Canada's Beutel Goodman's Picks Reveal 3 Gems

By Will Ashworth

Today’s InvestorThread brings three more Canadian stocks that I am covering to develop a diversified portfolio in the coming weeks.

As I wrote in last week’s coverage kickoff, these are Canadian stocks with market caps between $100 million and $10 billion. They will be stocks held by active fund managers and part of their top 25 holdings. 

My investing mantra here is simple: The less known, the better. 

Once I get to 30 and complete the selection process, I’ll dig into each of the 30 over subsequent issues of the newsletter. I anticipate the whole process will take about six months. Once done, I’ll develop a new angle to inform and educate readers. 

My first three picks last week were from the RBC Canadian Mid-Cap Equity A (0P0001MVJA.TO) — Premium Brands Holdings (TSX:PBH), Killam Apartment REIT (TSX:KMP, KMMPF:OTCMKTS), and Athabasca Oil (TSE:ATH).

Earlier this week, I introduced readers to three stocks held by Mawer New Canada Fund: Wajax Corp. (TSX:WJX, OTCMKTS:WJXFF), Winpak Ltd. (TSX:WPK, OTCMKTS:WIPKF), and, Topicus.com (TSXV:TOI, OTCMKTS:TOITF).

Today’s three have been selected from the Beutel Goodman Small Cap Fund. The fund’s website states that it has nearly $600 million in net assets invested in “quality companies with stable, growing businesses and strong balance sheets at discounts to their business value.”

The fund is looking for long-term capital appreciation with pick of smaller-cap Canadian issuers.

Aritzia (ATZ)

Aritzia (TSX:ATZ) was the Beutel Goodman fund’s fourth-largest holding as of June 30. It accounts for 5.11% of the net assets.

Aritzia and  Lululemon (NASDAQ:LULU) — both based in Vancouver — have captured a significant portion of the discretionary spending of Canadian apparel shoppers. Aritizia’s a little behind LULU, expanding south of the border but coming on strong.

In the 12 months ended Sept. 1, Aritzia opened seven new stores and repositioned three others. As a result, it had 122 stores at the end of the second quarter, 54 of which were in the U.S.

Aritzia continues to push its omnichannel approach. In the past five fiscal years, its e-commerce revenue grew from 23.1% to 33.7% as of March 2024. It continues to focus on three areas of growth: Geographic expansion, e-commerce, and increased brand awareness. 

The growth of the company’s e-commerce and retail stores in the U.S. will undoubtedly drive its success.

It has a different vibe than LULU, but it is thriving nonetheless.

Linamar (LNR)

Linamar (TSX:LNR) is the world’s 56th-largest automotive parts supplier and ranked 30th in North America. It’s based in Guelph, about an hour west of Toronto. It was founded by Frank Hasenfratz, a Hungarian machinist, in 1964 who named his startup from a combination of letters of the founder’s wife and two daughters' names.

Linamar made several acquisitions over the years. In 1980, it acquired White Farm Equipment, getting the company into the agriculture equipment business. It entered the industrial equipment market In 2001 when it acquired Skyjack. Its acquisition of MacDon, the Western Canada harvest specialist, got it deeper into agricultural equipment. 

In August, Linamar announced that Linda Hasenfratz, the founder’s daughter, would step down from her role as CEO and assume the executive chair position. Hasenfratz was CEO for 22 years. 

According to S&P Global Intelligence, Linda Hasenfratz owns 33% of the company. I love family-controlled businesses because they think in decades, not quarters. 

Brookfield Business Corp. (BBUC)

Brookfield Business Corp. (TSX:BBUC, NYSE:BBUC) is one of the many publicly listed vehicles created by its former parent, Brookfield Corp. (TSX:BN). Brookfield created BBUC for institutional investors that couldn’t invest in limited partnerships, such as Brookfield Business Partners L.P. (TSX:BBU.UN).

Brookfield Business Partners is a private equity investor that invests in business services, infrastructure services, construction, energy, and industrial companies. In March 2022, BBU.UN unitholders received one BBUC Class A exchangeable subordinate voting share for every two units held in the L.P. 

Today, Brookfield Business Partners is 64.8% owned and controlled by Brookfield. 

Following Brookfield’s labyrinth of businesses and corporate structures can be painful, but it’s all done in an effort to add value for shareholders. In the weeks ahead, I’ll explain why BBUC is a good financial stock to own for the long haul. 

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.