s time for some new stock picks!

For the video of this article please click here.

Market Overview

A lot has happened in the markets over the last few months. Investors are still digesting the results of the US election and placing their bets on stocks and industries that they think will get affected by the changes in policies coming to the US, such as potential tariffs.

Meanwhile, the economy has proven resilient with unemployment remaining generally low. Interest rates have been making some interesting moves with short term rates coming down while long term rates going up:

US Fed Funds Rate and 30 year bond yield, last 6 months.

The Fed cut their rate by 1% in the last few months yet the 30 year treasury bond yield has moved up by about 1%. This is rather interesting and it means that market participants are worried about longer term inflation more than before. Investors are likely also worried that the proposed tariffs in the US may result in inflation that’s harder for the Fed to fight using monetary policy. They are also not as worried about a prolonged recession.

US Government Bond Yields on 1/10/2025, 12 month to 30 years, commonly referred to as the Yield Curve.

The US government bond yield curve has “de-inverted” and is now upward sloping, meaning longer term yields are higher than shorter term yields. This is normal. A year ago this was not the case, shorter term yields were higher than longer term yields.

In Canada, Prime Minister Trudeau announced his resignation and it is expected that there will be a federal election sometime in 2025 and very likely a change of government. Under Trudeau the Canadian economy, stock market and Canadian dollar vastly under-performed the US economy, stock market and US dollar.

As the current Canadian government policies are likely mostly to blame for this underperformance, a change in policies in the direction of freer markets, lower regulations, lower taxes and lower government deficit spending is likely going to be seen as very positive. Valuations for Canadian stocks are also lower than for US stocks. While international investors are likely to only get excited about Canada after “the dust has settled” regarding US tariffs and after a federal Canadian election with a favorable result but I’m going to start having some Canadian stocks in my top picks sooner.

North West Company

My first stock pick is North West Company, symbol NWC on the TSX. The North West Company is a Canada-based company that is principally engaged in retail business in underserved rural communities. The company provides food, family apparel, housewares, appliances, and outdoor products, with food products accounting for the majority of the company’s revenue.  This stock is a good play on the Canadian economy that is doing well in the current business environment. It has historically generated very high return on equity for a retail stock, exceeding 18% in each of the last 10 years. The valuation is high at around 3 times book value but it is reasonable for a good quality stock like this. I expect this stock to deliver low double digits total return and if the business environment improves over the next few years, it could do even better.

ICL Group

My second pick is ICL Group, symbol ICL on the NYSE. ICL Group is a manufacturer of products based on minerals. The firm is comprised of four segments: phosphate solutions, potash, industrial products, and innovative agriculture solutions. This stock is in the materials sector. This sector tends to do well in an inflationary environment. Inflation has persisted for a lot longer than people were originally expecting after the re-opening of the economy after the 2020 shutdown. The company has nearly doubled its shareholders’ equity over the last 10 years, while paying a dividend at the same time. The current dividend yield is 3.7% which is very attractive and the stock is reasonably priced at around 1.1 times book value.

Sun Life Financial

My third pick is Sun Life Financial, SLF on the TSX. Sun Life provides life insurance, retirement, and asset  management products to individuals and corporate customers in Canada, the United States, and Asia. The
company’s investment management business contributes approximately 30% of its adjusted earnings and has around CAD 1 trillion in assets under management. This is another good company that is consistently able to generate low double digit return on equity, regardless of economic conditions. The valuation is also reasonable at 11 times forward Price to Earnings ratio. I expect this stock to deliver about 10% total return per year for the next few years. Not super high but decent for the risk.

Give Us a Call

As always, if you have questions about whether these stocks fit in your portfolio or if you have any other investment related questions, give us a call! 604-288-2084

Thank you and enjoy the holidays!

Read previous article