It could have been worse. The investing world went into 2023 dreading the recession that was (supposedly) certain to appear and expecting little out of the stock market. Instead, the fabled soft landing for the economy took shape, inflation faded, and most stock benchmarks posted respectable returns. Now with the end of the year upon us, what better time to grudgingly acknowledge the year’s best stocks while showering ridicule on the biggest duds. Here are the stars and dogs of 2023.
Celestica Inc. (STAR)
CLS - TSX
And the top-performing stock in the S&P/TSX Composite Index is … Celestica? You could be forgiven for forgetting that Celestica remains a publicly listed company in Canada, let alone one that could top the leaderboard for the entire market. It’s been a very long time since Celestica gave investors a good reason to give it a fresh look. In fact, the stock has spent the past 20 years or so in the wilderness, ever since the dot-com bubble burst. At the time, Celestica was a high-flying tech name making fibre-optic cables to wire the internet. Its stock crashed, and the company settled into its new role as one of the dullest names on the market. As a contract manufacturer, Celestica took up the excess when other tech companies got too busy. Over the past 10 years, its share price has rarely ventured out of the $10-to-$15 range. But the artificial-intelligence movement has breathed new life into Celestica, which is now supplying components to AI leaders Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. The company now says it is aiming for long-term earnings growth of 10 per cent a year. Tech investors are paying attention to Celestica – a sentence that hasn’t been written since the turn of the millennium. -Tim Shufelt
Cameco Corp. (STAR)
CCO - TSX
The world has a love-hate relationship with nuclear power. On one hand, it is a carbon-free energy source. On the other hand, Godzilla. For the past decade or so, the monstrous side of nuclear has taken hold of the global public perception. The Fukushima disaster in Japan in 2011 proved to be a wee bit of a reputational blow to the industry. Nuclear meltdowns tend to have that effect. Demand for uranium went into a multiyear slump as projects around the world were shelved. Germany moved to phase out nuclear power entirely. But that backfired in a couple of ways. First, it made countries such as Germany heavily dependent on Russian gas for their energy needs. And second, it ran counter to the effort to shift away from fossil fuels to fight climate change. Now, governments are returning to nuclear power to help meet emissions-reduction targets. Uranium prices have revived, and Cameco’s stock hit a new all-time high for the first time in more than 15 years. For now, Godzilla has been put back to sleep. Maybe in the next instalment of the franchise, the prehistoric reptile can be awakened not by nuclear radiation, but by horizontal fracking. Let the oil and gas industry fight the monster for a while. -TS
Eli Lilly and Co. (STAR)
LLY - NYSE
Good news, Big Pharma has fixed everything that’s wrong with you. The class of drugs known as GLP-1s, and colloquially known as Ozempic, have already solved obesity. They work by suppressing appetite, and have become the hottest thing in pharmaceuticals over the past couple of years for the incredible weight-loss results they can produce. But researchers are now looking at all kinds of potential knock-on benefits of these drugs. They may lower the risk of heart attacks and strokes. They could help with a huge range of health problems associated with obesity, including fatty liver, various cancers, even dementia. GLP-1s also appear to inhibit all sorts of addictive behaviours, from alcoholism to problem gambling. Studies show patients eating more vegetables and less candy. They exercise more. Will GLP-1s take a couple of strokes off your golf game? We can’t say for sure that they won’t! Eli Lilly’s version of the drug, called Zepbound, is expected to become the best-selling drug in history. At this point, you might be thinking, “This sounds an awful lot like a panacea and surely it’s too good to be true.” Ask your doctor if Ozempic can help curb that kind of negative thinking. -TS
Royal Caribbean Cruises Ltd. (STAR)
RCL - NYSE
There is arguably no greater sign that we have shoved the pandemic out of our collective consciousness than the fact that we, as a society, want nothing more than to be voluntary captives on floating germ incubators so that we may gorge on vast buffets and complain about the entertainment. Cruise ships became scenes of such dystopian misery in the early pandemic, it was fair to wonder if cruising was finished forever. But a couple years pass and you start to get a hankering for a Fuzzy Navel. And what else are you going to do with all that cruisewear? This thought seemed to strike all former cruise enthusiasts at once this year with all major operators seeing booming demand. Royal Caribbean posted US$4.2-billion in revenue in the third quarter, which was more than double the same quarter last year, and 10 times over the last two years. And for the first time in three years, the company realized a profit. Same goes for Carnival Corp., with both stocks landing in the top 10 on the S&P 500 leaderboard for the year. Analysts, like passengers, are returning to the sector with renewed enthusiasm. I’d still steer clear of the shrimp cocktail, though. -TS
