For many major equity indexes around the world 2013 has been and will be a “great” year, meaning total returns in local terms will be well into the double digits.

The S&P 500 Index , for example, was up 27.68 percent from Dec. 31, 2012, through Dec. 5, 2013. This follows the 15.99 percent total return for 2012. And it makes 2013 remarkable for the main US and global benchmark because only four of the 16 times the market has performed that well since 1928 has it followed up with a year that exceed the prior total return.

But the S&P 500 isn’t even the best-performing major index: Japan’s Nikkei 225 Index, in a year of recovery and “Abenomics” for the Land of the Rising Sun, was up 48.31 percent for 2013.

Spain is also enjoying a solid stock market year, with its main IBEX 35 Index up a cool 20.68 percent. Other bourses in Europe are seeing solid performance as well, with Germany’s DAX Index posting a total return so far in 2013 of 19.34 percent and France’s CAC 40 Index up 16.34 percent. The Euro Stoxx 50 Index has posted a 16.44 percent total return this year.

The UK’s FTSE 100 Index, meanwhile, is up 14.72 percent.

Down Under, the S&P/Australian Securities Exchange 200 Index has rallied by 16.52 percent in local terms in 2013, despite headwinds for a local economy that hasn’t experienced a recession in more than two decades.

And yet there’s the S&P/Toronto Stock Exchange Composite Index, languishing near the bottom of the global equity index standings, just ahead of Hong Kong’s Hang Seng Index at 8.42 percent, with a 2013 total return in local currency terms of 9.17 percent through Dec. 5.

Until mid-November the main Canadian index had actually posted a strong second-half rally versus the S&P 500, actually outperforming it from June 30 through Nov. 15, if only just by a quarter of a percentage point.

That represented a glimmer of hope against daunting evidence of a major trend reversal. During the 27 months through June 2013 the S&P/TSX underperformed the S&P 500 by about 40 percent in US dollar terms, a significant shift from the 2001-to-2011 period, when Canadian stocks outperformed US stocks by 247 percent.

The dip since mid-November has been exacerbated for US investors by a decline in the value of the Canadian dollar versus the buck from USD0.9722 as of Oct. 22 to a three-year low on Dec. 4 of USD0.9360.

Loonie weakness, however, could be one of the factors that drive a better performance for the S&P/TSX in 2014, in addition to a perception by investors of value relative to other countries’ stocks and a stabilized and recovering Canadian housing market.

A softer currency will boost Canada’s non-resource export industries, while the latter factor will calm fears of a US-style housing crash that leads to the implosion of the domestic economy.

Stimulative policy in Asia, particularly China, would drive consumption of Canadian resources, which would be well received for its impact on the Great White North’s balance of trade.

At the end of the day, however, the key element of any buy, hold or sell decision remains financial and operating performance for individual companies.

With all this in mind, here’s a sector-by-sector survey of what we’ve seen in 2013 and what may be in store in 2014 for Canada-based stocks, based on How They Rate groupings.

Oil and Gas

The major factor for Canadian oil and gas producers remains the “differential” between prices for Western Canada Select (WCS) and other major types of crude oil such as West Texas Intermediate (WTI) and European Brent.

Our primary concern is that companies be able to grow their production. Companies with sufficient scale that show consistent output growth are able to ride out ups and down for commodity prices because their cost structures allow them to compete and sell output despite shrinking margins and to expand and thrive when oil prices ride higher.

Notable performers include CE Portfolio Aggressive Holding Vermilion Energy Inc (TSX: VET, NYSE: VET), which had grown its production 13.6 percent year to date through Sept. 30, 2013. Vermilion also benefits from significant exposure to Brent pricing.

Management recently announced a 7.5 percent dividend increase, and we’ve raised our buy-under target on the stock in recognition of this move and the company’s solid guidance for 2014.

Vermilion is now a buy under USD56.

Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF) has also demonstrated its ability to grow output, with its key advantage technical advances that have allowed to boost recoveries using its waterflood techniques.

