Diversify Your Portfolio With These 3 Stocks

Need to diversify your portfolio? If so, consider buying Linamar Corporation (TSX:LNR), National Bank of Canada (TSX:NA), and MTY Food Group Inc. (TSX:MTY).

| More on:
The Motley Fool

One of the keys to success in investing is staying diversified, because it reduces your risk by minimizing your exposure to a single industry and allows you to benefit from the growth trends in several industries. With this in mind, let’s take a look at three stocks from three different industries that you could buy right now.

1. Linamar Corporation

Linamar Corporation (TSX:LNR) is one of the leading manufacturers of powertrain system solutions for the automotive, energy, and industrial markets.

At today’s levels, its stock trades at just 8.8 times fiscal 2015’s estimated earnings per share of $6.56 and only 7.5 times fiscal 2016’s estimated earnings per share of $7.72, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 12.5 and its industry average multiple of 23.8.

With the multiples above, its estimated 6.6% long-term earnings growth rate, and the high volatility in the market in mind, I think Linamar’s stock could consistently trade at a fair multiple of at least 10, which would place its shares upwards of $77 by the conclusion of fiscal 2016, representing upside of over 32% from current levels.

Also, the company pays a quarterly dividend of $0.10 per share, or $0.40 per share annually, which gives its stock a 0.7% yield.

2. National Bank of Canada

National Bank of Canada (TSX:NA) is the sixth-largest bank in Canada with approximately $216.1 billion in total assets.

At today’s levels, its stock trades at just 7.8 times fiscal 2016’s estimated earnings per share of $4.76 and a mere 7.4 times fiscal 2017’s estimated earnings per share of $5.04, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 10.1 and its industry average multiple of 13.1.

With the multiples above, its estimated 7.1% long-term earnings growth rate, and the high volatility in the market in mind, I think National Bank’s stock could consistently trade at a fair multiple of at least 10, which would place its shares upwards of $50 by the conclusion of fiscal 2017, representing upside of over 34% from current levels.

In addition, the company pays a quarterly dividend of $0.54 per share, or $2.16 per share annually, which gives its stock a bountiful 5.8% yield.

3. MTY Food Group Inc.

MTY Food Group Inc. (TSX:MTY) is one the largest franchisers of restaurants in Canada, and its portfolio of brands include Thai Express, Country Style, Extreme Pita, La Cremiere, and Tiki Ming.

At today’s levels, its stock trades at just 19.3 times fiscal 2015’s estimated earnings per share of $1.60 and only 18.7 times fiscal 2016’s estimated earnings per share of $1.65, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 21.1 and its industry average multiple of 35.8.

With the multiples above, its estimated 3.1% earnings growth rate in fiscal 2016, and the high volatility in the market in mind, I think MTY’s stock could consistently trade at a fair multiple of at least 22, which would place its shares upwards of $36 by the conclusion of fiscal 2016, representing upside of over 16% from current levels.

Also, the company pays a quarterly dividend of $0.115 per share, or $0.46 per share annually, which gives its stock a 1.5% yield.

Should you diversify your portfolio with one of these stocks?

Linamar, National Bank of Canada, and MTY Food Group are three of the most attractive long-term investment options in their respective industries, and all have the added benefit of dividends. Foolish investors should take a closer look at each and consider initiating positions in at least one of them in the very near future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned. The Motley Fool owns shares of MTY Food Group. MTY Food Group is a recommendation of Stock Advisor Canada.

More on Investing

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, November 8

The TSX Composite benchmark remains on track to end the week with strong optimism as it currently trades with 2.4%…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Bank Stocks

Best Stock to Buy Right Now: TD Bank or Manulife Financial?

Manulife continues to see momentum in its business and stock price, while TD Bank stock remains down and out.

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »

happy woman throws cash
Tech Stocks

3 Growth Stocks That Could Be Long-Term Wealth Creators

These three growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior…

Read more »

how to save money
Bank Stocks

This 5.9% Dividend Stock Pays Cash Every Month

First National Financial (TSX:FN) has a 5.9% yielding dividend that is paid out monthly.

Read more »