‘Imagine 2025,’ RBC says, is an attempt to identify themes that will become the norm in seven years and the forward-looking companies that will benefit.Nathan Denette/The Canadian Press
A thought exercise by RBC Dominion Securities on technology, the future and how to invest for it has produced a list of stock picks – several Canadian names among them – for those willing to buy and hold for the long run.
“Imagine 2025,” RBC says, is an attempt to identify themes that will become the norm in seven years and the forward-looking companies that will benefit. The report contains quirky ideas, such as the prospect of autonomous driving allowing consumers to turn their cars from depreciating assets to income generators, as well as broader concepts of the explosion of artificial intelligence, cloud technology and “precision farming.”
All told, the exercise generated 69 stock recommendations, including 12 in Canada. The selections include – unsurprisingly – all five of the “FAANG” stocks (Facebook Inc., Apple Inc., Amazon Inc., Netflix Inc. and Google’s parent Alphabet Inc.). At the same time, RBC has included some old-line names that may surprise (veteran U.S. grocer Kroger Co., which the firm says is “far ahead” in consumer analytics, with “a very rich and powerful customer database”).
The Canadian list also has some venerable names, such as Canadian National Railway Ltd., Toronto-Dominion Bank, Loblaw Cos. Inc., Magna International Inc. and Telus Inc.
The CN recommendation combines familiar themes – the railway’s three-coast network and strong operating performance – to what RBC analyst Walter Spracklin calls a commitment to implementing technology such as automation and data analytics.
TD, the RBC’s Darko Mihelic says, has a strong presence in artificial intelligence and “seem[s] more committed to technology advancement than other banks.”
Loblaw, analyst Irene Nattel says, is Canada’s leading retailer in both loyalty programs and e-commerce and is actively planning for digitalization of health care in Canada.
Magna, long buffeted by auto-sector sentiment and currently pushing against trade winds, is investing heavily in technology for the “car of the future,” electric and autonomous, analyst Steve Arthur says.
Telus, analyst Drew McReynolds says, has “the best exposure” to the big trends of wireless, internet and virtual-reality-driven data growth; the Internet of Things; and future industry consolidation.
The agriculture theme leads RBC to pick both U.S. equipment maker Deere & Co. – well-positioned for a “smart farming” trend that includes machine learning – and Canada’s Nutrien Ltd., the recent combination of Agrium Inc. and Potash Corp. of Saskatchewan. Analyst Andrew Wong says Nutrien has a “precision agriculture platform” and can help farmers navigate increasingly complex environmental regulations.
Analyst Derek Spronck, who covers the industrial products space, names SNC-Lavalin Group Inc. for its capabilities in clean power, rail, nuclear and renewable energy. He also cites Montreal’s WSP Global Inc., an engineering firm with expertise in the design of skyscrapers, rail transit, aviation and modern infrastructure.
Mr. Spracklin, the transportation analyst, also names Cargojet Inc., a Mississauga company with a market cap of roughly $850-million. The overnight-cargo firm is poised to benefit from continued growth in business-to-business sales and e-commerce, he says.
RBC analysts also name Brookfield Asset Management and its related company, Brookfield Renewable Partners. Brookfield Asset Management, analyst Neil Downey says, is a leader in the growing industry of alternative asset management with interests in renewable power and infrastructure. Brookfield Renewable Partners is even more of a renewables play (hence the name) and analyst Nelson Ng says its portfolio is weighted to water, which he sees as the most attractive of the renewables.
The RBC list makes room for one conventional resources company. First Quantum Minerals Ltd., analyst Sam Crittenden says, is becoming one of the world’s largest producers of copper just as the metal is entering into a structural supply deficit.
Here’s the full list:
Global Industrials:
Albemarle Corp.
Aptiv PLC
Canadian National Railway Ltd.
Cargojet Inc.
Deere & Co.
First Quantum Minerals Ltd.
General Motors Co.
Hexagon AB
Magna International Inc.
Northrop Grumman Corp.
Nutrien Ltd
Raytheon Co.
Roper Technologies Inc.
SNC-Lavalin Group Inc.
Tesla Inc.
WSP Global Inc.
Xylem Inc.
Global Technology:
Alphabet Inc.
Amazon.com Inc.
Apple Inc.
Facebook Inc.
Mastercard Inc.
Micron Technology Inc.
Microsoft Corp.
Netflix Inc.
Nextdc Ltd.
NVIDIA Corp.
PayPal Holdings Inc.
salesforce.com Inc.
ServiceNow Inc.
Splunk Inc.
Synopsys Inc.
Visa Inc.
Global Financials:
Americold Realty Trust
Beazley PLC
Brookfield Asset Management Inc.
Chubb Ltd.
ING Groep NV
JPMorgan Chase & Co.
Prologis Inc.
SVB Financial Group
Toronto-Dominion Bank
Global Healthcare
Celgene Corp.
CVS Health Corp.
Gilead Sciences Inc.
Intuitive Surgical Inc.
iRhythm Technologies Inc.
SAGE Therapeutics Inc.
UnitedHealth Group Inc.
Global Telecom and Media:
American Tower Corp.
Cellnex Telecom SA
Digital Realty Trust Inc.
GDS Holdings Ltd.
Telus Corp.
Vodafone Group PLC
The Walt Disney Co.
Global Consumer:
adidas AG
The Estée Lauder Cos. Inc.
The Kroger Co.
Loblaw Cos. Ltd.
LVMH Moët Hennessy Louis Vuitton SE
McDonald’s Cosp.
Walmart Inc.
Yum! Brands Inc.
Global Energy:
Brookfield Renewable Partners LP
Halliburton Co.
NextEra Energy Inc.
Ørsted AS
Schlumberger Ltd.
David Milstead