Don't Miss AI's Third Wave
The year 2024 saw a recovery in the stock market in the second half after the Bank of Canada began interest rate cuts. The TSX Composite index surged as much as 22% until November and then corrected 3.75% in December, closing 2024 at a gain of 18.31%. Five sectors have a heavy weightage in the index: financial (31%), energy and utilities (21.5%), industrial (13.6%), materials (12.5%), and information technology (8%).
While large-cap stocks led the sectors by market cap, it was the mid-cap stocks that outperformed in 2024.
Leading stocks in energy and utilities
Canada has one of the largest oil sands reserves and exports more than 90% of its oil and gas to the United States. It also has a vast electricity generation capacity that makes electricity cheap.
Enbridge leads the energy sector with its largest pipeline infrastructure used to transmit oil and gas. Its stock price surged 30.5% in 2024 as it completed a major acquisition of three gas utilities in America. Enbridge stock broke its $45-$60 range as the company’s overall size increased. The stock has been hovering above $60 since November.
While Enbridge continues to be a good stock for its dividend, the outperformer was a $6.87 billion market cap independent power producer, Capital Power (TSX:CPX). Its stock price surged 79% till November and ended at a 70% gain after the December dip. Driving the rally was the completion of the Genesee repowering project and strength in the United States contracts.
The company develops and operates power generation facilities in Alberta and the United States. While Alberta has a speed-to-market advantage due to existing generation capacity and transmission distribution overcapacity, electricity prices are falling. The United States has exciting data centre energy opportunities with higher base rates, but the process is complex and lengthy.
Hence, U.S. project completion brings high cash flow and drives the stock price. Amidst the tariff uncertainty, Capital Power’s stock price has dipped 27% since December but is trading 30% above the December 2023 price.
Leading stocks in the industrial sector
Within the industrial sector, Canadian Pacific Kansas City leads with a market cap of $96.72 billion, but the stock underperformed the market, rising only 1.86% in 2024. Meanwhile, Bombardier (TSX:BBD.B) outperformed the market, growing 107% till October 11, 2024, and closing the year with an 84% gain in 2024.
Driving the growth was Bombardier’s successful delivery of two defence-related aircraft to the German government and the U.S. Army. This marks its entry into the defence space, which it expects to generate USS$1 billion in revenue in the long term. Another growth driver was achieving an aftermarket service revenue target of US$2 billion a year ahead.
However, Bombardier stock has dipped 20% since December as Trump tariffs could affect the United States Air Force order for eight jets worth about US$465 million. This dip is a buying opportunity as the tariffs won’t last long.
Leading stocks in the technology sector
In the technology sector, Shopify leads with a market cap of $201.9 billion, and the stock surged 50% in 2024. However, Celestica (TSX:CLS) emerged as the best performer, with its stock price surging 253%. Driving this growth was the artificial intelligence boom. Celestica is an electronics manufacturing service provider. Its Connectivity & Cloud Solutions segments saw a surge in orders for servers, storage, and networking equipment from enterprises and hyperscalers.
However, this growth has slowed in the fourth quarter of 2024, which has pulled the stock down 33% since February. The company’s revenue and earnings guidance for 2025 hints at a slowdown in growth, making the stock expensive at a 20.8x forward price-to-earnings (P/E) valuation.
Investor takeaway
Not all outperformers of 2024 are worth buying in 2025. Celestica may not generate significant growth in 2025. However, Bombardier has significant growth potential, and Capital Power has strong dividend growth potential. They are stocks worth buying at the dip.
