Investment analyst top picks from a panel at the Cantech 2015 Investment Conference in Toronto, held on January 15, will likely be ones to remember. Of the six stocks mentioned, two notched gains of more than 100% and one moved up more than 50%, for an average return of about 46% in the 10-month period since.
Kinaxis Inc. (TSX: KXS): +140%
This was the top pick from Robert Young of Canaccord Genuity. He liked the recurring revenue, predictable business model (subscription software), and strong growth prospects for this company. Kinaxis is a provider of cloud-based subscription software that enables customers to improve and accelerate analysis (modelling) and decision-making across their supply chain operations in a matter of minutes and seconds, as opposed to days with some of more established software providers. Mr. Young added that the predictability of Kinaxis’ revenue model is “very high.” During its most recent quarter (Q3), the Company saw its revenue surge 34% to $23.7 million, while its profit for the period rose to $3.8 million from $2.5 million a year earlier.
TIO Networks Corp. (TSXV: TNC): +102%
PI Financial’s Pardeep Sangha chose this company as his second pick. TIO is a cloud-based bill payments processor that processes bills for wireless service providers, such as AT&T, and utility companies, such as PG&E. At the time, Mr. Sangha believed the Company was in a good growth phase, generating $50 million in revenue last year while he expected more than $70 million in revenue in 2015. TIO Networks’ stock price jumped 17% on July 14 after the Company said it would acquire Softgate Systems, Inc., a provider of consumer retail bill payment solutions, in a cash-and-stock transaction valued at approximately US$31 million. Softgate’s 2014 revenue grew 18% to US$36 million.
COM DEV International Ltd. (TSX: CDV): +54%
This was the second pick from Daniel Kim of Paradigm Capital. COM DEV has been in business for 25 years and has an 80% market share in the technologies that it delivers, that is components for satellite companies that send their products into space, he said. Although COM DEV only grows its business about 5% a year, the company has invested about $100 million in a new industry – tracking ships at sea in real time. This business is now profitable, he contends, growing at 50% per year and could potentially double the earnings of the company. On November 5, 2015, Honeywell International Inc. announced it would buy COM DEV in a C$455 million deal.
Espial Group Inc. (TSX: ESP): +15%
Both Massimo Voci of Haywood Securities and Pardeep Sangha liked this stock. Espial develops software for Smart TV manufacturers as well as Smart Top box vendors and has a recurring revenue model. On January 13, 2015, after the close of trading, the company announced a major contract with European Tier 1 Cable operator and its stock price surged more than 30%. Mr. Voci asserted that “there’s a huge change going on cable industry today,” adding that Espial is delivering the “superior, Netflix-like experience” to cable operators and was winning substantial contracts. Mr. Sangha, meanwhile, believed the Company’s share price could double from the $2 a share level at the time, which it did by April 14. Espial stock price, however, sank 30% on October 29, 2015, after the Company disclosed that a North American cable operator does not intend to deploy Espial’s software on its next generation platform going forward.
QHR Corporation (TSXV: QHR): +3%
Mr. Voci’s second stock pick was considered by him to be a “safer” name – high recurring revenue (more than 80%) but lower growth. QHR produces electronic medical records and other software in the healthcare industry. About 50% of doctors in North America are still using paper medical records, he said. The transition is occurring at rate of about 10% to 15% per year. Mr. Voci believed the company had been trading at a depressed multiple because it has a small U.S.-based business that’s been burning cash and weighing on QHR’s profitability. The company, though, had made some organizational changes to its U.S. operations that will hopefully help drive growth this year. Investors who bought this stock after the Conference could have made a 30%+ gain had they sold at its March 5 high, but would be basically breaking even if they were still holding it today (Nov. 11).
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Baylin Technologies Inc. (TSX: BYL): – 38%
Daniel Kim liked this company for its “world-class technology that approaches massive markets that are growing quickly.” Born out of Israel, Baylin began developing antennas for smartphones and 10 years ago became the main antenna supplier for Samsung. Mr. Kim admitted that the company has disappointed from its IPO price and Samsung has made many missteps and Baylin suffered as a result, seeing that Samsung provided more than 70% of the company’s revenue.
He believed the company had now begun to diversify, though, into infrastructure via cellular repeaters, which are miniature ‘base stations’ that go into ceilings of public rooms to provide cellular data, as well as into stadiums to provide audience members with a truly immersive video experience. It has also entered the home gateway market, through WiFi and cable boxes, and is working with companies such as Cisco Systems. Unfortunately for Baylin 2014 wasn’t a great year financially, as its revenue fell to $44.9 million from $80.1 million while swinging to a per-share loss of $0.75.