Investing in Your Backyard: Ontario

Grab some back bacon and milk in a bag -- it's a backyard investing kerfuffle north of the border -- and you're invited!

There are many good reasons for researching investment opportunities in a certain geographic area. Today, we're crossing the border into Canada to see what we can see in the great province of Ontario.

It's where you'll find Toronto, the nation's largest city, as well as capital city Ottawa. Bordering five U.S. states, it's sometimes hard to tell where Ontario ends and Buffalo or Detroit begins. Some French knowledge might be helpful, though moreso around Ottawa than in Toronto.

If you happen to live in West Grey or North Glengarry, you already have a few advantages when it comes to evaluating the local market, such as access to local news sources and the word on the street, and a high probability of being a customer or employee of these companies. And if you're not a local resident, you might still want to know whether the weather matches the business climate -- a hot area could be chock-full of undiscovered treasures on their way to greatness.

Without further ado, here are the largest companies headquartered in Ontario, Canada:

Company

Market Cap (billions)

CAPS Rating

Bull Ratio

Royal Bank of Canada (NYSE:RY)

$69.6

****

97%

Manulife Financial (NYSE:MFC)

$54.6

*****

98%

Toronto-Dominion Bank (NYSE:TD)

$49.7

***

94%

Data taken from Motley Fool CAPS as of June 1, 2007.

Toronto is a major financial hub, and seven of the eight largest corporations in Ontario are Toronto-based banks and financial institutions. Investment bank Manulife has plenty of fans in our CAPS community. Hihoterry, for one, calls it a "solid, well managed co. with a money making machine in tow and lots and lots of cash. Yummy!"

Royal Bank is a diversified money center in the mold of American counterparts like Bank of America or Citigroup. All-star CAPS player theknife251 thinks it's the bee's knees, elbows, and stripes:

This pick will appeal to Fools Income players. It's big, it's global and it provides a 3% dividend every year! Not too mention it's averaging a five year 18+% return. A sleepy but exciting buy and hold pick.

Tie your runners, Fool!
But enough about banks and onto more exciting businesses. Manulife may be the most heavily traded of those seven major financial operations, but its $20 million daily dollar volume pales next to fellow Torontonian Research In Motion (Nasdaq: RIMM  ) -- over $900 million worth of the BlackBerry maker's stock changes hands every day.

That doesn't give RIMM much Foolish street cred, though. It's a perennial one-star CAPS stock with only a 42% approval rate -- but more than 1,100 user ratings. Another heavily traded but equally disrespected Ontarian stock is data networking expert Nortel Networks (NYSE: NT  ) .

Yep, these are Canadian stocks, despite their enormous American presence and well-known brand names. The same goes for larger-than-life Motley Fool Rule Breakers pick IMAX (Nasdaq: IMAX  ) , or former Microsoft rival Corel. No, the WordPerfect you saw in stores never defaulted to Canadian spellchecking.

If Internet gambling software is more your bag, there's Motley Fool Hidden Gems recommendation Cryptologic (Nasdaq: CRYP  ) . In the January review of all hisHidden Gems, Fool Bill Mann gave the company his "Nikita Khrushchev Rehabilitation Award, 2006." A plethora of fresh clients, coupled with lower share prices and renewed confidence in the management team, landed that fictitious distinction.

Foolish Finale, eh?
So there's plenty more to Canada than hockey and mountain hiking. The Toronto Stock Exchange is the sixth-largest stock market in the world (by total market cap). Easy access to the northern U.S. with a highly developed highway and railway system helps the manufacturing industry there, and what is arguably the cleanest major city in the world also is home to the Canadian film and media industry.

There's nothing remarkable about the CAPS grade curve here, nor does Ontario house scads of Foolish newsletter picks. Nevertheless, it's certainly a fruitful -- and often overlooked -- region for hunters of quality businesses, and you might be surprised at how familiar the market feels to us Americans.

Do you agree? Disagree? Feel free to weigh in on the mainline Canadian market -- or on any stocks at all, really -- by joining Motley Fool CAPS and blasting away with your ratings and commentary pitches. And if Mississauga isn't your 'hood, maybe we'll come around where you live the next time.

Further Foolishness:

Global Gains lead analyst Bill Mann is currently traveling in China, India, and Taiwan in search of new investment opportunities in some of the world's fastest-growing economies. Get updates and analysis live from the field by sending Bill an email at BillTrip@Fool.com.

Fool contributor Anders Bylund is a Bank of America shareholder, but he holds no other position in any of the companies discussed here. He is a huge fan of Toronto-born rocker Neil Young. You can check out Anders' holdings if you like, or follow him around the world on these Foolish local-business treks. Bank of America is an Income Investor selection. Microsoft is an Inside Value choice. Foolish disclosure is always red-hot.


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