The Monthly Gems by Allan Tong

Once a dog, this American pet food maker is a comeback after reporting Q1 results. Shares jumped 30% after the company reported earnings per share (EPS) of US$0.15, which blew away street estimates by 291%. Meanwhile, revenues of US$2.9 billion (all USD)were in line. Net income more than tripled from a year ago to $67.3 million, or $0.15 per share while gross margins climbed 130 basis points to 29.7% and net margins increased 150 basis points to 2.3%. Growth has moderated, but profits are now consistent and growing. Analysts were impressed enough to raise Chewy's price target rose by 8.4% to US$25.12. So, how did the company beat the post-Covid slump? One step was recently opening Chewy Vet Care clinics, targeting younger, tech-savvy pet owners, who can see their pet's medical information displayed on interactive screens in the exam room but also access that data on their portable devices. This cohort of Millennials and GenZ'ers make up 46% of pet owners in the U.S., so penetrating this market through the clinics is a savvy move.

A month ago, this defense company reported total revenues of $3.98 billion which beat the street's $3.8 billion and rose 4.2% year-over-year as operating income climbed from $265 million to $415 million (all USD) in that time. The operating margin expanded from 7.2% to 10.4% as total incomes declined 9.3%. The future looks positive with a backlog of $36.57 billion. To cap it off, the company raised its full-year earnings guidance from $7.50-7.90 to $8.40-8.80 per share and cash flow from $1.1 billion to $1.3 billion. After Leidos reported this beat, the stock and made fresh 52-week highs in the weeks that followed. It's come back a bit which makes it an attractive entry point.

Quietly rising 17% since the year started, this Quebec manufacturer of in-home lifts serves an aging demographic. One thing to note is its EPS growth: up 8.1% annually since 2021. In the last year, revenue grew 2.2% to $835 million. Insider have been buying shares (always a good sign) and now hold 20% of the company. The icing on the cake is SIS' dividend, which has more than doubled in the past decade and now pays just under 3%. This trend should continue, based on management projections of revenue growth to top $1 billion next year. Last year, the company enjoyed a record backlog as well.

It's a homegrown success story driven by customers who promote their wares on social media. However, given an iffy forecast for the Canadian consumer, and a rosier one for Americans, you're buying ATZ for its continued expansion into the U.S. It's ambitious: eight to ten new stores annually through 2027, based on 100 possible locations down there.

Old tech can have new life. This underdog, outlier or what have you, surprised the market when it reported in late March. Its forward PE jumped from 12x to over 16x, largely driven by higher demand for its AI servers. It's now cruising above 28x PE, well above its historic average of 11.55x.

By all means, this EV stock should be tanking. At the end of April it reported adjusted EPS of 45 cents adjusted vs. the street's 51 cents expected, and posted revenues of $21.30 billion that missed the estimated $22.15 billion. For months leading up to that report, the street knew that EV sales were not increasing, but had likely plateaued, at least for now.

CSU are M&A specialists, growing by buying. Forget the dividend which pays only 0.15%. Also unusual for a tech name is Constellation's low 0.81 beta, but its high share price of $3,600 will be a barrier for some retail investors. Consider this a long-term, Canadian steady eddy, if you can afford it.

 It helps that DOL faces little competition in this country, apart from local Mom & Pop shops. In fact, DOL is aiming for 2,000 locations, as the company has enjoyed 10% annual revenue growth in the last five years. The company has started buying back shares (13.6 million in summer 2023). Another low-beta (0.57) but low-dividend (0.27%) name that rewards investors with the share price increasing. It likely will, but wait for a market pullback before adding shares or entering. Currently, DOL is trading near highs.

The simplest way for Canadian investors to participate is through an ETF. To be blunt, these instruments aren't popular with Canadian investors. The daily volumes of the HXX average 2,250 shares, which actually rank higher than fellow Euro ETFs. As a total return ETF, HXX doesn't pay a yield (no worries about taxes), but it charges a rock-bottom MER of 0.17%. Most importantly, HXX rose 12.9% in Q1 and 23.84% in 2023. HXX is most exposed to France with 43% of its holdings, followed by Germany at 25.6%. Consumer goods and financials make up 40% of HXX. Its top holdings are AMSL, LMVH (Louis Vuitton), Total Energies, Sap and Sanofi.

Not to be confused with Osisko Mining, OR-T is a pure-play royalies streamer in precious metals, and minerals have been hot on the TSX so far this year. OR-T is up nearly 19% or three-fold the Toronto index's performance. As gold makes new highs almost every day, OR continues to shine. It trades just over its NAV, so it's cheap. It pays only a 1.11% dividend, so income investors will stay away

Paying only a 0.78% dividend, BN is attractive for its growth, not income. Since spinning off, BN has risen 25% while BAM has climbed about 48% and the TSX barely 10%. From last December through February, BN has slightly outperformed its cousin, rising over 18%. Aside from declining rates, the societal transition into renewables is not slowing and government investments will continue to fuel Brookfield's infrastructure business. Consider BN a long-term hold.

Dundee is nowhere as large as Barrick, Franco Nevada or Agnico Eagle, which comprise a third of the Canadian materials sector, but it has outperformed it so far in 2024. Dundee shares have rallied 8.5% in this time period while Barrick is down over 16%. Also, Dundee holds more potential upside. Consensus sales estimates are 15% and EPS 28% for the coming year. Dundee's cash flow yield is a comfy 11%. Recently, the company bought Osino Resources to enhance its portfolio of gold operations.

Only last October did Cameco surpass its long-standing peak set in May 2007. Now, money has rushed in and pumped up shares. Also, Cameco's EPS missed two of its last four quarters. True, cash flow is healthy and the PE is 67x, far below its median average of 93.67x. At the end of the day, uranium is a commodity, making it subject to price swings; it started 2024 at US$85.34, topped US$106 in early February and fell back to US$95 to begin March. Further, the hard run-up in CCO shares makes us cautious. Consider this a risky buy or a buy on weakness.

The fast food chain is as ubiquitous as Starbucks or Tim Horton's in Canada, but flies under the radar of Bay Street. Only one analyst covers PZA, but rates it a buy. What's to like? PZA pays a 6.3% dividend yield which the company increased 3.3% three months ago. Its last quarter topped expectations, while it beat EPS in the prior three. Beta is a steady 0.99. During the first nine months of 2023 same-store sales rose 9.8% while EPS climbed 12.4%. Caveats: average daily volumes are only 23,819, and the company has no moat, though it is an established brand with locations everywhere.

In fact, Visa's share has risen from 52.8% in 2007 to 61% in 2022 (based on transaction volume). Mastercard holds 25.5%, down from 28.2% in that period, while AmEx has slipped from 15.6% to 11.3%. AmEx caters to the business class and wealthier clientele. When they spend, AmEx rallies, but if they spend less, then AmEx falters. That sums up AmEx in the past year, and it's currently enjoying the best momentum. If you expect this trend to continue, then buy AmEx. If you want less volatility, an established brand and consistent earnings, then go with Visa.