Jordan Zinberg, president and CEO, Bedford Park Capital
FOCUS: Canadian small and mid cap equities
Top Picks: McCoy, Goeasy, Bird
MARKET OUTLOOK:
After a muted second quarter, Canadian equities performed very well in the third quarter of 2024. There were no summer doldrums this year for Canadian stocks, as the third quarter featured substantial volatility as well as continued merger and acquisition activity.
Drilling down into Canadian equity market attribution for the third quarter, there was a clear shift in investor preferences with a few previously out of favour sectors generating strong outperformance. Unsurprisingly, interest rate sensitive sectors such as telecom and real estate were standout performers, given the current downward trajectory of interest rates. Notably, sentiment has already shifted again so far in the fourth quarter with energy and materials stocks leading the way.
Our current focus is on third quarter earnings, and we will be watching closely for clues about each company’s prospects for 2025 and beyond. The current interest rate easing cycle provides an excellent backdrop for equities, and the opportunity set within Canadian small and mid cap stocks continues to be robust.
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TOP PICKS:
McCoy Global (MCB TSX)
McCoy is an oilfield services company that we added to our portfolio recently. The company specializes in technology driven solutions used in well construction that reduce the amount of labour required on the rig floor, which lowers costs while improving worker safety. The balance sheet is pristine, the company is highly profitable, and we expect the stock to rerate as recurring revenue increases substantially in 2025 and 2026.
Goeasy (GSY TSX)
Goeasy has been one of Canada’s best performing financial stocks over the past decade. The stock was down 15 per cent over the past week after the company announced a debt refinancing along with a slight reduction in third quarter revenue yield guidance. We believe that the sell off in the shares is not warranted and that current levels represent an excellent entry point for investors, with the stock now trading under eight times 2025 consensus earnings.
Bird Construction (BDT TSX)
Bird is a construction and maintenance business that operates across Canada. Management recently announced aggressive three-year growth targets as well as a 50 per cent increase to their dividend. This company has a very healthy backlog, margins should continue to expand, and both top and bottom line growth have been impressive.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MCB TSX | Y | Y | Y |
| GSY TSX | Y | Y | Y |
| BDT TSX | Y | Y | Y |
PAST PICKS: July 4, 2023
Mainstreet Equity Corp (MEQ TSX)
- Then: $137.60
- Now: $203.95
- Return: 48%
- Total Return: 48%
Lumine Group (LMN CVE)
- Then: $18.23
- Now: $32.40
- Return: 78%
- Total Return: 78%
Source Energy Services (SHLE TSX)
- Then: $5.00
- Now: $12.90
- Return: 158%
- Total Return: 158%
Total Return Average: 95%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MEQ TSX | Y | Y | Y |
| LMN TSX | Y | Y | Y |
| SHLE TSX | Y | Y | Y |