This week, we’ll be going over the last few companies reporting earnings here at Stocktrades Premium, along with some analysis of the Ycharts Fund Flow reports that have been released.
Now that earnings are passing, besides a few stragglers on the Bull Lists (Enghouse, BRP Inc, Couche-Tard, and the banks), we’ve got some time to sit down and identify new opportunities for the lists over the coming weeks. It will also allow us to finally dig into the record number of member feedback e-mails we received!
For now, let’s jump right into some earnings.
Goeasy Ltd (GSY)
It was another solid quarter for Goeasy, which beat on the top and bottom lines. Earnings of $2.95 (+9%) beat by $0.16, and revenue of $262M (+19%) beat by a million.
Despite fears of an economic slowdown, the company is witnessing record loan originations. On the quarter, loan originations came to $648M, a 47% increase from the third quarter of 2021. This led to record organic loan growth of $219M and exited the quarter with $2.589B in gross consumer loans receivable.
Net charge-offs – a metric that will be heavily scrutinized moving forward as it is a highlight of loans it expects to go unpaid – came in at 9.3%, which was in line with estimates, in line with the previous quarter, and in line with Fiscal 2022 guidance of 8.5-10.5%.
The company’s automotive financing segment, which started last year, is witnessing large-scale growth as it posted record quarterly originations, which were up 144% on a year-over-year basis. Although it does remain a relatively small portion of the business, at the pace it’s growing, it could undoubtedly become a core operation soon.
The company also noted that as of the end of Q3, it had the highest percentage of low-risk originations in company history, and hard assets secured 37.6% of consumer loans.
We understand there is uncertainty given its status as an alternative lender. But since we’ve covered the company at Premium, and since Mat has been following it (a decade), it has never missed guidance. We’d have no problem accumulating shares or starting a position at these levels.
You can view our full report of Goeasy here
Alaris Equity Partners (AD.UN)
It was another strong quarter for Alaris, which beat on both the top and bottom lines plus came in with a low single-digit raise to the distribution. Revenue of $42.9M beat by $3.4M, and EBITDA of $55.31M topped expectations by ~$4.4M.
On a per unit basis, revenue was flat, while diluted EPS dropped by 31.3% over Q3 of Fiscal 2021. Revenue exceeded its guidance this past quarter, and it now expects that its revenue run rate in the next 12 months will be $168.6M.
It also expects positive run rate cash flow of 31.1M or 0.69 per unit. Finally, it expects a positive distribution reset of +3.1% in Fiscal 2023, resulting in $4.5M of incremental revenue. As mentioned, it also increased its annual distribution by 3.1%.
Much like we’ve seen with REITs, the company saw a decrease in the fair value of investments in Q3 by 7.1M – due in large part to “impact that higher market interest rates has had on the valuation of common equity investments” – no surprise there. That said, book value rose to $19.57 per share.
While there were no major investments in the quarter, it did make a US$24M investment in Sagamore Plumbing post-quarter. It also made a $26M investment into an existing partner (Asscient) post-quarter.
You can read our full report on Alaris here
Jamieson Wellness (JWEL)
Jamieson reported earnings a while back. However, we missed highlighting it in the newsletter. It is our most recent Dividend Bull List addition, and we certainly like the forward-looking prospects for the company.
Jamieson reported third-quarter earnings that generally missed the mark. It reported revenue of $138.9M when $142M was expected, and earnings of $0.34 missed expectations by $0.04.
The company didn’t move much in price on the earnings miss, primarily because it was still a strong quarter overall. Revenue increased by 23% year-over-year, driven by strong organic growth, particularly in China, which saw revenue grow 29.2% over the same period. The company faced some currency weakness internationally, but the strength in the USD offset it.
The quarter’s most notable news was that the company acquired its distribution partner in China, effectively eliminating the middleman. Jamieson will now directly manage customer relationships in China, along with the distribution and production of its products.
Overall, the thesis remains well intact with Jamieson. Expansion in China is strong, and if the country can move away from zero-COVID protocols and strict lockdowns, we feel the company could fuel even further growth.
You can read our full report on Jamieson here
Fund Flow Reports
Ycharts recently released their Fund Flow reports, which summarize the latest fund flows data. The reports reveal the categories, funds, and ETFs with the biggest cash inflows and outflows each month, plus additional historical periods.
In just a few pages, these reports give insight into where the market is trending, which can be a helpful tool to gauge market sentiment.
We’ve found these reports to be extremely useful in our current research. And, if you’ve got some time to read them, they are well worth it.
