It’s that time of year again, earnings season! If you’ve been a member for any amount of time, you know there is a ton of content to be released here at Stocktrades Premium when earnings kick off, as we update our Bull List reports every time a company reports earnings.
It’s also even more jam-packed because we have our model portfolio updates going on right now. But first, let’s look at a couple Stocktrades Premium stocks that reported earnings last week.
Lightspeed Commerce (LSPD)
Lightspeed posted a strong 3rd quarter in which it topped estimates in terms of revenue, adjusted earnings, and adjusted EBITDA.
One of the key accusations in the short report issued last year was that Lightspeed could not grow organically, and needed to do so through large-scale acquisitions. This claim was put to bed in the quarter as the company posted over 70% organic growth in its subscriptions and transactions volume. If we do add in acquisitions, that grow balloons to 150%+.
The company also stated that it thinks a 35-40% annual organic growth rate moving into the future is achievable.
One of the main issues that caused a lot of panic from shareholders was CEO Dax Da Silva stepping away. To us, this is really not a surprise. He has mentioned stepping away as far back as 2015, and it is not that uncommon for a CEO with 15+ years at the helm to hand off the reigns to someone else. He will still be active within the company.
This is speculation by us, but we have a feeling this is why earnings were adjusted from market open on February 3rd to market close on February 2nd so that people could digest the news while markets were closed.
And on an interesting note, Blackrock, one of our US Foundational Stocks, recently took a large position in Lightspeed. The company filed a Schedule 13G, which is when a party takes ownership of 5% or more of the total shares outstanding of a company. Blackrock now owns 8.5% of Lightspeed, adding more than 11 million shares to their previous position.
We do not know the full details of the purchase, but we would imagine it will be spread out over the next while as to not create any large swings in volume.
Overall, we remain bullish on the company, and you can read our full updated report here
Open Text (OTEX)
Open Text (OTEX) delivered a solid quarter in which earnings of $0.89 per share met expectations and revenue of $876.5M beat by $4.48M.
Notably, the company closed on the Zix acquisition which led to an increase in Fiscal 2022 guidance. The company now expects cloud growth of up to 10% and total revenue growth of 4%. Also worth noting, the company secured several customer wins including Novartis and Volkswagen. In total, it signed 17 new partners. Overall, it was a steady quarter for this reliable tech company.
In our last report on Open Text, we mentioned this:
“As such, if the bottom were to fall out from the tech sector, we feel Open Text may be the company with the lowest volatility. In fact, we are seeing the bottom fall out of several tech stocks and OTEX is holding up quite well.”
And, this is certainly true in 2022. Through the start of the year, Open Text is down around 5%. XIT, the Canadian Technology ETF, is now nearly 3 times that.
It remains a solid dividend growth option in the Canadian tech sector. You can read our full report here.
Brookfield Renewables (TSE:BEP.UN)
Brookfield Renewable Partners (BEP.UN, BEPC) delivered a mixed quarter. FFO of $0.41 beat by $0.09 and revenue of $1.09B missed by $10M.
The company exited the quarter with more than 15K megawatts of capacity currently in late-stage development and has a development pipeline of 62K megawatts globally. On the day, it also announced its annual distribution increase. Brookfield raised the distribution by 5.3% to $0.32 per share which is inline with guidance for 5-8% annual dividend growth.
It is a Foundational Stock so there is no report on the company. However, if you’d like to view the complete update of our Foundational Stocks in 2022 if you missed it, you can click here.
Model Portfolios
There were a few changes to all of our Early Stage model portfolios this week. However, nothing overly major. Our Early Stage portfolios are growth-focused and as you’ve probably realized over the last 4-5 months, growth has taken a significant hit.
If you’re looking to download and view the portfolios, or even download the complete portfolio pack which contains our recent notes, portfolio overview, and reports on each individual company, simply click here.
Next week will be our Mid-Stage portfolios. But for now, let’s go over the Early Stages.
Early Stage Conservative
In terms of company performance, strong showings from the financial sector in TD Bank, Bank of Montreal, and Intact Financial have somewhat made up for struggling performances on two big bets in this portfolio, Shopify, and Parkland Fuels.
We’re still bullish on both these companies. In fact, Parkland Fuels is the largest holding inside of this portfolio at the time of the update, Shopify being the 2nd. There is no doubt both companies are facing some pressure in terms of share price, but it’s important we continue to have a long-term mentality.
In terms of moves, we’ve made some small ones. We’ve reduced our financials (Intact Financial, TD Bank, Bank of Montreal) down to 3% weighting each. Due to the run-up in financials, this portfolio was approaching 25% exposure to the sector.
Although we are certainly still bullish on the sector, we feel 25% may be a tad too much, especially when this portfolio lacked some exposure to industrials.
With the allocation room from this rebalancing, we’ve added recent Bull List stock Waste Connections (TSE:WCN) to the portfolio. Waste Connections has undergone its first double-digit correction in quite some time, and for a conservative portfolio that lacks exposure to the industrial sector, we felt it was a perfect time to add a defensive option like Waste Connections to the portfolio.