Meta Platforms Inc. (STAR)
META - Nasdaq
Do we even know what this company is any more? We’ve long let go of the idea of Facebook having any cachet as a social network. It ceased to be cool when the parents showed up, and then the grandparents showed up, and then the whole platform became a disconnected jumble of suggested content, ads and video reels. Even the company distanced itself from its flagship with a name change in 2021, suggesting that it was all in on the metaverse. Then investors bristled at the idea of tossing unlimited billions of dollars into the black hole of the company’s metaverse branch, at a time when the rest of the tech space is kind of moving away from the whole virtual-reality thing. None of which explains why Meta’s stock had the best year in its history, second only to Nvidia Corp. in the S&P 500, and up by roughly US$600-billion in market capitalization on the year – more than four times the size of Royal Bank of Canada, this country’s largest public company. Meta’s triumphant year has largely been driven by vast cost-cutting, including the elimination of more than 20,000 jobs, and a focus on increasing advertising revenue. This is the company whose origin story became one of the indelible films of the previous decade, now seemingly handed over to the accountants. Let’s see Social Network director David Fincher try to make a zeitgeist movie out of that. -TS
Nvidia Corp. (STAR)
NVDA - Nasdaq
Think of all the ways artificial intelligence is improving people’s lives. College students can now have ChatGPT write a term paper in less time than it takes to shotgun a Coors Light. Self-driving cars can navigate through heavy traffic while only rarely braking abruptly or crashing into emergency vehicles. And music lovers can, at last, listen to Nirvana’s Smells Like Teen Spirit with Frank Sinatra on lead vocals. This is progress. But AI’s biggest gift thus far might just be the gigantic sack of money it is making for shareholders of Nvidia. As the world’s biggest producer of computer chips used in AI applications, Nvidia kept crushing sales and earnings estimates all year long. In the third quarter, for instance, revenue surged more than 200 per cent year-over-year to a record US$18.1-billion, as net income soared more than 1,200 per cent to US$9.2-billion. AI is still far from perfect, but with Nvidia’s stock more than tripling this year and posting the biggest gain on the S&P 500, there’s nothing artificial about the money investors are making. -John Heinzl
Alimentation Couche-Tard Inc. (STAR)
ATD - TSX
Before there were 24-hour convenience stores, life was hard. Stoners who craved a hot dog or a Snickers bar in the middle of the night had to settle for a piece of mouldy cheese or a rotting apple in the back of the refrigerator. Out of cigarettes? Time to sift through the ashtray for a choice butt or two. But thanks to Alimentation Couche-Tard, folks no longer have to suffer such indignities. With more than 14,000 c-stores globally under the Circle K, Mac’s and Ingo banners, the Quebec-based retailer makes it easy for people to grab a coffee or a snack and gas up their vehicles at any time of day or night. Having nearly doubled EBITDA (earnings before interest, taxes, depreciation and amortization) over the past five years thanks to acquisitions and organic growth, the company is now aiming to achieve US$10-billion of EBITDA by fiscal 2028, up from US$5.8-billion in fiscal 2023. Judging by the stock’s steady ascent as the company repeatedly blew past earnings estimates this year, there’s never been a more convenient way to make money. -JH
Dollarama Inc. (STAR)
DOL - TSX
According to legend, if you place a frog in lukewarm water and gradually turn up the heat, the animal won’t sense the temperature change and will boil to death. Well, if you shop at Dollarama, I’ve got news for you: You’re the frog. Even as the retailer has been raising prices in recent years – the most expensive items now cost $5 – customers keep coming back for more. In the third quarter, Dollarama’s revenue jumped by nearly 15 per cent to $1.48-billion – driven by new store openings and the sixth consecutive double-digit increase in same-store sales – as earnings rose 29 per cent to $261.1-million or 92 cents a share. Not only is Dollarama’s customer traffic now eclipsing prepandemic levels, but the average transaction size is about 26 per cent higher, Irene Nattel, an analyst with RBC Dominion Securities, said in a note. “Price points up to $5 should sustain [the] upward trajectory,” Ms. Nattel said. Just to set the record straight: Despite what the legend claims, frogs will indeed climb out of the water before they boil to death. But in Dollarama’s case, customers don’t appear to be in a hurry to leave any time soon. -JH