Third-quarter production reached a company-record, while funds from operations surged by 44 percent. Crescent Point is a buy under USD48.

Among non-Portfolio Oil and Gas names, Bonterra Energy Corp (TSX: BNE, OTC: BNEFF) has shown spectacular growth thus far in 2013, with third-quarter production up 76.9 percent to 11,794 boe/d, while funds from operations for the period more than doubled to CAD46.8 million.

Bonterra also boosted its monthly dividend rate by 3.6 percent to CAD0.29, its second increase this year and the ninth since June 2009. Bonterra Energy is now a buy under USD50.

The 30 companies that make up the Oil and Gas segment of the How They Rate coverage universe generated an average US dollar total return of 5.08 percent from Dec. 31, 2012, through Dec. 2, 2013.

The five that are currently held in the CE Portfolio Aggressive Holdings–including ARC Resources Ltd (TSX: ARX, OTC: AETUF), Crescent Point, Enerplus Corp (TSX: ERF, NYSE: ERF), Lightstream Resources Ltd (TSX: LTS, OTC: LSTMF) and Peyto Exploration and Development Corp (TSX: PEY, OTC: PEYUF)–have generated an average total return in US dollar terms of 11.14 percent.

By comparison, the S&P/TSX Energy Index posted a US dollar total return for the same time period of 3.77 percent.

My expectation is that improving economic fundamentals in the US will have a positive impact around the world, including for Canadian oil and gas companies.

My preference leans toward companies with higher oil exposure, though ARC has shown significant production growth and the ability to generate FFO growth with its gas-weighted profile, even as it invests heavily with an eye on a substantial 2014 ramp-up.

Peyto, too, has unique characteristics, chief among them the lowest cost of production of any natural gas producer in North America.

Electric Power

Waning electricity demand and a prolonged and severe slump in the wholesale power sector have weighed heavily on companies in the Electric Power section of How They Rate.

There is no clear sign yet that these North American trends will reverse, though accelerating economic growth in the US would go a long way toward fixing the sector’s problems.

I’ve sold Atlantic Power Corp (TSX: ATP, NYSE: AT) from the Aggressive Holdings, as its specific balance sheet problems and lack of sufficient scale were heavily exposed by the wholesale downturn.

I remain bullish on long-term prospects for clean power companies Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP) and December Best Buy Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF), both of which continue to add hydroelectric and wind power assets that operate under long-term contract with solid counterparties.

They’ll also benefit from a shift away from coal-fired power in the US, whether or not the Environmental Protection Agency’s recently proposed rules on new coal-fired generation stations survive Supreme Court scrutiny.

Consumers–retail, commercial, industrial–are beginning to demand clean power at levels that will soon approach critical mass, the point at which technologies that once were relatively expensive approximate costs for traditional sources.

Brookfield Renewable, which has a sizable presence in the US with 112 generation facilities, totaling over 2,814 megawatts, and Innergex, whose presence south of the border is thus far limited to Idaho, are 21st century electric power producers with bright futures.

Gas/Propane

This group of four companies, including Portfolio Holdings EnerCare Inc (TSX: ECI, OTC: CSUWF) and Parkland Fuel Corp (TSX: PKI, OTC: PKIUF), are essentially unregulated utilities, providing services that are essential but to customers who have a choice as to whom they engage for delivery of those services.

We sold one Gas/Propane company from the Portfolio, Just Energy Group Inc (TSX: JE, NYSE: JE), earlier this year due to questions about the sustainability of its business model as well as the manner in which its employees conducted themselves on the ground in the customer acquisition process.

Results in the equities market this year have been mixed, with EnerCare posting an impressive 22.40 percent total return in US dollar terms. Parkland, meanwhile, is down 5.31 percent, having given up a lot of ground over the past six weeks due to concerns about the impact of compressed refiner’s margins on its results.