Since our last update in September, the portfolio is down around 2.26%, which is just slightly trailing its benchmark. Considering it has some stocks that are struggling in the short term in Shopify, Parkland, and Algonquin Power and Utilities, this is a strong sign that when sentiment returns to those companies, the portfolio is in a solid position to outperform, much like it has the majority of its existence.
Early Stage Moderate
This portfolio is about as close as it gets to a “if it isn’t broken, don’t fix it” type situation. However, we still do have some changes within it to help this one improve its outperformance.
The portfolio has annualized returns of 22% since its inception in 2018 and has outperformed its benchmark by 35% over that same timeframe. Considering this portfolio contains around 15% exposure to fixed income options (13.7% at the time of this update), north of 20% annual returns is a solid performance. In fact, as you’ll see later the Early Stage Aggressive portfolio has around the same returns, so this one is providing a better risk-adjusted return.
Over the short term, much like the other Early Stage portfolios, it has underperformed. This is due to exposure to companies like Shopify, goeasy Ltd, Magna International, Well Health, and even Algonquin Power.
For companies like Magna International, the issue is supply chains. For others like Shopify and Well Health, it is simply the threat of a rising interest rate environment and negative sentiment. But with that being said, we’re not too worried about that sentiment over the short term, except for one particular holding.
The stock we’ve decided to ultimately sell and move on from is Real Matters. The company was added to the Bull List after promising results in 2020. However, its performance has lagged and ultimately there are just better options for this portfolio because of the lack of exposure to a particular industry, which we’ll get to in a bit.
Real Matters has reaffirmed its intentions to hit 5-year guidance, which would represent some pretty strong growth. However, with the trajectory of the business, we’re just not confident that management can actually deliver. Other transactions in the portfolio include simply rebalancing our ETFs to their target allocations.
With the proceeds, we’ve added an oil and gas ETF XEG. If you were a member in mid-2021, we sent out an e-mail highlighting the opportunity in XEG as a multi-year hold. In fact, I (Dan) ended up taking a position myself.
The holding of XEG will expose the portfolio to not only major oil producers like Canadian Natural, Suncor, and Imperial Oil, but natural gas players like Tourmaline Oil as well. Instead of picking individual companies, we’ll instead buy broad exposure and benefit from what is expected to be a strong couple of years from oil and gas companies in terms of distributions and share buybacks.
Other than that, this is a well-balanced portfolio.
Early Stage Aggressive
In our previous update of this portfolio, we had stated that it was yet another if it isn’t broken, don’t fix it situation. And at that time, growth stocks were touching all-time highs and this portfolio was outperforming its benchmark at a rapid clip.
Here we sit 4-5 months later, and the portfolio has taken a significant hit. Why are we speaking on this? Primarily to show you the true volatility of this portfolio and why it is the riskiest model at Stocktrades Premium, by quite a large margin.
The portfolio is currently down 7.7% YTD, and just over 11% over the last 3 months. Considering this portfolio contains many small-cap pure growth plays like Good Natured Products and Dialogue Health, this isn’t really all that surprising.
Since its inception in 2018, the portfolio has returned over 85%, or 22% annualized. So, we’re far from pushing the panic button. This portfolio is designed with the longest projected time horizon, and we feel all of the companies inside of this portfolio have a strong chance of outperforming the broader markets over the next 5+ years.
In terms of moves inside of this portfolio, the main move was to shave off profits from Intact Financial and TD Bank. TD Bank was purchased inside of this portfolio at a discount and as a result, it went from a 4% allocation to nearly 6%. We’ve decided to trim that back and trim our Intact Financial position back after some nice gains as well.
These moves are not because we aren’t as confident in Intact or TD. In fact, they add some large-cap exposure and stability to this aggressive portfolio. It is more so because we see another small-cap Canadian company in the financial sector having a bit more value and long-term outperformance potential. More on that below.
The other moves inside of this portfolio are simply the rebalancing of the ETFs to their targeted allocations. As a result, we have about 4% in the portfolio, and we’ve decided to purchase Bull List stock Equitable Group (EQB).
The addition of what we feel is an undervalued alternative lender adds to this portfolio’s high growth nature. The portfolio now has an 11%~ weighting to the Canadian alternative lending sector, one we’re particularly bullish on.
Portfolio recap
Early Stage Conservative
- Reduction in our positions in Intact Financial, Bank of Montreal, TD Bank due to a run-up in financial exposure.
- The addition of recent Bull List stock Waste Connections as the portfolio lacked industrial exposure.
Early Stage Moderate
- Sold Real Matters and trimmed up ETFs to their targeted exposure.
- Added the Canadian oil and gas ETF XEG, as this portfolio had no energy exposure at all.
Early Stage Aggressive
- Trimmed back profits from TD Bank and Intact Financial.
- Added a position in Equitable Group.
As always, the Q & A is open to any inquiries, along with the Discord!
Next week we’ll tackle the Mid-Stage portfolios. So, look for those to be updated over the course of the week and an e-mail sent out Sunday!
And, make sure to head to the portfolio section of the website if you’d like to download the portfolio packs or overviews.
