Jennifer Radman, Vice President, Head of North American Equities & Senior Portfolio Manager at Caldwell Investment Management Ltd. was featured in Huffington Post article How You Could Make Money Helping Canada Fix Its Innovation Problem.
Canada isn’t known for its innovation. Maybe it would be, if more of us invested in it.
This Canada Day weekend, it may be worth taking a moment to consider just how patriotic your investments are.
If you’re a typical Canadian with typical investments, the Canadian part of your portfolio is likely a very generic package of large energy and financial companies included in your mutual funds. That’s simply because this what dominates Canada’s stock markets.
But there’s more to Canadian business than oil and mortgages, even if that’s not always easy to see.
Canada is not a top innovation economy. On a per-person basis, Canada spends about half as much money on research and development as the U.S. It’s one of the core reasons why we keep sliding on those rankings of world’s most competitive economies.
But we could actually help change that, ourselves, by investing in innovative Canadian businesses.
Putting money in these up-and-coming businesses can also make good business sense, if they’re the right kind of company: Businesses working in a new field and grabbing market share from traditional businesses “can perform well even without broad-based economic growth,” said Jennifer Radman, a lead portfolio manager at Caldwell.
Radman should know: She manages Caldwell’s Canadian Value Momentum Fund, which seeks out businesses that “may be overlooked or not accessible to larger (funds).” The fund boasts that it has consistently beaten the S&P TSX index in recent years.
Here are some ideas for how to invest in Canadian businesses that are at the forefront of innovation today. Who knows, maybe if we put more of our savings into cutting-edge businesses instead of real estate, we’d have better jobs and more affordable housing.
Important: These are not “stock recommendations” of the sort you see on investor blogs. We’re not predicting the companies mentioned here are going to soar in value or anything like that.
This is an illustration of some of the options out there. So please don’t sue us if your investment strategy doesn’t pan out. And always do your research before investing.
The food revolution
Food is one of the fastest-changing industries out there right now. People are increasingly eating out, and demanding higher-quality food when they do.
And maybe most notably, “plant-based diets are slowly going mainstream,” Dalhousie University food industry expert Sylvain Charlebois recently noted. “The entire food supply chain, both ends of the food continuum, from farm to fork, are adapting to a consumer looking for alternative sources of protein.”
Many of the celebrated brands behind the food revolution are American (think Beyond Meat and Impossible Burgers) but traditional Canadian food producers are waking up the new reality. Maple Leaf Foods, which now calls itself a “protein company,” has a plant-based meat subdivision ― Greenleaf Foods ― which estimates it does 95 per cent of its business in the U.S.
Fast food chains are getting in on this as well. A&W Canada, which trades on the TSX, has introduced Beyond Meat products, as has Tim Hortons (which is part of 3G Capital, a privately held company).
And some Canadian businesses are benefiting from the trend to convenience foods. For instance, TSX-traded Premium Brand Holdings owns dozens of food brands and has a contract to make breakfast sandwiches and wraps for Starbucks. The company has grown rapidly in recent years and estimates it holds half the prepared sandwich market in Canada.
Canadian e-commerce is dominated almost to an absurd extent by U.S. companies (you found it on Instagram, bought it on Amazon, got it delivered by UPS), but even in this field you can invest Canadian.
One major player is Shopify, an Ottawa-based company traded on the New York Stock Exchange that has become a global leader in building online shopping platforms for retailers.
With people shopping online, cyberhacking has become big business, and so therefore so has cyber-security. Vancouver-based Absolute Software builds software to secure “end point” devices, and its technology is used by manufacturers like Dell, Lenovo and Microsoft.
Also based in Vancouver is Destiny Media, which makes technology to securely stream content instantly, another big business these days. Its largest customer is Universal Music.
But Radman points out that the e-Commerce revolution also offers opportunities you may not have thought of. Her fund includes Cargojet, a Mississauga-based airline with a hub at Hamilton’s John C. Munro Airport. It has contracts with Canada Post, FedEx and UPS, which are doing brisk business in the age of one-day Amazon deliveries.
Now here’s an area where Canada really is leading the world on innovation ― at least for now. You’ll be spoiled for choice investing in the cannabis market, as there are now dozens of cannabis companies trading on the TSX.
If your spidey sense is telling you cannabis drinks are going to be big, you can invest directly in that play. For instance, Quebec-based Hexo has a partnership with Molson Coors to make pot beverages, while TSX-traded Canopy Growth (the world’s largest cannabis company, valued at US$23 billion) has a deal with Constellation Brands, owner of Corona and other beer and liquor brands.
If you think cannabis accessories will be big business, there’s New Brunswick-based Organigram, which produces cannabis vapourizers on top of the bud itself. Many other companies produce cannabis accessories, but few of them are publicly traded.
Even if you lose your job to a machine, you might still be able to make out alright by investing in companies that build those machines.
Radman sees all the trends lining up in this industry’s favour.
“Labour costs are going up, it’s hard to find people, there are quality control issues ― all sorts of reasons why manufacturing is going towards robotics and automation.”
That’s a trend “we don’t see stopping or reversing,” she added.
Radman’s fund includes Cambridge, Ont.-based ATS Automation, which builds automation systems for numerous industries, including autos, pharmaceuticals and telecoms. Perhaps somewhat ironically, the company employs nearly 4,000 non-automated human beings worldwide.
If you’re not a fan of institutional investing, you can still help Canadians innovate new products and solutions. These days this is easier than ever, thanks to crowdfunding platforms, like Kickstarter, which allow anyone with an idea to raise money from countless donors to make the idea a reality.
Crowdfunding platforms will often promote some of these campaigns themselves, if they feel them worthwhile. For instance, Kickstarter is drawing attention to BabyLegs, a project to create a trawl that can monitor plastic pollution in surface water. The name presumably comes from the fact the trawl will be “made from pink baby tights.”
by Daniel Tencer, Business Editor, HuffPost Canada