EnerCare received probably the best possible news for its 2014 prospects this week with passage of a new consumer protection bill in the Ontario provincial legislature that will make it harder on unscrupulous competitors to draw away its waterheater rental customers.

Parkland should benefit from management efforts to control costs and the continued execution of its plan to double earnings before interest, taxation, depreciation and amortization (EBITDA). And it will also benefit as refiner’s margins revert to the mean after dropping to near five-year lows.

Business

This is a disparate collection of companies whose pressure points and catalysts vary a great deal. Most of them, including Bird Construction Inc (TSX: BDT, OTC: BIRDF), are sensitive to macroeconomic conditions. Bird has suffered from a pullback in industrial expansion activity, even as government spending on large projects has contacted. It’s also had a major contract blow up, leading to a significant writedown that impacted third-quarter results.

At the same time, however, Bird continues to win new contracts, and its backlog is now approximately CAD1.1 billion. The current dividend rate is well supported, and because of insurance requirements it carries minimal debt.

In other words, this laggard is well positioned for a rebound in 2014.

Cineplex Inc (TSX: CGX, OTC: CPXGF) is anomalous within the context of this group, as its business has shown tremendous resilience throughout the cycle. History has proven that people will go to the movies during booms or busts if the product on the screen is compelling.

What Cineplex has managed to do, as a means of smoothing out those rough times when Hollywood fare doesn’t entice the public, is expand the range of content available on its screens, with live broadcasts from the Metropolitan Opera for example.

It’s also been a leader in technological advancement, bringing 3D, IMAX and digital projection capabilities to most of its facilities. This allows it to charge premiums at the box office.

Cineplex has had another strong year on the TSX, with a year-to-date total return of 30.66 percent. At these levels it’s trading above our recommended buy-under target, which we continue to evaluate. Normal practice is to raise it based on dividend increases and/or acquisitions that improve the value of the underlying business.

Only a major pullback would bring Cineplex back into buying range. We’ll have more on Cineplex in the January 2014 Portfolio Update.

Norbord Inc (TSX: NBD, OTC: NBDFF) is another company that’s sensitive to macroeconomic conditions, as its primary output, oriented strandboard, is a major component of new home construction. The stock has posted a modest gain in 2013, 4.40 percent in US dollar terms, based on the solid recovery for the US housing market. The company recently reinstituted its dividend and currently yields 7.4 percent. Norbord is a good way to play the stabilized North American housing market as well as a recovery in Europe, and it’s trading for just 8.43 times earnings. Buy under USD32.

ShawCor Ltd (TSX: SCL, OTC: SAWLF) has an interesting niche in the energy business with its pipe-coating specialization. It will be involved in a lot of liquefied natural gas (LNG) projects around the world.

It also has significant and beneficial exposure to deepwater, shale, oil sands and enhanced recovery operations in the oil and gas space as well as to the build-out of water infrastructure. It also has significant exposure in the fast-growing Asia-Pacific region.

ShawCor reported 15 percent sequential and 35 percent year-over-year revenue growth for the third quarter, while net income was a company record CAD73 million.

The stock has underperformed this year, with a US dollar total return of negative 1.41 percent. But its business prospects are bright. Management has raised the dividend four times in the last five years, and the company has never cut its payout. ShawCor is a buy under USD45.

Real Estate

Real estate investment trusts (REIT) on both sides of the border have been hit hard amid rising fear of the impact the US Federal Reserve “tapering” its purchases of long-dated mortgage-backed securities.

Of the 14 Canadian REITs in the How They Rate coverage universe only Morguard REIT (TSX: MRT-U, OTC: MGRUF) has posted a positive total return this year, 4.85 percent. The average return for the CE group is negative 13.81 percent. The S&P/TSX Capped REIT Index, meanwhile, is down more than 15 percent this year.

In my view Canadian REITs, including Portfolio Holdings Artis REIT (TSX: AX-U, OTC: ARESF), Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF), Dundee REIT (TSX: D-U, OTC: DRETF), Northern Property REIT (TSX: NPR-U, OTC: NPRUF) and RioCan REIT (TSX: REI-U, OTC: RIOCF), are undervalued right now.

