Adding 3 Small Caps to Canada Coverage

By Will Ashworth

My last installment brought the introduction of my Canadian stock coverage to the halfway mark, with 15 to go before I jump into the meat-and-potatoes analysis of what will total 30 businesses and why investors should like them. 

One of the names in my last installment was controversial. Rogers Communications (TSX:RCI.B) was included, a company with a $27 billion market cap that could hardly be confused with a small cap. 

If I find a small-cap communications services stock worth owning in the future, I will ditch Rogers for that “player to be named later”, but for now, it remains.  

Today’s three are from the TD Canadian Small-Cap Equity Fund, an actively managed SMID fund with net assets of $682 million. It is sub-advised by Connor, Clark, and Lunn, an independent portfolio manager with a long history of investing in Canadian equities. 

Small caps account for 42% of the fund, mid-caps (51%), and large caps the remainder. The average market cap is $4.82 billion. The fund's benchmark is 60% S&P/TSX SmallCap Total Return Index and 40% S&P/TSX Completion Total Return Index. 

Happy Investing.

Brookfield Renewable Corp. (BEPC)

With the addition of Brookfield Renewable (TSX:BEPC, NYSE:BEPC), the utilities sector now has some representation in my TSX/TSX Venture 30. It owns one of the world’s largest renewable energy portfolios with hydroelectric, wind, solar, distributed energy and sustainable solutions across five continents. It has a market cap of nearly $8 billion. 

Best of all, it’s a Brookfield Corp.  (TSX:BN, BN:NYSE) creation. I am a big fan of Brookfield CEO Bruce Flatt. He’s made a lot of people, including himself, very wealthy by making astute investments at the bottom of the cycle. 

In late 2011, Brookfield took its renewable energy assets held through its wholly owned subsidiary, Brookfield Renewable Power,  and combined them with the publicly traded Brookfield Renewable Power Fund to create Brookfield Renewable Energy Partners L.P. It changed its name to Brookfield Renewable Partners L.P. (TSX:BEP.UN, NYSE:BEP) in May 2016. 

Brookfield Renewable Corp. was created in July 2020 for institutional and retail investors who couldn’t or wouldn’t own limited partnerships. 

Chartwell Retirement Residences (CSH.UN)

Chartwell Retirement Residences (TSX:CSH.UN, OTCMKTS:CWSRF) is a real estate investment trust (REIT) that owns and operates several types of senior housing, from independent living apartments to long-term care (LTC). 

It currently wholly owns 110 residential locations and has part ownership in another 52, with 24,603 suites available at these properties. Most properties are located in Ontario and Quebec, with others in Alberta and British Columbia.

Although the company’s history dates back to 1998 and the merger of three companies  — JBG Management, Alert Care Corp., and Chartwell Care Corp.  — its latest incarnation started with its IPO in November 2003. The REIT took on its present name in January 2013. 

Operating LTC facilities is a tricky business. The margins are low, and regulatory oversight is significant. As a result, Chartwell decided in 2022 to wind down its operations in this area. Today, those account for just 3% of revenue.  

Income investors should love Chartwell stock. 

EQB Inc. (EQB)

EQB Inc. (TSX:EQB) is a financial services company based in Toronto with assets under management and administration of $125 billion. Its primary operating asset is Equitable Bank, a digital bank that is Canada’s seventh largest by assets. 

Interestingly, as much as it’s considered a digital innovator, its commercial banking unit has $34 billion in loans outstanding to 21,000 Canadian businesses, making EQB much more than a fintech upstart. 

In October, EQ Bank was named Brand of the Year by Strategy magazine. Of course, it’s hard not to like a bank that features Eugene and Dan Levy  — the brilliant father-and-son comedy team who created Schitt’s Creek, a runaway hit in both Canada and the U.S.  — in an ad campaign encouraging Canadians to move on from their current expensive bank accounts. 

In the quarter ended July 31, 2024, EQ Bank had more than 485,000 customers, up 32% from a year earlier. 

In the words of Charlie Sheen’s character in Wall Street, it’s a comer. 

Until next time. 

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.