The fourth wave of COVID-19 is here. The number of cases in Canada is on the rise and while the situation isn’t as dire as it was in March 2020, there is still cause for concern. If the country does go into another lockdown, investors should be looking at stocks that will be able to survive and even grow during the lockdown.
There is also the case for higher inflation and increased interest rates which investors have to take into account. You need stocks that will beat these factors to give you a real rate of return. Here are four companies with the potential to deliver solid returns, irrespective of another lockdown.
Andrew Peller is one of Canada’s largest producers and distributors of wines and spirits. The company had a very good FY21 due to the pandemic. Andrew Peller is in a unique position where sales are expected to increase whether or not there is another lockdown.
The company’s sales for Q1 FY22 ended June 30 came in at $92.4 million, down 6.1% from Q1 FY21. Net earnings for June 2021 quarter were $3.3 million compared to $11.2 million in the corresponding quarter in the previous fiscal year.
If there is a lockdown, the situation will be similar to March 2020. The company said, “When the pandemic was announced in March 2020, the Company saw an increase in sales as a result of higher consumer purchases due to uncertainty around trade channels for alcoholic beverages remaining open.”
If the fourth wave of the pandemic is not as bad as the previous ones, and the economic recovery continues on the back of reopening, there will be a lot of revenge drinking which will see its sales go up. Andrew Peller said, “The Company’s sales in hospitality, licensee, and export channels remained impacted in the first quarter of fiscal 2022 due to government-mandated closures and restricted international travel. Many of these restrictions were lifted during June of fiscal 2022, and as a result, the Company expects sales in these channels to increase when compared to fiscal 2021.”
Andrew Peller increased its dividend by 10% in the June 2021 quarter. It now has a forward yield of 2.85%. The current stock price for the company is $8.57 and analysts have given it a target of $13.5, an upside of over 57%.
H2O Innovation is a water stock. It provides water solutions and specialized water to municipalities, utilities, and corporations. It had a very good 2020, where its stock price rose from $0.85 on April 1, 2020, to $2.85 on January 1, 2021, an increase of over 235%.
Since then, the stock has suffered and fallen to $2.65 but the promise of the company is strong. The company has consistently grown its revenues in the last three years, from $82.7 million in 2017 to $133.6 million in 2020, at a CAGR (compounded annual growth rate) of 17.31%. Today, 87% of the company’s revenues are recurring.
It deals in one of the most important resources that the world needs: Clean water. As municipalities look to preserve and manage their water more economically, H2O stands to make a killing. On July 26, the company announced that it had been awarded six new capital equipment projects in its Water Technologies & Services (WTS) business line and reached substantial completion on six others. These new contracts have brought its total WTS backlog to $34.8 million.
On July 20, it said it had signed a $10.4 million operation and maintenance (O&M) contract for the City of Laurel in Quebec for a period of 4 years. This has brought its O&M backlog to $83.2 million.
For Q3 FY21 ended March 31, 2021, the company reported revenue of $39.2 million, an increase of 8.6% over the corresponding quarter in the previous fiscal. Net earnings came in at $2.1 million compared to a net loss of $3.1 million for Q3 FY20. Net debt was reduced to $3.3 million from $10.5 million in June 2020.
The stock trades at $2.65 and analysts have given it a target of $3.61, a potential upside of over 36%.
Sylogist is a Canadian software company that pays a handsome dividend yield of 4.6%. The company provides enterprise solutions that are critical to its customers’ operations who include schools and government organizations among others.
The company reported its numbers for Q3 FY21, which ended June 30. Revenue came in at $9 million, 4% lesser than $10 million it had reported for Q3 FY20. It also reported a loss of $0.2 million before income tax compared to a $3.8 million profit in the corresponding quarter last fiscal year.
The company has a reputation of being a steady plodder but a new management team has drawn up plans to grow the company in a more aggressive fashion.
Bill Wood, CEO, and President said, “We also have now fully transitioned to an Agile product development methodology in which we release desired features and innovation on a faster, approximately monthly, cadence. These changes will help support accelerated growth in the coming quarters, strengthen customer connections, bolster our competitive position and improve operational excellence to support both organic and inorganic expansion going forward.
More specifically, we are investing in sales, marketing, and account management, with a view to enlisting and activating customer advocacy, driving high-quality leads, and expanding our thought leadership in the markets we serve.”
Analysts expect a positive re-rating on the company. The stock closed at $10.87 on August 17. Analysts have given it a target of $15.75, an upside of almost 45%.
Intertape is an offline play on the online space. If Canada goes into lockdown again, it’s good news for e-commerce players. It’s also good news for Intertape because this is the company that supplies tapes, wraps, and packaging to a lot of them.
Intertape knows that the e-commerce space will be a mainstay of its business and has been investing heavily to expand its e-commerce play. And the results have begun to show. 2020 was a record year for the company in terms of earnings, EBITDA (earnings before interest, tax, depreciation, and amortization), and cash flow. Revenue was up 41% to $376.7 million, net earnings increased 162% to $33.7 million and EBITDA increased 60% to $65.7 million
And if the fourth wave doesn’t come to pass, the company is protected as there will be a general recovery in the industrial space and offline retail. The company is now going down the inorganic route for expansion. This is a great value stock to buy in case of another lockdown scenario.