All five reported third-quarter financial and operating numbers supporting the case that the recent selloff represents an opportunity to lock in excellent yields on businesses that continue to show signs of enduring strength.

Buy up to prices listed in the Portfolio tables if you don’t own them already.

Natural Resources

In general, this group of companies rises and falls with commodity prices and is therefore directly tied to macroeconomic conditions.

Acadian Timber Corp (TSX: ADN, OTC: ACAZF) has slumped in 2013 following an outstanding performance in terms of its share price in 2012. Operating and financial numbers have held up, however, and recent data suggest the US housing market is in the midst of a sustainable recovery, a positive sign that demand for Acadian’s timber product should grow in 2014.

Permits for future US home construction hit a near five-and-a-half-year-high in October, and prices for single-family homes notched big gains in September, suggesting a run-up in mortgage interest rates hasn’t derailed the housing recovery.

According to the US Dept of Commerce, building permits jumped 6.2 percent in October to an annual rate of 1.03 million units, the highest since June 2008. It was only the second time since mid-2008 that permits breached the 1 million-unit mark.

And the S&P/Case Shiller composite index of home prices in 20 metropolitan areas jumped 13.3 percent in September from a year ago, the strongest gain since February 2006.

Ag Growth International Inc (TSX: AFN, OTC: AGGZF) has staged a solid recovery in 2013, including a total return of 30.17 percent, as the impact of the 2011-12 North American drought has waned.

Third-quarter sales were up 40 percent year over year, as farmers prepared to handle what the US Dept of Agriculture forecast would be a record corn crop this year. The company’s strong brands and dominant North American market share ensured it would survive for the long term. Now its emerging international presence will drive growth rather than simply mitigate the impact of the drought.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) recently inked a deal that will basically double its size, as the sulphuric acid and industrial chemicals company continues its efficient expansion. The stock is up just over 4 percent this year and is poised for long-term growth with its emerging scale in North America coupled with an international presence that provides leverage to the global economic recovery.

Energy Services

The eight Energy Services companies in How They Rate combined to post the second-best year-to-date average US dollar total return, 24.44 percent.

A recent addition to the coverage universe, Secure Energy Services Inc (TSX: SES, OTC: SECYF), led the way with a 54.81 percent gain.

Former Aggressive Holding PHX Energy Service Corp (TSX: PHX, OTC: PHXHF) has posted a good recovery year, with a total return of 38.26 percent to match its strong operating and financial performance. The company announced a 16.7 percent dividend increase along with third-quarter results.

Fortunes for this group are tied to energy: When crude oil and natural gas prices surge so does drilling activity, but when prices slide activity can stop on a dime. Crude oil prices rallied hard in the third quarter but have come back thus far in the fourth.

Canadian energy companies have the complicating factor of oil price differentials, though infrastructure improvements and more short-term fixes such as crude-by-rail have had a positive impact from their perspective.

Natural gas has been on a solid uptrend since early August but remains in a long-term trough.

Overall, however, 2013 has been a year of recovery.

And 2014 holds the potential promise of a Canadian liquefied natural gas build-out, which would have a positive impact on the group.

Several companies, including Essential Energy Services Ltd (TSX: ESN, OTC: EEYUF), Precision Drilling Corp (TSX: PD, NYSE: PDS) and Trinidad Drilling Ltd (TSX: TDG, OTC: TDGCF), offer technologies that make them key participants in, for example, ultra-deepwater and horizontal and pad drilling projects.

Cathedral Energy Services Ltd (TSX: CET, OTC: CETEF) has been the laggard of the group, with a loss thus far in 2013 of 16.57 percent. But management announced a 10 percent dividend increase in November, as third-quarter revenue grew by 19.9 percent. Exposure to US directional drilling and production testing services drove this solid performance.

