Peter Hodson, founder and head of research at 5i Research
Focus: Canadian small and mid-cap stocks

MARKET OUTLOOK

Investors continue to look for reasons to be negative while the market continues to roll higher: Impeachment, China, valuations, the new virus scare, government debt, housing, you name it. Investors will use any excuse not to be bullish.Yet, corporate earnings have a very easy year-over-year comparison, interest rates are low and the Fed is accommodating and Trump will likely behave himself and keep his tweets under control at least until the November election.

Fund managers who held cash last year are going to lose clients and they will likely start spending some money. This and short covering may be driving the short-term rally, but if we look beyond this the fundamentals are still pretty good. We will worry more when there is nothing to worry about.

TOP PICKS

Peter Hodson's Top Picks

Peter Hodson, founder and head of research at 5i Research, discusses his top picks: Kinaxis, Lightspeed, CAE Inc.

KINAXIS (KXS TSX)

Kinaxis had a blowout third quarter. The company offers a robust supply chain, sales and operational solution globally. As clients become more comfortable with its software benefits, the potential for them to order large-scale global rollouts becomes very interesting for Kinaxis. This could drive revenue/earnings acceleration. The company has $200 million in cash and 2019 earnings should double from 2018 levels when they’re released.

LIGHTSPEED (LSPD TSX)

Lightspeed is a new public company in the point-of-sale/payment space. We might not go as far as calling it the “new Shopify,” but so far so good (it’s up 2.5 -fold from its March 2019 IPO).This is a very high-growth company with huge potential. It comes at a very high valuation and share price volatility, but there is a big shortage of tech growth companies in Canada. It has a large net cash position and recently used its expensive stock to make an attractive acquisition. Lightspeed is already up more than 20 per cent in 2020. The company cancelled a planned equity issue last year and thus there is short-term risk.

CAE INC (CAE TSX)

We have liked CAE for a while. One of the reasons is the difficulty of new competitors entering the airline training space. The Boeing fiasco of course only highlights the need for more training on simulators. CAE has a large backlog and earnings growth looks solid. At 28 times earnings it’s not cheap, but its last earnings beat by 12 per cent and it raised its dividend by 10 per cent last year.

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
KXS N N Y
LSPD N N Y
CAE N Y Y

 

PAST PICKS: FEB. 20, 2019

Peter Hodson's Past Picks

Peter Hodson, founder and head of research at 5i Research, discusses his past picks: Shopify, Constellation Software, Micron Technology.

SHOPIFY (SHOP TSX)

  • Then: $236.35
  • Now: $619.65
  • Return: 162%
  • Total return: 162%

CONSTELLATION SOFTWARE (CSU TSX)

  • Then: $1158.44
  • Now: $1409.15
  • Return: 22%
  • Total return: 25%

MICRON TECHNOLOGY (MU NASD)

  • Then: $42.21
  • Now: $59.53
  • Return: 41%
  • Total return: 41%

Total return average: 76%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
SHOP N N Y
CSU N N Y
MU Y N N

 

FUND PROFILE

5I Research Model Growth Portfolio

  • 1 month: 1.9% fund, 0.45% index
  • 1 year: 33.3% fund, 22.9% index
  • 3 years: 8.3% fund, 22.1% index

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WEBSITE: www.5iresearch.ca