There are four reports in total:
• US Fund Flows Report Click here to download
• Canada Fund Flows Report Click here to download
• US Strategy Flows Report Click here to download
• Canada Strategy Flows Report Click here to download
The latest reports were released this past week, and the data is reflective as of the end of October.
Canada Overview
Let’s start with Canada. For this report, we’ll focus on the Strategy Flow document, which reflects the combined outflows and inflows of both Mutual Funds and ETFs.
You can always check out the individual Fund Flows reports we’ve linked above for a more detailed breakdown.
Here is a snapshot of the two most important tables.
If these are too small to see in your e-mail client, click here for the Equity table, and here for the Fixed Income table.
|
|
 |
First, let’s look at the Equity side of the house and bring your attention to Category Returns.
For the first time in a long while, you can see Category Returns are green across the board – except for Emerging Markets.
It was such a good month for stocks that the 3-month return for the Canadian Equity category is in the green for the first time this year.
That said, there were still significant net outflows in the Canadian Equity market. Why would this be? How can stocks go up while money flows out?
Investors are likely profit-taking after a big one-month run-up. On the flip side, it looks like Canadians are again starting to invest in US equity funds, as it marks the second consecutive month in which that category has seen positive net inflows.
Flows into fixed income remain largely the same as in previous months. We see a net outflow in Canadian Fixed Income across the board, with the lone exceptions being the Canadian Corporate Fixed Income and Floating Rate Loans.
I’m sure the category Floating Rate Loans immediately stands out for you because of the Algonquin Power situation.
As a reminder, floating rate loans adjust periodically (30 to 90 days) based on changes in interest rates. This isn’t good for a company like Algonquin since it means they will have to pay out more interest as rates rise.
On the flip side, these types of loans are attractive to investors as there is the potential to earn higher levels of income with each subsequent Fed rate hike.
Risk-off sentiment
Unfortunately, the Canadian reports don’t break down the data quite the same as the US reports. Still, it is worth noting that in the US, Large-Cap equities saw the most significant inflows, and growth-focused stocks across each category (Large, Mid, and Small Caps) continued to have net outflows.
 |
 |
In our opinion, this is a key indicator of risk sentiment. The last time either of the growth categories saw net inflows was back in March 2022, and it was only the Large Cap growth segment.
That means for the past 7-months, growth consistently underwent net outflows as investors shifted their portfolios. Ycharts only introduced this table in January. Not once since then have all three growth profiles shown net inflows.
What does this all mean?
Anyone exposed to the unprofitable, more speculative options on the Growth Bull List feels the impacts of these overall outflows from growth stocks.
We remain in a risk-off market and will likely stay there until we see a notable shift of inflows into growth stocks.
It also explains why small to mid-cap growth stocks (the majority of TSX-listed growth companies) have struggled for the better part of the past year.
Let’s turn our attention to the U.S
Although the U.S. also saw strong inflows to Equity funds with a $16B bump in assets, investors still flocked towards Money Market funds with $35.6B in net asset flows, which was more than half of all of Q3’s net flows to the category.
 |
Interestingly, we saw a notable shift in terms of sector inflows.
 |
For the first time in some time, Technology was the leading sector as it saw ~$2.3B in net inflows. This is a notable shift as the Technology sector saw net outflows for the past few months.
This is a good sign for growth investors, as perhaps the markets are warming up to tech stocks which have taken an absolute beating in 2022.
If we pair this with the Equity Style table, investors likely focused their efforts on more stable, large-cap tech stocks.
That said, it could also signify that the “risk-on” sentiment is nearing a return. While one month does not make a trend, it is a good sign nonetheless.
On the opposite side of the spectrum, we see Utilities and Real Estate with notable outflows. After proving resilient in the early part of the year, utilities are starting to crack under the pressure of rising rates.
As a high CAPEX (Capital Expenditure) industry, it becomes not only more expensive to grow but more expensive to replace existing infrastructure. Given this, it is unsurprising to see the first net sector outflow for utilities in months.
We also continue to witness net outflows from real estate. Benchmark fixed mortgage rates are above 7% in the United States, and we see a cooling of property values as a result.
We are starting to see this play out across the earnings season for the first time this quarter. As rates rise, REITs are booking significant revisions downwards to property values which, in turn, has a negative impact on Net Asset Value (NAV).
Overall, these fund flow reports are a fantastic tool to get a birds-eye view of recent past activity. We are happy to be able to share them with members.
