The Monthly Gems by Allan Tong

A favourite of Stockchaser Billy Kawasaki, the tech giant reported a superb quarter on April 25. Its cloud services revenue grew 27% year-over-year for the quarter, impressive when you consider that companies have been trimming their capital expenses because of rising interest rates. Revenue of $52.9 billion beat the expected $51.1 billion, while EPS of $2.45 surpassed the street's $2.23. A key surprise was personal computing totaling $13.3 billion in business instead of the $12.3 billion expected. The street has left PC's for dead after the pandemic, but maybe the street has been too pessimistic. Shares popped 7.37% the following day and continued to new 52-week highs to end April well above $300.

Also on April 25, this packaging company from Winnipeg reported a strong quarter. Q1 2023 EPS of $0.60 rose 16% from $0.52 a year earlier and marked the company's highest quarterly earnings in history, despite higher operating expenses shaved EPS by two pennies. Revenues of $304.5 million jumped 10.3% higher from a year ago, while volume grew by 8.7%. Note that Q1 2022 suffered from an aluminum foil shortage. Gross margins slightly shrunk to 28.8% compared to 29.5% a year ago.

Europe's mild winter depressed natural gas prices and did no favours for nat gas stocks. A year ago, ALA was making new 52-week highs in the wake of Russia's invasion of Ukraine (quagmire, anybody?) That was $7 ago for ALA-T, but AltaGas's processing business continues to be strong as the company lowers debt by selling assets like the Mountain Valley Pipeline and recently Alaskan Utilities (for US$800 million).

The federal budget offers a wide range of tax breaks for green energy producers. Stockchaser Trevor Rose picked this long before the budget for its 9.6% increase in revenues, rising EBITDA and ever-growing dividends. It helps that BEP.UN is back by a giant parent company, and it continues to grow by acquisition. Late last year, BEP.UN with Cameco snagged Westinghouse which serves about half the nuclear power generating business and makes about half the world's nuclear reactors. About 85% of its revenues are recurring. Given Russia's invasion of Ukraine, governments are embracing nuclear power again. Add to this, BEP.UN's foundation of robust cash flow and balance sheet.

Unless another bank melts down, financials will continue to recover. The contagion spread to Big Six in Canada with stocks like TD getting beaten down. With the greatest exposure to the U.S., TD is one to buy (already recommended by Stockchase), but BMO is another that will bounce back. Stockchaser Michael O'Reilly picks it for its consistent and attractive numbers: 5.9x PE, 1.18x price-to-book, and a 4.79% dividend yield. To compare, Royal Bank trades at 12.27x and pays 4.11%. Thanks to the banking crisis, BMO shares sank 6.9% in March, but in the the last week have recovered 2%. Expect this trend to continue.

Speaking of which, KRE on the NYSE holds a basket of regional U.S. banks, including Comerica, SVB Financial and East West Bancorp. Some of the names in this basket will ring a bell for the wrong reasons. This ETF, as of the end of March, has lost 24%. If you think that the editors of Stockchase have gone temporarily insane, consider that sooner or later the regionals will bottom. Also factor that KRE charges only a 0.35% MER, pays a not-bad 2.39% dividend yield, and its beta is only 1.1, surprising considering all that has happened.

According to Stockchaser Michael O'Reilly, TMUS checks off several boxes: has 113 million customers, is the only American standalone 5G mobile network, and has a deal with Amazon AWS (the #1 cloud service) to provide 5G to their customers. Also consider that TMUS took a leap forward on April 1, 2020 when it officially absorbed Sprint to add their 33.84 postpaid subscribers to T-Mobile's existing 47 million subs.

Canadians buy utilities for their fat, reliable dividends, however rising interest rates have stolen some of that thunder and even reliable names like Northland have taken a hit in recent months. Since August 30 last year, NPI has slid from $45.45 to $33. That doesn't reflect the strong performance by this name, which has easily beaten all four of its last quarters, trades at only a 9.58x PE and a super-low 0.38 beta and pays a 3.63% dividend based on 34.68% payout ratio. Cash reserves are up, so are revenues by 17% and net income by 300%.

However, Nvidia is not a slam dunk. It trades at nearly 100x PE, has missed two of its last four quarters, its revenues and income have declined year-over-year. ChatGPT is a blessing, but the technology still has many flaws and is evolving. How long will this craze this last and how long will it boost Nvidia shares? Consider this a trade or a risky buy.

Based in Winnipeg, this REIT owns property in Manitoba, BC, Arizona, Colorado, Minnesota and Wisconsin, broken down into 47% office, 32% industrial and 20% retail. Before you get alarmed over the office and retail holdings, consider Artis' 6.92x PE, 6.35% dividend yield based on a 43.8% payout ratio, and 6.5x cash flow, as Stockchaser Michael O'Reilly notes. In fact, the forward PE is 11.51x, so the market has faith in this name, even though mixed REITs have fallen out of fashion in this post-Covid world.

CLF currently trades at 4.62 earnings, still below 6.02x when shares peaked about nine months ago. In fact, its forward PE stands at 9.66x, so the street feels this name has a lot of runway ahead. A few caveats, though. CLF doesn't pay a dividend, and its beta is 2.17, so expect some bumpiness. That said, Cleveland-Cliffs is currently enjoying strong momentum, driven by steel prices and slower interest rate hikes.

Stockchaser Trevor Rose stresses that PLC is enjoying growth through acquisition, closing three in the last quarter of 2022 alone. Its Q3 2022 report announced last November a year-over-year increase in net revenues by 10.7%, greatly helped by these acquired operations. Management has a history of being disciplined and it offered positive guidance. Aging demographics are another tailwind, cash flows are strong, and barriers to entry remain high, so Park Lawn enjoys a moat. However, net margins shrank from 9.8% to 6.6% from Q3-2021 to Q3-2022, attributed to the pandemic. Park Lawn pays a modest dividend of 1.7%, which is safe at a payout ratio of 46.53%. Overall, this is a buy.

CAP REIT pays 3.4% dividend yield at a safe, low 50% payout ratio, and last month the REIT also paid a special distribution. It trades at 14.84x earnings, a premium over Killam Apartment REIT (9.04x). Casting a shadow over residential REITs is the pledge of Prime Minister Trudeau, made in August 2021 during that election campaign to impose rent controls to solve the country's housing affordability crisis. So far, Ottawa has only threatened to review the tax treatment of REITs and actually hasn't done anything.

Problem is, the street already knows this and has driven up TJX shares near 52-week highs from $56 to $80 in the last quarter. The stock has settled around $80 for the past month. However, there's still some room to grow because of this recessionary tailwind. Company earnings are expected to rise 40% in coming years, so there's a lot of optimism in this name. Its loyalty card program continues to attract customers across various demographics including Gen Z'ers and millennials who enjoy treasure hunting among the hand-me-down wares. The company is expanding, but not recklessly, increasing square footage by 1% quarter-over-quarter most recently.

Stockchaser Trevor Rose recently recommended good, old-fashioned cash. These are uncertain markets, equities are lagging, but we've likely endured the worst of interest rate hikes. Have a stash o' cash handy to take advantage of market sell-offs. The bears have not exhausted themselves, but the time to market will enter overselling. Banks are now offering attract high-interest savings accounts paying in the neighbourhood of 4.5% and even 5%. Park your money there without risk and be ready to deploy to pick up an undervalued stock when it goes on sale.