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Often an investor will ignore a stock just because it is ‘up’. This can be a costly mistake as a rising share price usually means things are going well in the underlying business and may continue to do so as markets wake up and adjust to what is happening. Here are three companies whose share prices are on the rise and we think should not be ignored by investors.

Great Canadian Gaming (GC-T)

We discussed Great Canadian in a recent investment ideas article in The Globe and Mail, but it is a company that deserves greater investor attention. GC is a company we cover at 5i Research and hold in one of our model portfolios. It operates casinos across Canada and is known for the River Rock casino in B.C. More recently, however, the company has won two large gambling “bundles” in the Greater Toronto Area in partnership with Brookfield Business partners on one bundle and Clairvest Group for the other. (A gambling bundle consists of a group of gambling assets – casinos, slots, etc. –within a certain geographic territory.) Over the past year, GC is up 130 per cent and up 63 per cent over the past three months.

Why Great Canadian is on the move

While the recent news of the gambling bundles has helped shares, it is the results the contracts have recently brought in that have helped the stock move significantly higher. Revenues were up 62 per cent on the quarter with only 68 days’ out of roughly 90 days’ worth of results from a single bundle being included. If the actual growth number was not impressive enough, GC beat analyst estimates on revenue and earnings per share (EPS) by 55.9 per cent and 80.5 per cent respectively. Investors may look at the chart and ignore the stock because of the gains it has already seen, but ignoring this company for that reason could be a mistake. GC still has one more gambling bundle to be included in results and the first bundle has not yet had a full quarter worth of revenues included in results yet. Also, we tend to find that when a company has a big beat versus estimates, the trend tends to continue for a few quarters as analyst estimates take time to catch up, so more ‘beats’ could be in the cards for Great Canadian.

The Stars Group (TSGI-T)

We have covered The Stars Group since it was called Amaya and was considered a small-cap stock. Now, The Stars Group is one of the largest online gambling providers in the world and owns some of the best brands in the space such as PokerStars. TSGI is up nearly 95% in the last year and just shy of 30 per cent in the past three months.

Why The Stars Group is on the move

Things have been busy at TSGI. The company made a $315-million purchase of an Australian online sports-betting business in Australia. In an attempt to make this sizable acquisition obsolete, TSGI then announced a $4.7-billion acquisition for Sky Betting & Gaming. Finally, the US Supreme Court then ruled that states can allow sports betting if they so choose to, essentially increasing the total addressable market available to a company such as TSGI. Add in a string of strong quarterly results and there are a lot of reasons behind the rise in shares of TSGI.

Photon Control (PHO-T)

Moving away from companies coincidentally operating in the gambling industry, Photon Control produces sensors for the semiconductor industry. So, investors looking for a way to have exposure to a growing semiconductor space but not wanting to own them directly may want to consider a company such as Photon Control. While higher risk than the above-mentioned stocks, Photon Control is a little-known company in Canada with shares up roughly 62 per cent over the past year and 35 per cent over the past three months.

Why Photon Control is on the move

Photon recently up listed from the Venture exchange to the TSX. This often opens the company up to a larger set of investors who can purchase shares and brings the company onto the radars of investors that may not have been aware of the company previously. On top of this recent development, Photon posted record revenues and backlog in the recent quarter.

While past performance is never a guarantee of future success, strong performance is also not a reason to ignore a stock, in our view. All of these companies are worth further investigation for an investor and are undergoing changes that could benefit the long-term fundamentals of the business outside of the recent returns.

Disclosure: The writer holds no positions in the above-mentioned stocks. In order to remain conflict-free, employees of 5i Research cannot trade in Canadian stocks.

Ryan Modesto, CFA, is CEO at 5i Research, a conflict-free investment research provider for retail investors offering research reports, model portfolios and investor Q&A, which is available to try for free. 5i Research provides content under an agreement with The Globe and Mail, which receives royalty compensation.

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