Investors should favor Royal Bank of Canada over National Bank of Canada and Canadian Natural Resources Ltd. over Imperial Oil Ltd., UBS AG said today in its first list of most- and least-preferred Canadian stocks.
Royal Bank, Canada’s largest lender by assets, is the best bet among Canadian banks for investors looking to combine the prospects of a high return with low risk, UBS’s Canadian equity research team said in the inaugural edition of its “Alpha Preferences” report for Canada. National Bank, Canada’s sixth- biggest bank, is “least preferred,” Zurich-based UBS said.
UBS expects the stocks to perform better or worse than their overall industry in about the next 60 to 90 days. The Standard & Poor’s/TSX Composite Index has risen 10 percent so far this year, and on Nov. 8 reached 13,052.48, its highest level since September 2008.
Canadian Natural, the country’s second-largest energy company by market value, has much to gain from higher oil prices and has “a good portfolio of international assets,” UBS said. Imperial Oil, the Canadian oil company owned mostly by Exxon Mobil Corp., suffers from “limited absolute production growth” and higher costs at its Kearl oil sands project.
Investors looking for risk-adjusted return should also buy Petrominerales Ltd., Ensign Energy Services Inc., Osisko Mining Corp., First Quantum Minerals Ltd., Finning International Inc., and Quebecor Inc., UBS said.
Least-favored in the same sectors are Pacific Rubiales Energy Corp., TransAlta Corp., New Gold Inc., Quadra FNX Mining Ltd., Linamar Corp. and Bell Aliant Regional Communications Income Fund.
In a separate note today, George Vasic, a UBS strategist, substituted First Quantum for Sun Life Financial Inc. in the bank’s 12-stock Canadian portfolio.
First Quantum, Canada’s second-largest publicly traded copper producer, was yesterday named a “key call” by Onno Rutten, a UBS analyst, who cited exploration success at the company’s Trident project in Zambia.
Sun Life, Canada’s third-largest insurer, has gained more than 20 percent since falling to a 2010 low in August, Vasic said.