Stella-Jones Inc. (STAR)
SJ - TSX
Let’s play a word association game. When I say “utility poles,” what word comes to mind? Most people say something like “tall” or “straight” or “go away, creep. I’m not interested in your stupid game.” But mention utility poles to Stella-Jones investors, and the word that invariably pops into their heads is “cha-ching!” While sexy industries such as artificial intelligence and electric cars garner all the headlines, the Montreal-based maker of pressure-treated wood utility poles, railway ties and residential lumber quietly goes about making its investors rich. Why? Because, as boring as these products are, they never go out of style. Over the past 10 years, the shares have posted a total return of about 220 per cent, or more than 12 per cent annually. This year brought some of the stock’s strongest gains yet, as sales through the first nine months of 2023 rose nearly 10 per cent to $2.63-billion and net income jumped about 32 per cent to $270-million. With utility poles – Stella-Jones’s largest division – benefiting from higher prices as the company boosts production to meet future demand, the stock could be growing straight and tall for a while yet. -JH
Tesla (STAR)
TSLA - Nasdaq
When a business is struggling, companies have a range of options. They can reduce costs, raise financing or seek new customers, for example. Launching a very public, profanity-laced rant – as Elon Musk did after advertisers including Disney and Apple bailed from X, formerly Twitter – isn’t generally considered a winning turnaround strategy. For Mr. Musk, the unhinged outburst was perhaps the clearest indication yet that the world’s most erratic billionaire may finally sense that the walls are closing in, and not just at X. Over at Tesla, the year began on a bullish note as better-than-expected electric-vehicle deliveries and optimism about the company’s new Cybertruck drove the stock up more than 140 per cent in six months. But with interest rates rising and competition growing from other EV makers, Tesla soon had to resort to a series of hefty price cuts to keep its vehicles moving, with predictably ugly results for its bottom line. In the third quarter, net income tumbled 44 per cent and Tesla’s gross margin continued to erode, falling to just 17.9 per cent from 25.1 per cent a year earlier. Thanks to the stock’s big gains earlier in the year, it still qualified as a star in 2023. But with Tesla’s profits falling, X imploding and only about 10 Cybertrucks delivered to date, all bets are off for 2024. -JH
Moderna Inc. (DOG)
MRNA - Nasdaq
Let’s be honest, the stock market is kind of a jerk. No matter what calamity happens to befall humankind, financial markets will find a way to turn it into an investible theme. War on the horizon? You could make a killing in defence stocks. The global financial system is breaking down? Let’s make heroes of the hedge funds and short-sellers profiting from the chaos. The pandemic was not even a month old before a stock rally for the history books got under way. Sure, the body bags are piling up by the millions, but check out this bull run! At the heart of that dissonance was Moderna, whose COVID-19 vaccine took it from little-known biotech to household name, making it by far the best-performing stock of the S&P 500 through the first year and a half of the pandemic. That script sure flipped this year. Plunging demand for COVID-19 vaccines has returned Moderna to the development-stage space whence it came. Its vaccine revenues are forecasted to decline by nearly 70 per cent this year, and it should lose money for at least the next two years. It serves as a reminder that all investment themes and pandemics alike must pass. -TS
Laurentian Bank of Canada (DOG)
LB - TSX
It’s always so sad when a “strategic review” fails to find a buyer. It’s like going to one of those speed dating events and being told you’re too ugly to enter the building. At this point, you announce that you’re more confident than ever in your positioning in the dating market and in your unique offering for romantic prospects, but no one’s buying it. Then a perfect specimen arrives and immediately sets everyone’s hearts aflutter. HSBC Canada was the heartthrob on the scene this year, as suitors lined up for the rare opportunity to buy a large, high-performing Canadian lending institution. The sad sack, of course, was Laurentian Bank. For years, it struggled to grow, which itself is tough to pull off in the cozy oligopoly that is Canadian banking. Its financial limitations made it a questionable target when Laurentian put itself on the auction block in July. The process was called off in September for lack of interest. Then, a disastrous technology upgrade saw the bank’s systems crash. The CEO was ousted soon after, followed by the departure of the chairman. The year capped off with a terrible earnings report. The lesson here: Before pursuing a serious relationship, work on your own self-worth. -TS
