By Will Ashworth

A few words of introduction for my debut here on InvestorThread. I will be writing about Canadian stocks that I believe can deliver exceptional performance over the next three-to-five years. I’m excited to get back to writing about Canadian companies. Perhaps they'll even be one or two from the East Coast where I live in Halifax.

To make things interesting for both readers and myself, over the next month, I’ll select TSX and TSX Venture-listed stocks with market caps between $100 million and $10 billion that active managed exchange-traded funds have in their top 25 holdings and that I believe make sense for InvestorThread readers to own.

I’ll generally be writing three times a week for InvestorThread.

To get the ball rolling, I’ll pick three stocks from each actively managed Canadian equity fund until we reach 30 names. At that point, I’ll dig more deeply into each of the 30, going in all kinds of different directions on the analysis front.

In my writing about stocks, I aim to provide readers with an informed opinion based on my 20-plus years experience writing about investments. If I can help you make money or, equally important, avoid losing too much, I’ll feel I’ve succeeded in my work with here.

Happy Investing.

Exploring RBC Canadian Mid-Cap Equity Fund

My first actively managed fund from which to choose three stocks is the RBC Canadian Mid-Cap Equity A (0P0001MVJA.TO), which has $517 million in net assets and tries to beat its S&P/TSX MidCap Index benchmark. (Note: All figures in CAD, unless otherwise indicated.)

The average market capitalization of the fund’s 79 holdings is $8.7 billion, with the top 10 accounting for nearly 24% of its net assets. Managed by four portfolio managers at RBC Global Asset Management, it was launched in July 2021, so its track record isn’t great. Year-to-date, it’s gained about 7.7%.

Nonetheless, here are the three stocks I like from their portfolio.

Premium Brands Holdings (PBH)

Premium Brands Holdings (TSX:PBH) has a market cap of $4.33 billion. It is one of Canada’s most successful food companies. Founded in 1917 as Fletcher Limited, it got going in 2001 when George Paleologou became its president.

Expanding the business through a combination of organic growth and acquisitions, it made headlines in January 2021 when it partnered with seven Mi'kmaq First Nations, led by the Membertou First Nation of Cape Breton Island in Nova Scotia and the Miawpukek First Nation of Newfoundland and Labrador, to acquire Halifax-based Clearwater Seafoods for $1 billion. It was the single-largest investment in the Canadian seafood industry by an Indigenous group.

Premium Brands stock has underperformed in the last 12 months, returning only 3.3%. Still, investors have done better holding these shares instead of food segment rival Maple Leaf Foods (TSE:MFI), which is down more than 10% in the same period. Still, PBH stock has the potential to get back into the $130s, where it traded in 2021.

Killam Apartment REIT (KMP)

I didn’t think it was possible, but with the Killam Apartment REIT (TSX:KMP, KMMPF:OTCMKTS) selection, I’ve already managed to include two stocks with ties to Canada’s East Coast. After this, I might be pushing my luck by adding more. We’ll see.

Killam owns apartments and manufactured home communities (MHC) worth an estimated $5.3 billion in Atlantic Canada, Ontario, Alberta and British Columbia. Based in Halifax, it is the largest owner of residential real estate on the East Coast.

Killam acquired its first apartment in 2002. It expanded into Ontario in 2010, Alberta in 2014, and British Columbia in 2020. It now owns 18,801 apartment units and 5,975 MHC sites across seven provinces.

In 2018, 73% of its properties were located in Atlantic Canada. Today, due to its geographic expansion, that number has fallen to 64%. By 2028, it hopes to lower that to 55%.

Yielding 3.5%, the residential REIT is an excellent long-term investment for income and capital gains.

Athabasca Oil (ATH)

I would be lying if I said I was a big energy investor; far from it. However, I want to provide decent diversification in my 30 selected stocks so Calgary-based oil and gas producer Athabasca Oil (TSE:ATH) gets the nod. It has a $2.71 billion market cap.

“Our diversified asset base is exclusively located within Alberta with a production base of ~40,000 boe/d (~85% liquids) and a ~90 year reserve life. Our Light Oil Division drives high margin returns in the liquids rich Montney and Duvernay shale plays. Our Thermal Oil Division underpins a low corporate decline and is capable of generating significant free cash flow,” states the Athabasca investor relations site.

It’s not the most significant energy holding in RBC’s fund but it is popular with Scotia Capital analysts who recently initiated coverage with a sector outperform rating and a target price of $6.50, 27% higher than where it’s currently trading. 

I don’t think you can have a TSX-focused portfolio without a few energy businesses. 

That’s it until Wednesday.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. None of the above should be construed as investment or financial advice. Investing is inherently risky. Please perform your own due diligence.