Cathedral Energy, which is yielding 6.6 percent, is a great buy for bargain hunters up to USD6.

Energy Infrastructure

These companies are tied to energy, too, but the assets they own and operate, including pipelines and storage terminals, generate fee-based revenues that aren’t strictly tied to ups and downs of commodity prices.

The ongoing North American oil and gas explosion continue to create opportunities for these companies to add assets, increase cash flow and grow dividends for the long term.

Among our top picks in the sector, AltaGas Ltd (TSX: ALA, OTC: ATGFF) is trading below its recommended buy-under target even after a 13-percent-plus run thus far in 2013. AltaGas has seen solid growth on the ground this year too, having added infrastructure assets as well as regulated utility assets in recent years.

Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) is hovering just above our recommended buy-under target of USD32. Patient investors will enjoy exposure to its diversified portfolio of assets, which includes transportation and storage infrastructure that delivers oil and natural gas as well as a natural gas processing facility.

TransCanada Corp (TSX: TRP, NYSE: TRP) seems to be suffering a bit due to the looming shadow of Keystone XL. The company is much more than this single, albeit important, project.

TransCanada’s record of dividend growth is built on 42,000 miles of natural gas pipelines that move approximately 14 billion cubic feet a day, or about 20 percent of North American demand, as well as about 400 billion cubic feet of natural gas storage capacity and 21 power plants with a total generating capacity of nearly 12,000 megawatts.

Buy TransCanada up to USD47.

Information Technology

This group is represented in the CE Portfolio by Shaw Communications Inc (TSX: SJR/B, NYSE: SJR), which has posted a US dollar total return of 4.6 percent thus far in 2013. Shaw’s cable TV business generates reliable cash flow, but it is susceptible to competition from Internet Protocol TV, among other technological advances.

Shaw yields 4.1 percent and is trading below our recommended buy-under target of USD24. The Information Technology group has posted an average total return of 17.91 percent this year, but that figure is skewed by the come-backing Yellow Media Ltd (TSX: Y, OTC: YLWDF), which is 146.97 percent to the positive, all on share-price gains alone as the company pays no dividend.

Removing Yellow reduces the IT average total return to 5 percent.

Perhaps the most critical event of 2014 will take place in January, as the Canadian government hosts its auction of 700 megahertz spectrum.

None of Canada’s Big Three wireless incumbents–including BCE Inc (TSX: BCE, NYSE: BCE), Telus Corp (TSX: T, NYSE: TU) and Rogers Communications Inc (TSX: RCI/B, NYSE: RCI)–will participate due to the government’s wish to have a fourth market participant emerge from among the many smaller, regional players in the domestic market.

No large foreign companies applied to enter the auction.

Financial Services

It’s well known that Canada is home to the one of the safest financial systems in the world. In fact Canada has earned the title as the world’s most sound banking system from the World Economic Forum for six years running.

Canada’s Big Six banks–Bank of Montreal (TSX: BMO, NYSE: BMO), our top pick and CE Portfolio Conservative Holding Bank of Nova Scotia (TSX: BNS, NYSE: BNS), Canadian Imperial Bank of Commerce (TSX: CM, NYSE: CM), National Bank of Canada (TSX: NA, OTC: NTIOF), Royal Bank of Canada (TSX: RY, NYSE: RY) and Toronto-Dominion Bank (TSX: TD, NYSE: TD)–have combined for 27 dividend increases since November 2010.

They’re all well positioned to benefit from a US-led North American economic recovery.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF) continues to build scale and is on the verge of becoming not just a leading North American but a top global provider of payment processing and other services to financial institutions.

Management is disciplined and has a solid track record, reflected in the company’s 30-percent-plus total return thus far in 2013.

Brookfield Real Estate Services Inc’s (TSX: BRE, OTC: BREUF) business model is such that it won’t see significant uptick in revenue during real estate booms. It’s also set up so that any housing downturn has very little impact on the company’s finances. It’s a rather humdrum investment, but Brookfield Real Estate did boost its dividend by 8.7 percent last month.

