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Echelon Capital Markets’ “Top Picks Portfolio” reported a solid return of 19 per cent in 2021, but it still underperformed the S&P/TSX Composite Index and S&P/TSX Small Cap Index, which rallied 25 per cent and 20 per cent, respectively.

A major detractor to the portfolio’s performance was its absence of energy stocks, the top performing sector in 2021 with many small-cap energy stocks realizing triple-digit returns. Also hurting the portfolio’s performance was the strength in large-cap stocks.

“The outperformance of large cap stocks in the second half of the year has hindered the Top Picks Portfolio, which tends to favour catalyst-rich, small-to-mid capitalization companies where growth is a clear focus,” the firm said. “While the small cap outperformance has reversed in H221 [second half of 2021], we look for investors to remain focused on high-quality small cap names with specific catalysts or underlying secular growth trends in an environment where low real interest rates are expected to persist.”

Echelon’s “Top Picks Portfolio” is characterized as, “An aggressive, catalyst-rich portfolio of high-growth, entrepreneurial companies. We have benefitted from positive catalysts with take-outs, product launches, mine developments/resource enhancements, and regulatory approvals all common events. We specifically strive to select stocks that are catalyst-rich supported by proven execution, positioned for high growth, and backed by strong economics.”

The securities in the Portfolio are primarily small and mid-cap growth stocks along with several micro-cap stocks, which can be thinly traded and volatile. As a result, many of these securities are best suited for consideration by investors with a high risk tolerance within a well-diversified portfolio.

Here is Echelon Capital Markets’ updated “Top Picks Portfolio” of 15 stocks for the first quarter of 2022:


Ayr Wellness Inc. (AYR-A-CN) with a target price of $75. The average target price is $70, implying a potential return of 250 per cent.

Analyst Andrew Semple: “We do not see convincing reasons for the company to trade at such a steep discount. Ayr has closed its most significant announced M&A [merger and acquisition] transactions, continues to deliver solid financial results, and is adequately funded to execute on its organic and acquisitive growth plans. We believe the closing of several pending acquisitions including Herbal Remedies and Dispensary 33 in Illinois, Tahoe Hydro in Nevada, and the beverage company Levia could further solidify the financial outlook for 2022. In addition, adult-use sales in New Jersey (expected to begin in Q222), adult-use store approvals in Massachusetts, and the potential to announce new M&A transactions given the company’s fully funded balance sheet may be catalysts for the shares to outperform. Furthermore, positive progress on new construction projects in Pennsylvania and Massachusetts and relief from supply chain constraints may help move the shares towards our target price.”

Columbia Care Inc. (CCHW-CN) with a target price of $14. The average target price is $13.38, implying a potential return of 252 per cent.

Analyst Andrew Semple: “We continue to view Columbia Care as significantly undervalued, and the company could deliver much stronger-than-forecasted results as it is likely to be an early mover in the attractive Virginia, New York, and New Jersey cannabis markets, some of the highest growth cannabis states in America.”

Verano Holdings Corp. (VRNO-CN) with a target price of $40. The average target price is $36.57, implying a potential return of 131 per cent.

Analyst Andrew Semple: “Verano continues to have ample catalysts for outperformance in 2022 and Q122. We believe the company is exceptionally well-positioned to be a leading business in the upcoming New Jersey and Connecticut adult-use markets. First adult-use sales in each state are expected to begin in 2022, with New Jersey (expected Q222) the most imminent opportunity. New M&A, Q421 results, and operational milestones (e.g., completion of production facility expansions, new dispensaries, etc.) also offer to be catalyst events.”

Special Situations

Redishred Capital Corp. (KUT-X) with a target price of $1.65. The average target price is $1.54, suggesting a potential gain of 71 per cent.

Analyst Amr Ezzat: “With freshly raised capital ($8.6-million at $0.88 per share, including the full exercise of the over-allotment option) and many of the company’s franchisees up for renewal in the next three years, we expect management to go cherry picking and deploy more capital into accretive tuck-ins. The acquisitions highlight KUT’s low-risk sizeable M&A pipeline. We estimate that KUT can more than double its revenues through the roll-up of its franchisees.”

Calian Group Ltd. (CGY-T) with a target price of $85 (the high on the Street). The average target price is $78.13, suggesting a potential return of 34 per cent.

Analyst Amr Ezzat: “The stock has tripled in the last three years, as management transitioned its philosophy and growth strategy from what was a ‘steady Eddie’ operator with stable revenues/earnings, to one seeking to capitalize on growth in a more aggressive fashion. We argue that the Street has consistently underestimated valuation by failing to recognize the accretion potential of M&A on Calian’s earnings and more importantly on its valuation.”

Converge Technology Solutions Corp. (CTS-T) with a target price of $14.50. The average target price is $13.60, suggesting a potential return of 31 per cent. The analyst has a “speculative buy” recommendation.

Analyst Rob Goff: “While supply chain constraints negatively impacted Q321 revenues and EBITDA [earnings before interest, taxes, depreciation and amortization], consideration of the record bookings at $250-million (+$200-million year-over-year) clearly reveals that the quarter would have significantly surpassed expectations except for the supply challenges … We look for Q421 results to be judged against revenues plus bookings. Consequently, we look for revenues plus booking to reflect strong demand. We do caution that bookings may be boosted by clients advancing orders to be earlier in the queue as supply deliveries are received. We look for a significant catch-up in H222 as pent-up demand can be met.”

Quisitive Technology Solutions Inc. (QUIS-X) with a target price of $2.75. The average target price is $2.52, suggesting a potential return of 114 per cent. The analyst has a “speculative buy” recommendation.

