3 TSX Stocks Quietly Crushing the S&P 500

Skiier goes down the mountain on a sunny day

Did you know that many TSX stocks outperformed the S&P 500 over the last five years?

It’s true. You wouldn’t know it by looking at a TSX Composite Index chart, but individual Canadian names have beaten the legendary “SPY.” In this article, I will explore three such stocks that managed to beat the S&P 500’s return in the trailing one- or five-year period (or both).

Brookfield

Brookfield Corp (TSX:BN) is a Canadian financial services conglomerate whose shares have risen 45.5% over the last five years. The S&P 500 is only up 27% in that timeframe, so BN is ahead of U.S. large cap stocks as a whole.

Why has Brookfield performed so well?

Part of it is simple financial performance. The company’s revenue has compounded at 16.7% over the last 10 years and at 10% over the last five. Its earnings are down over this period, but that is a function of many complex accounting factors such as the spinoff of Brookfield Asset Management, 25% of which was given to investors as a separate entity. Its distributable earnings are up.

Another reason why Brookfield has performed well is because its CEO Bruce Flatt is very good at fundraising. He knows how to play the media, and that fact means his fundraising rounds usually bring in a lot of money.

Constellation Software

Constellation Software (TSX:CSU) is a Canadian software company that operates on a venture capital-like business model. It buys small companies, typically for $5 million to $10 million, and seeks to integrate them into its own operations. It buys them when they already have revenue, and ideally when they are profitable. The company has had a lot of success with this approach. Its revenue has compounded at 22% and its earnings at 8% over the last five years. Not a bad growth track record all things concerned. The company is also quite profitable, with a 6.5% net margin and a 21% return on equity. Its stock, up 36% in the last year and 206% in the last five years, has beaten the S&P 500 over both timeframes.

EQB

EQB Inc (TSX:EQB) is a small Canadian bank whose main claims to fame are having no branches, and offering high-yield GICs. Most Canadian banks offer pretty high-yield GICs these days, but EQB’s GICs have higher yields than most. For example, it currently has a one-year GIC yielding 5.1%, which is a little higher than the standard 5% yield that most banks offer.

Because most of its deposits are GICs, EQB Inc has a very high liquidity coverage ratio (LCR). It reported its LCR as being 340% back in 2022. I wasn’t able to find more recent LCR estimates from the company, but if its deposit mix is still 95% GICs like it claims, then its LCR is likely still quite high.

EQB has very high growth for a bank. In the trailing 12-month period, its revenue grew 39.9%, and its earnings grew 10.2%. It also has a 23% net income margin. On the whole, it is a pretty intriguing company. Up 140% over five years, it has nearly doubled the S&P 500’s return.

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Fool contributor Andrew Button has positions in Brookfield. The Motley Fool recommends Brookfield, Brookfield Asset Management, Brookfield Corporation, Constellation Software, and EQB. The Motley Fool has a disclosure policy.