S&P Global Clean Energy Index (DOG)
You know those rich kids and trust-fund babies who are given unlimited money and opportunities but still manage to be complete screw-ups? That’s kind of what the clean-energy space feels like right now. It’s not that wind and solar companies are making the pages of the New York Post with DUIs and night-club antics. But they have had a ruinous year, despite being bestowed with monumental government support and growing global demand for renewables. When the economics of a sector rely entirely on access to cheap capital, all it takes is a rise in interest rates to make it all fall apart. Offshore wind projects were scrapped or shelved around the world this year. Danish wind company Orsted AS abandoned its projects in New Jersey that should have provided enough power for half a million homes. Enphase Energy Inc. is the worst-performing stock in the S&P 500 index this year, with a price drop of 50 per cent. This carnage comes on the heels of the U.S. Inflation Reduction Act, widely seen as the most ambitious U.S. climate policy ever, which put in place a set of tax credits and subsidies for renewable energy production that could end up totalling more than US$1-trillion. Not enough, evidently, to keep the sector from foundering. Seems like junior needs a bigger allowance. -TS
Match Group Inc. (DOG)
MTCH - Nasdaq
The pop-music canon tells us a lot about what you can and can’t do with love. You can’t buy it, can’t hurry it etc. But where’s the song about how hard it is to turn it into a viable, profitable commodity for investors? Because Match Group is certainly having trouble doing that. Multiple dating apps, in fact, have stumbled badly on the year. Bumble, a female-driven platform, is down by 80 per cent from its 2021 peak. Match Group, which operates the Tinder and Hinge apps, has lost more than 80 per cent of its value. A few things have gone wrong. The dating industry has become oversaturated. About half of the population of singles in North America are already using dating apps, making it difficult for any one platform to grow substantially. These companies are also struggling to retain paying subscribers. Match Group’s paying users declined by 5 per cent in the third quarter in the face of aggressive price hikes. To be fair, the Tinder Select subscription plan at US$499 a month seems a tad steep. But for all you investors who were once infatuated with dating stocks, and are now shuffling around the financial district staring at your shoes, don’t be afraid to love again. -TS
Park Lawn Corp. (DOG)
PLC - TSX
You know that old one about why there was a long line outside the cemetery? Because people are dying to get in? Yes, it’s a lame dad joke, but it’s also something of a business model for Park Lawn Corp., which is one of the largest funeral services providers in North America. And during the pandemic, the line outside of Park Lawn’s cemeteries got considerably longer. Excess mortality through the worst of the COVID-19 crisis effectively pulled a lot of demand forward. As mortality rates have subsequently normalized, Park Lawn’s quarterly results have suffered from some tough comparisons. The company is also fairly aggressive with M&A, using strategic acquisitions as a means to grow the business. Serial acquirers tend to thrive on cheap credit. When interest rates rise, it gets tougher to make the math work. But analysts are still bullish on the stock, in no small part because of aging demographics in North America. Until some mixture of AI and Ozempic can make us immortal, we’ll just have to keep lining up. -TS
BRP Inc. (DOG)
DOO - TSX
Back when interest rates were low and fogging a mirror was the only requirement for obtaining a loan, people had plenty of money to spend on superfluous big-ticket items. A three-wheeled motorcycle? Cool! An all-terrain vehicle? Right on! A Sea-Doo? Gimme two, in case I crash the first one into my buddy’s dock. Yes, those were the good old days for BRP. But with interest rates and inflation surging and consumers pulling back in 2023, selling noisy powersports vehicles suddenly became a lot more challenging for Quebec-based BRP. The third quarter was especially tough, as BRP’s revenue skidded 8.9 per cent and earnings fell by more than half, with sales of Sea-Doos, three-wheeled motorcycles and pontoon boats all down from a year earlier. The “long-awaited powersports downturn is finally here,” said analyst Cameron Doerksen of National Bank Financial. While that’s bad news for BRP shareholders, it’s great news for people who want to enjoy the outdoors without listening to the incessant whine, or choking on the fumes, from BRP’s motorized machines. -JH
