Stocks are tumbling into bear markets and economies are falling into recessions. Put away that fear, my friend. For centuries, bear markets and recessions have provided opportunities to scoop up shares on the cheap.
Of course, the exact bottom can’t be timed. It may be next month or next year. In short, you may need the patience of Job to watch your purchases slip and slide for a while before the turnaround kicks in (or, instead of passively watching, buy some more shares at even better bargains).
How to find good companies to invest in? One way is with the help of the brokerage analysts whose stock picks have performed well enough to earn a five-star ranking on TipRanks.com. This top ranking indicates they have good stock-picking skills and some independence from having to support the underwriting department whenever it issues dross.
I went looking for five-star analysts and their recent Canadian stock picks to get some buys issued as of last week. The following recommendations were among those that popped up.
BRP Inc. (Robin M. Farley at UBS Group)
BRP Inc. (DOO-T) was founded in 1937 by Joseph-Armand Bombardier to make snowmobiles, including the iconic Ski-Doo brand introduced in the 1960s. In the 1970s, the Valcourt, Que.-based company continued operations as part of Bombardier Inc. but was spun out in 2003 and now manufactures newer generations of snowmobiles, personal watercraft and other recreational vehicles.
For the quarter ended April 30, financial results were affected by supply chain disruptions. Revenue was $1.8-billion, down slightly from the same quarter last year, while earnings per share came in at $1.66, ahead of expectations but 35 per cent below last year.
The company’s valuation is about half its historical average, which makes its stock a value buy, according to Ms. Farley at UBS Group. She believes earnings will improve in quarters ahead as supply disruptions clear up and new products are launched.
Caisse de depot et placement du Québec, which manages Quebec’s public pension plan, owns more than 10 per cent of BRP’s shares. In June it purchased another $15-million worth at an average price of just under $90. The company has a good growth trajectory, as reflected in a stock-price gain of more than 230 per cent since its initial public offering in 2013.
Tecsys Inc. (Deepak Kaushal at BMO Capital)
Tecsys Inc. (TCS-T) develops and sells supply-chain-management software in Canada, the United States and internationally. For its fourth quarter ended April 30, the Montreal-based firm reported revenues slightly below consensus expectations but 6 per cent higher than for the same quarter last year. Net income increased 30 per cent, to $2.6-million.
Mr. Kaushal initiated coverage of Tecsys in April with an outperform rating. In his report, he said the company is transitioning to a software-as-a-service business model and should be able to leverage “its leadership in the healthcare and complex distribution industries to sustain organic growth and expand margins, as supply chain technology has become more critical.”
In his July 4 research report, he maintained his outperform rating despite revenue declines in the company’s legacy business, arising from the transition to the new business model. “That said, we remain confident in … a return to margin expansion in H2/F23 as record backlog improves capacity utilization and elevated investments normalize.”
AltaGas Ltd. (David Quezada at Raymond James and Benjamin Pham at BMO Capital)
AltaGas Ltd. (ALA-T) operates regulated natural-gas utilities in the US and midstream assets in the Western Canadian Sedimentary Basin. In the quarter ending March 31, the Calgary-based company recorded net income of $380-million on revenues of $3.89-billion. It is a defensive play, paying a dividend yielding almost 4 per cent.
Analysts such as Mr. Quezada and Mr. Pham have applauded the company’s recent acquisition of the remaining stake in Petrogas Energy Corp. that it did not already own, giving AltaGas full control of the company. The transaction will be immediately accretive to earnings, financed without issuing new equity, and supportive of AltaGas’s capacity to export liquefied petroleum gases from the West Coast.
Larry MacDonald also writes at Investing Journey
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