Stockchase Opinions

The Panic-Proof Portfolio (Stockchase Research) Hammond Power Solutions Inc. HPS.A-T PAST TOP PICK Jan 07, 2025

(A Top Pick Nov 26/24, Down 6.1%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with HPS.A has triggered its stop at $127.  To remain disciplined, we recommend covering the position at this time.  When combined with our previous guidance, this will result in a net investment gain of 21%  

$123.720

Stock price when the opinion was issued

electrical electronic
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TOP PICK

Dry transformers. Spending fair bit of money to ramp up production and capabilities. Strong balance sheet. Data centres are going to use a lot of power, so the story will continue. Trades ~10x EBITDA, but growing at really high teens multiples for revenue and EBITDA. Yield is 0.8%.

(Analysts’ price target is $165.00)
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Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Sep 10/24, Up 36.3%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with HPS.A has achieved its target at $146.  To remain disciplined, we recommend covering half the position and trailing up the stop (from $95) to $105 at this time.  

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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Sep 10/24, Up 11.2%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with HPS.A is progressing well.  To remain disciplined, we recommend trailing up the stop (from $105) to $115 at this time.

BUY ON WEAKNESS

On a tear. It's always been expensive. Revenues have been growing, though net income's been a bit slow to follow. If it can get to a critical mass, then stock will be OK. Expect volatility. Look for big selloffs around quarterly earnings. Watch position size in your portfolio.

premium

This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

TOP PICK
Stockchase Research Editor: Michael O'Reilly

Recently reported earnings for HPS.A showed record margins, increased revenues and a growing order backlog.  Healthcare and data centre infrastructure projects are growing well for this manufacturer of electric transformers.  We like that cash reserves are growing, while debt is retired.  It supports a 27% ROE.  We recommend trailing up the stop (from $115) to $127 at this time, looking to achieve $166 -- upside potential of 22%.  Yield 0.7%

(Analysts’ price target is $165.67)
PARTIAL SELL

Exposed to the right verticals. One of the very few pure-plays in Canada. Management's been great. Stock has benefited from pickup in demand. But is it sustainable? Margins can't remain elevated forever. Power demand is real. Given the runup, be careful. 

Hold, or reduce on strength. Better ways to get exposure.

DON'T BUY

He sold it after rising 300% for him. Problem now are their capacity constraints. They're growing capacity in Guelph and New Mexico, but you're overpaying on limited growth. He doesn't see the growth, considering their PE.

WATCH

Still owned by founder, second generation. Has done the same thing for a long time; what changed is number of places they could sell to. Good business, but not a great price right now. 

DeepSeek was like a "man overboard" moment for a stock like this, as many own it simply as a beneficiary of data centre buildout. This sentiment makes it harder for the long-term investor.

BUY

Stock may have overshot last few years. Pullback is an opportunity to accumulate. Really needed if you believe in the electrification trend. Not as exposed to tariffs as other companies, as they have pricing power.