Canada Goose Holdings Inc. (DOG)
GOOS - TSX
Economists make a distinction between non-discretionary and discretionary purchases. Non-discretionary items include things such as food, medicine and, unless you live in the forest, toilet paper. A $2,000 winter coat, on the other hand, falls squarely into the discretionary category. You might really want a Canada Goose parka, but if money is tight and your goal is simply to stay warm, a North Bay dinner jacket layered over two or three sweaters from Value Village will do the job. All of this helps to explain why Canada Goose’s stock price continued to sink this year, as rising interest rates and inflation cut into consumers’ disposable incomes. For its second quarter ended Oct. 1, sales rose just 1 per cent year-over-year to $281.1-million, prompting the company to slash its fiscal 2024 revenue and earnings forecasts, citing “the increasingly challenging global macro-economic and geopolitical environments.” It’s enough to make one nostalgic for the prepandemic days when Canada Goose briefly topped $90 a share. But with the stock touching record lows this year, investors are clearly cutting loose from the Goose. -JH
Estée Lauder Companies Inc. (DOG)
EL - NYSE
As the Smokey Robinson song goes, “My smile is my makeup I wear since my breakup with you.” Well, nobody is smiling at makeup giant Estée Lauder these days. First came the COVID-19 pandemic, which caused cosmetics sales to fall because folks sitting at home in their sweatpants don’t tend to buy a lot of lipstick and eyeshadow. With global travel disrupted, Estée Lauder’s strategy of selling in duty-free shops and other locations that cater to well-heeled consumers also took a direct hit. On top of all that, China’s slow economic reopening, growing competition from niche brands and Estée Lauder’s inability to connect with the younger TikTok crowd contributed to a more than 50-per-cent drop in the stock price through the first 10 months of 2023, erasing about $45-billion in market value. It all adds up to a lot of unhappy shareholders, including generations of the Lauder family who have lost an estimated US$15-billion and are reportedly fighting over succession plans at the beauty empire. Look closely at Estée Lauder’s stock chart and you can see the tracks of their tears. -JH
First Quantum Minerals Ltd. (DOG)
FM - TSX
Try not to think about copper. You’re thinking about copper, aren’t you? Of course you are, because copper is everywhere – in electrical wires, automobiles, plumbing pipes, doorknobs – thanks to its conductive properties and corrosion resistance. Oh, and let’s not forget trombones, which are made with brass – a copper-zinc alloy – and are used to create that sad “womp, womp, womp” sound you hear when game-show contestants lose out on a big prize. Which brings us to miner First Quantum Minerals. In a move that caught investors completely off guard, the government of Panama ordered First Quantum to shut down its giant Cobre Panama copper mine – by far the company’s largest project – in response to fierce opposition from environmental, labour and Indigenous groups. This followed the decision by Panama’s Supreme Court to tear up the company’s “unconstitutional” 20-year contract to operate the mine, just weeks after the deal had been finalized. With First Quantum losing about $20-billion of market value since the summer, you can’t help but hear the “womp, womp, womp” of a trombone when you look at its sad stock chart. -JH
Slate Office Real Estate Investment Trust (DOG)
SOT.UN - TSX
The next time you decide to work from home, think about how your selfish, thoughtless actions are affecting office REITs. Before the pandemic, offices were one of the most stable real estate classes, offering a combination of steady returns and attractive yields that appealed to risk-averse investors. But then you had to ruin everything, didn’t you? When COVID-19 came along, you didn’t want to get really sick or possibly even die, so you stayed home and worked remotely, never giving a second thought to the hardship you were inflicting on others. Consider Slate Office Real Estate Investment Trust. With its vacancies and borrowing costs both rising, Slate’s unit price has plunged more than 80 per cent from its pre-pandemic levels. Adding to investors’ misery, in November the REIT suspended its distribution and announced plans to divest about 40 per cent of its assets. Other office landlords also saw their unit prices tumble and suspended distributions, including Inovalis REIT and True North Commercial REIT. Think about that the next time you enjoy a leisurely breakfast while still wearing your pyjamas at 10 a.m. -JH
John Heinzl
Tim Shufelt