Analyst Rob Goff: “We look for organic revenue growth to exceed expectations while QUIS adds shareholder value through accretive acquisitions. Expectations for a transformative 2022 are led by LedgerPay [the company’s cloud-based payment processing and data insights platform] commercialization and accretive ISO [independent sales organizations] acquisitions.”

Healthcare & Biotech

DIAGNOS Inc. (ADK-X) with a target price of $1.55, suggesting a potential return of 297 per cent. Echelon Capital Markets is the only firm covering this penny stock. The analyst has a “speculative buy” recommendation.

Analyst Stefan Quenneville: “DIAGNOS Inc. (ADK) remains a Top Pick in anticipation of the finalizing of the August 2021 MoU [Memorandum of Understanding] with EssilorLuxottica/GrandVision, the world’s largest eye care company, to utilize DIAGNOS’s Computer Assisted Retinal Assessment (CARA) platform to offer Diabetic Retinopathy screenings across 8,000-10,000 of their worldwide locations … While the timeline and scale of a potential deal remain uncertain for now, concluding a deal with EssilorLuxottica would be a game-changer for ADK given the sizeable financial opportunity and the industry validation of its technology platform. To address this optionality, we are conservatively assuming a 50 per cent probability that a deal will be concluded, and that the technology will be rolled out to 4,000 locations over 24 months starting in mid-C2022.”

Quipt Home Medical (QIPT-X) with a target price of $11.25. The average target price is $12.68, suggesting a potential return of 70 per cent.

Analyst Stefan Quenneville: “While the fragmented DME market provides ample opportunity for accretive acquisitions, Quipt has achieved a regional scale that would make it an attractive target for one of the handful of larger national players… The company has grown to a revenue run rate of US$112-million, primarily via acquisitions. The vast majority of the over 6,000 DME suppliers in the U.S. are very small players, providing Quipt with ample targets that fit its M&A criteria of approximately $5-20M in sales, EBITDA margins of 10-20 per cent and attractive, accretive multiples (5-7 times trailing EBITDA).  Management has a consistent track record of quickly driving synergies and improving margins to its roughly 20 per cent corporate level, resulting in post-integration prices closer to 2-4 times EBITDA. In addition, Quipt is able to pay attractive prices as it rarely competes with the much larger national players for deals of this size.”

Real Estate

BSR REIT (HOM-UN-T) with a target price of U.S.$21. The average target price is US $20.15, suggesting a potential price return of 12 per cent, not including the yield.

Analyst David Chrystal: “BSR is uniquely positioned among Canadian-listed REITs to benefit from unprecedented rent growth in the U.S. Sunbelt, with a portfolio highly concentrated in three high-growth Texas markets. Rapidly rising market rents combined with no regulatory restrictions on marking expiring leases to market should allow BSR to deliver sector-leading organic growth over the next 12 months.”

Killam Apartment REIT (KMP-UN-T) with a target price of $25.75. The average target price is $25.87, suggesting a potential price return of 14 per cent.

Analyst David Chrystal: “Over the course of 2022, we expect Killam to deliver nearly 500 apartment suites across five development projects, with a total cost of approximately $240-million. While the full FFO [funds from operations] contribution will not occur until 2023, we expect that completion of these developments could drive a fair value gain of $60 to $70-million ($0.55-0.65/unit).”

Precious Metals

Silver X Mining Corp. (AGX-X) with a target price of $1. The average target price is 88 cents, implying a potential return of 167 per cent. The analyst has a “speculative buy” recommendation.

Analyst Gabriel Gonzalez: “: Silver X is expected to issue 2022 production guidance and declare commercial production in short course, which we believe will draw greater investor attention to the Company and help to revalue the shares. We believe that a $4-million convertible debenture maturing on June 30, 2022 (convertible at $0.4677/share) could overhang the stock in the short term, but production and cash flow visibility from guidance, as well as completion of several quarters of production as a public company (since Q321) could provide enough momentum for the shares to revalue higher through Q1/Q222. An updated resource estimate and PEA [preliminary economic assessment] in Q222 should also provide additional investor confidence in production at Nueva Recuperada.”

Osino Resources Corp. (OSI-X) with a target price of $2.20 for this gold exploration and development company. The average target price is $2.60, implying a potential return of 136 per cent. The analyst has a “speculative buy” recommendation.

Analyst Ryan Walker: “Our positive view reflects a significant (approximately 2-million oz) resource, robust PEA economics, and substantial exploration potential on a very large land package in an established mining region in politically stable Namibia. We expect imminent technical studies to demonstrate the potential for higher production of approximately 150,000 oz/year (vs. the PEA at approximately 100,000/year) which should broaden OSI’s appeal amid a new wave of sector M&A activity. We also highlight potentially swifter permitting in Namibia in this regard.”

Pan Global Resources Inc. (PGZ-X) with a target price of $1.30, implying a potential gain of 71 per cent. Echelon is the only firm covering this penny stock. The analyst has a “speculative buy” recommendation.

Analyst Ryan Walker: “Armed with approximately $17-million in cash, PGZ plans aggressive exploration at Al Andaluz.”

ESG & Energy Transition

E3 Metals Corp. (ETMC-X) with a target price of $5. The average target price is $4.57, implying the share price may rally 71 per cent. The analyst has a ‘speculative buy’ recommendation.

Analyst Michael Mueller: “With demand for battery-quality lithium expected to substantially increase before the second half of this decade, E3 is positioning itself to be a top-tier North American provider of lithium hydroxide monohydrate (LHM), a key component of lithium-ion batteries used in electric vehicles…We believe E3 is in a position to outperform its peers in the near term after a period of relative underperformance in H221 [second half of 2021] and a number of material milestones expected in 2022, which we believe will garner attention to the Company’s PEA-level Clearwater brine project in Alberta.”

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