Peter Hodson is head of research at 5i Research Inc. His focus is on Canadian small- and mid-cap stocks.
Amaya Gaming Group Inc.
Three very good acquisitions have set Amaya up for excellent growth, and it is well-positioned to benefit from legalization of online gaming. Revenue growth will be big this year, and the company is becoming profitable. It is well-managed, has excellent shareholder support and is a relatively unique name in Canada
Contrans Group Inc.
Contrans is a transport company, with big leverage to the economy. It recently raised its dividend by 25 per cent, and business is good. It has survived many downturns in the business, and we think one day will be sold to a bigger player.
We think this is an interesting way to play the residential housing market, through property management and other services. A first-ever dividend is an extremely positive sign for small and mid-sized companies, and FSV declared its first on Wednesday. Earnings growth is very high, it is not overly expensive, and it hit a new high on Wednesday in the face of a very weak market tape.
Past picks: Feb. 19, 2013
Total return: +1.90 per cent
Total return: +8.85 per cent
Total return: +9.67 per cent
Total return average: +6.81 per cent
Despite some commodity weakness, we see more of the same in equity markets: slow, steady stock gains, based on rising profits, rising dividends, takeovers, and a world awash in liquidity. We would suggest a tax-advantaged, growing dividend of 3 per cent to 4 per cent is far superior to a tax-disadvantaged bond at 2 per cent. Investors remain skeptical, so valuations remain low. Cash is risky if inflation picks up; bonds are very risky if rates rise, and gold is not acting well at all. The default trade remains equities.
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