5 Great Stocks from North of the Border - Investment Ideas

When U.S. investors are reminded of the importance of investing abroad, the first thing that usually comes to mind is the emerging markets. Certainly there are some excellent growth opportunities around the globe, but it just might pay off to look north of the border.

Although the climate leaves much to be desired, Canada is a major player in the global economy and a member of the G-7. It ranks 6th among all countries on the Index of Economic Freedom, which is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal (the U.S. ranks 9th). The country scores high for its pro-business environment, free trade policies, private property rights and freedom from corruption.

O, Canada

Canada is also a nation rich in natural resources like gold, copper, timber, potash, natural gas, and it is the 6th largest oil producer in the world. In fact, the U.S. imports more oil from Canada than anywhere else. But it also has a diverse economy with the services sector accounting for more than 70% of its GDP.

And although much is made about China's massive exports to the U.S., Canada is actually its #1 trading partner with 75% of exports going to America.

The Mild Recession

What was dubbed as the Great Recession of 2008-2009 in several parts of the world was really more of a mild recession for our neighbors to the north. There are several different reasons for this, but 12 straight years of budget surpluses, prudent lending and the lack of a Fannie Mae-type organization perpetuating a housing bubble certainly didn't hurt.

As a result, Canada's unemployment rate stands at just 7.6%, and its central bank has actually been raising interest rates.

With a stable economy, pro-business policies and rich natural resources, Canada looks like a great place to invest some cash. Here are 5 companies headquartered north of the border that are worth taking a closer look at:

Magna International (MGA)

Magna is headquartered in Aurora, Ontario and is a major automotive supplier to OEMs. Shares have risen more than 475% from their lows in March of 2009, but as I outlined here, I believe the automotive recovery has plenty of gas left in the tank.

Earnings estimates have been soaring over the last several months, along with the share price. Valuation remains in check, however, with shares trading at just 11.5x forward earnings, a discount to the industry average of 16.4x. It sports a PEG ratio of 1.0.

MGA is a Zacks #1 Rank (Strong Buy) stock.

Lululemon Athlectica Inc (LULU)

Lululemon is rapidly becoming a household name. The company, which is headquartered in Vancouver, British Columbia, manufactures and sells yoga apparel in 134 corporate-owned and franchised stores throughout Canada, the United States and Australia.

Back in December, LULU reported Q3 2010 earnings per share of 36 cents, crushing the Zacks Consensus Estimate of 25 cents. Sales were up 56% year-over-year driven by an incredible 29% increase in same-store sales. Analysts' estimates soared following the earnings release.

Like a pair of its yoga pants, Lululemon seems a little pricey with a forward PE of 46. When you factor in the expected growth, however, it's not so bad. Its PEG ratio, for instance, is a respectable 1.5.

LULU is a Zacks #1 Rank (Strong Buy) stock.

Silver Wheaton Corp (SLW)

Silver Wheaton is the only mining company with 100% of its revenue coming from silver production. Based upon its current agreements, 2010 production is forecasted at 22.0 million ounces of silver and 28,000 ounces of gold, for total production of 23.5 million silver equivalent ounces. By 2013, annual production is expected to increase to nearly 40 million silver equivalent ounces. The company is wildly profitable, too, with a net margin (net income/sales) of 61% in the first nine months of 2009.

Silver prices have had a rough start to 2011, falling 9% in January. Still, prices for gold's overshadowed cousin have risen more than 70% over the last 12 months, and earnings estimates for SLW have been surging. If silver prices stabilize or increase moving forward, expect SLW to have a banner year.

Silver Wheaton is based in Vancouver, British Columbia. It is a Zacks #1 Rank (Strong Buy) stock.

Sun Life Financial (SLF)

With a name like Sun Life Financial, you might have guessed the company was headquartered in Florida, but in fact it's Toronto, Ontario. The company is a leading financial services firm providing a wide range of products.

In the third quarter of 2010, the company reported EPS of 78 cents, crushing the Zacks Consensus Estimate of 58 cents. Assets under management increased 10% year-over-year. The Zacks Consensus Estimate for 2010 is $2.54, representing 174% increase over 2009 EPS. The 2011 estimate is currently $2.87, corresponding to 13% growth.

Valuation looks attractive with shares trading at just 10.9x forward earnings, a discount to the industry average of 11.5x. It has a PEG ratio of 1.1. Sun Life is a Zacks #2 Rank (Buy) stock.

TELUS Corp (TU)

TELUS Corp is Canada's second largest telecommunications company. While its wireline division has been soft as customers move away from land line phones, its wireless division has seen strong growth due to a continued increase in subscribers.

Estimates have been rising over the last several months as TU has delivered three consecutive positive earnings surprises. Based on the Zacks Consensus Estimate, analysts are expecting 24% EPS growth in 2010 and 12% growth in 2011.

TELUS also pays a dividend that yields a hefty 4.5%. Shares trade at 12.8x forward earnings with a PEG ratio of 0.9. It is a Zacks #2 Rank (Buy) stock.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
LULULEMON ATHLT (LULU): Free Stock Analysis Report
 
MAGNA INTL CL A (MGA): Free Stock Analysis Report
 
SUN LIFE FINL (SLF): Free Stock Analysis Report
 
SILVER WHEATON (SLW): Free Stock Analysis Report
 
TELUS CORP (TU): Free Stock Analysis Report
 
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