And evidence is mounting that Canada’s housing market will avoid a US-style crash.

Food and Hospitality

With the sale of food wholesaler and distributor Colabor Group Inc (TSX: GCL, OTC: COLFF) in the June 2013 issue we no longer have any Food and Hospitality exposure in the CE Portfolio. Colabor has posted a loss of 34.53 percent thus far in 2013.

Like the rest of the group, which for the most part includes companies that collect royalties based on the use of their brands by franchised restaurants, Colabor’s fortunes are tied to the well-being of the North American economy. The group has posted an average US dollar total return of 14 percent in 2013.

Among them only Liquor Stores NA Ltd (TSX: LIQ, OTC: LQSIF), the largest publicly traded owner/operator of liquor store in North America, is trading below my recommended buy-under target as of this writing. Alcohol consumption is notoriously recession-resistant, as people drink to celebrate good times and to ease the sorrow of bad times. At least that’s the cliché.

Liquor Stores has seen only tepid same-store sales growth, though cash flow generation is strong. But the last dividend move was a cut announced in January 2011, from CAD0.135 per share to the current level of CAD0.09 per month.

Health Care

Long-term senior and post-acute facility owner/operator Extendicare Inc (TSX: EXE, OTC: EXETF) has had a rough time in the US due to government-mandated cuts to medical funding.

The Aggressive Holding recently announced a strategic review that will consider the very specific question of how best to separate its US and Canadian operations. Canada has actually been a source of solid growth for the company.

The stock is down about 10 percent this year. But Extendicare has posted a 22 percent rally off its CAD5.45 closing low on the TSX on May 1, shortly after it announced a 42.8 percent dividend cut.

Extendicare remains a buy under USD7.

Medical Facilities Corp (TSX: DR, OTC: MFCSF) has been the star of the group, with a total return of 23.27 percent this year. The owner/operator of specialty surgical centers in the US Midwest hasn’t been hurt by Medicare cutbacks and continues to post solid financial results. It also benefits from business from non-Medicare, non-Medicaid patients. The only problem right now is price. But this is a solid company and a reliable dividend-payer that operates in regions of relative economic strength.

Transports

With an average total return of 28.87 percent thus far in 2013 this group of railroad, trucking, school bus and incentive plan businesses has been the star of the How They Rate coverage universe.

Even the laggard, Chorus Aviation Inc (TSX: CHR/B, OTC: CHRVF), is in the green with a total return of 2.72 percent. Best of the bunch is Canadian Pacific Railway (TSX: CP, NYSE: CP), which will continue to benefit from the rise of crude-by-rail as a solution to Canada’s and North America’s energy infrastructure issues, as will its main domestic competitor Canadian National Railway (TSX: CNR, NYSE: CNI).

Both stocks, however, look pricey at these levels.

A longtime member of the CE Portfolio, TransForce Inc (TSX: TFI, OTC: TFIFF) last month announced an 11.5 percent dividend increase. That drove a significant increase in its buy-under target to USD23. It’s currently trading just above that level. Again, patience will pay off with ownership of a business that continues to acquire smaller truckload, less-than-truckload and other logistics companies that complement and expand its existing services.

TransForce’s operations thrive when the North American economy is expanding. But management’s disciplined approach and conservative financial policies position it for expansion during economic slowdowns.

Student Transportation Inc (TSX: STB, NSDQ:  STB), continues to build its school transportation business, taking advantage of budget-cutting school districts by negotiating directly with parent groups to establish services in several Florida communities.

Among other non-Portfolio favorites, WestJet Airlines (TSX: WJA, OTC: WJAFF) is enjoying a phenomenal period of growth. The company declared its first-ever dividend in November 2010, CAD0.05 per share per quarter, and has already increased it three times, to the present level of CAD0.10.

All signs point to a 20 percent increase in February 2014.