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Summer is coming to an end and scenic views of boats and lakes are being replaced with cars, construction and computer screens. The e-mails come in more frequently; phones start ringing and the markets, after a fairly quiet few months, start to buzz a bit more. Naturally, as attention drifts to other things over the summer, investors can get a bit out of the loop. To help you hit the ground running this September, we wanted to highlight a few names of interest that may have been missed while on vacation.
Friday close: $6.05
Pure Technologies Ltd. inspects water pipelines and oil and gas pipelines with various tools and is featured in the Globe Data Store.
The company is able to find weaknesses in prestressed concrete cylinder pipes, critical to the transport of water in cities before the pipes fail. This allows cities to fix the pipe before it becomes an issue, extending the life of the infrastructure. This is opposed to a more broad-brush and costly strategy of just replacing sections of pipe due to age.
What is interesting about Pure is that the company is also moving into the oil- and gas-pipeline business (known as PureHM) and seeing good growth in this area with revenue growing by 27 per cent and 71 per cent year over year in the recent three-month and six-month periods, respectively. The cherry on the top in our view for Pure is that this company helps to cater to two popular investment themes currently: water and infrastructure.
The infrastructure theme is self-explanatory but if an investor wants exposure to water, owning a company that monitors the pipelines that transport water and waste water could be a good place to start. The one factor that may hold investors back here is a higher valuation, but one that we think is deserved.
Friday close: $43.60
This is a more recent addition to our Balanced Equity Model Portfolio, which has returned over 100 per cent since we started the model portfolio back in March, 2013. New Flyer Industries Inc. has a "simple" business in that it makes buses, but it is one of those companies that continually reward shareholders.
The company holds roughly a 50-per-cent market share, the dividend has grown by 65 per cent (changed from monthly to quarterly) over five years and the company is not afraid to make acquisitions to remain competitive.
Additionally, New Flyer has a track record of surprising markets to the upside by beating analyst estimates (materially) over the past six quarters for earnings per share and over the last three quarters on revenue. What's particularly interesting with New Flyer is that even after a 120-per-cent return over the past year, the stock still looks cheap given a forward P/E ratio of about 14.
Friday close: $7.34
Absolute Software Corp. is a company that has gone through a bit of a restructuring in the past years with the sale of some businesses and now looks ready to be back on the growth path, targeting 7- to 10-per-cent revenue growth in 2017 while investing in research and development. This news of higher- than-expected investment for the next year sent shares down nearly 15 per cent, which we think opens up an opportunity for yield-hungry (but higher-risk) investors who are willing and able to look past a single year when investing.
Even if 2017 turns out to be a lacklustre year for the stock, as the company positions itself for growth, investors still receive a 4.5-per-cent yield. Meanwhile, insiders own just over 15 per cent of shares and the company has the potential to repurchase up to 10 per cent of the public share float. Add in a strong balance sheet and recurring revenues at 97 per cent and there are a good number of reasons why Absolute Software should be on an investor's radar. The recent drop brought the yield of this name down to a level where we were happily able to add it to our model income portfolio.
Friday close: $30.75
Spin Master Corp. is a stock that reminds us of our childhood. The company produces toys under brands such as Meccano, Paw Patrol and Air Hogs and even recently purchased Etch A Sketch and has differentiated itself in the past through integrating technological features into its toys.
Since analysts began covering this name, Spin Master has beaten revenue estimates every quarter (four quarters so far) and even after a 46-per-cent rise in the share price over the past year, Spin Master shares are still relatively cheap at 16 times next years earnings.
The shares of Spin Master, in our view, draw a lot of parallels to New Flyer mentioned earlier. Similar to Absolute Software, Spin Master also has significant insider ownership at over 17 per cent (but there was some very modest insider sales in August) and a strong balance sheet to help fund future growth.
While all of the above-mentioned stocks will not fit all investor types, it can save a lot of time if investors at least build a watch list of companies to keep on your radar, so when something changes, the stocks can be quickly referenced and considered as an addition to a portfolio. Hopefully these names make building that list a bit easier.
Ryan Modesto is managing partner with 5i Research. 5i Research offers conflict-free investment research for DIY investors. You can purchase individual reports in the Globe Data Store.