AGT Food and Ingredients Inc. specializes in processing lentils, chickpeas and other crops into specialty products for food manufacturers.
If you're hunting for Canadian stocks for your retirement portfolio, here are six equities recommended by three experts.
Jason Castelli, portfolio manager at Raymond James Ltd., Toronto
With inflation picking up at the end of 2016, Mr. Castelli says the market will favour cyclical stocks such as commodity-oriented equities rather than defensive stocks such as consumer staples. Here are his picks.
- HudBay Minerals Inc.: Based in Toronto, this producer of copper, gold, silver and zinc has significant holdings in Manitoba as well as operations in Arizona and Peru. “They performed well in 2016 and we think they will continue to do well as global growth is expected to improve in 2017 given some of the policies that President Trump is proposing.” The company is trading at about four times price-to-cash-flow compared with its historical average of more than 12, so its share price has room to grow. Still, its ascent could stall if global growth – particularly in China – stumbles.
- Intertape Polymer Group Inc.: A leading producer of adhesive tapes used by North American manufacturers and retailers, it’s expected to do well thanks to continued growth of e-commerce. More shipments from online retailers means more packaging, which ultimately requires more tape. But the Montreal-based firm’s story is not just one of organic sales growth. It also has acquired smaller firms to build its market share. “The management team is looking to double revenue in the next five to seven years” using both strategies, Mr. Castelli says. But the company could face headwinds if economic growth in North America is not as strong as anticipated.
Jennifer Radman, senior portfolio manager with Caldwell Investment Management Inc., Toronto
Ms. Radman co-manages Caldwell's Canadian Value Momentum Fund, selecting undervalued stocks showing positive trends. These two companies could be in the early stages of growth, she says.
- Imvescor Restaurant Group Inc.: A franchise and licensing company for restaurants primarily in eastern Canada, including Pizza Delight, Scores and Baton Rouge, Imvescor has built a reputation for buying struggling businesses and turning them into moneymakers. “The business is improving and we see a good balance sheet,” says Ms. Radman. At the same time, Imvescor is undervalued compared with similar companies in North America. Largely flying under the radar, it may take time to show price growth momentum commensurate to its business prospects. Moreover, it is “looking at an acquisition strategy, and with that you get risk.”
- AGT Food and Ingredients Inc.: Formerly Alliance Grain Traders, this company specializes in processing pulses, such as lentils and chickpeas, and grains, making them into specialty products for food manufacturers. “They are benefiting from this global trend of getting more protein into diets,” Ms. Radman says. Moreover the Regina-based company is expanding. “They’ve made a lot of acquisitions of key infrastructure so they can move product around and source it depending on where the good pricing is.” The company’s prospects for the year could be impaired, however, by bad weather, which would reduce crop yields and increase costs.
Les Stelmach, portfolio manager with Franklin Bissett Investment Management, Calgary
After a tough couple of years, companies involved in production, exploration and services in the oil and gas sector are expecting better prospects for 2017, Mr. Stelmach says.
- Freehold Royalties Ltd.: Like its competitor PrairieSky Royalty Ltd., Freehold is not involved directly in exploration and production of oil or natural gas. “Instead it is the owner of freehold and mineral properties in Western Canada,” says Mr. Stelmach, who co-manages three funds for Franklin Bissett, including its Energy Corporate Class fund. “Rather than paying the Crown – the province where the well is being drilled – the royalty would go to Freehold, and the reason it is a great energy investment is because it has very high free cash flow, even under low commodity prices.” Investors should expect to see a dividend hike this year as its past distribution was based on oil at $35 (U.S.) a barrel (it’s about $52 now). While low prices could continue and affect its profitability, Freehold faces less of an impact than companies directly involved in the sector. Conversely, if oil and gas prices rise, it may not experience as much of an uptick.
- Horizon North Logistics Inc.: An energy services firm, Horizon began by building and running work camps for energy and mining companies. But it has diversified since the downturn, Mr. Stelmach says. “Not only does it rent and operate these camps, it has an operation that can manufacture these camps, and they have a lot of spare capacity today,” he says. “What they’ve been able to do is increase the variety of customers they serve.” Another area of growth is manufacturing modular homes and even hotels. “They can bring a fully prefabricated hotel on site, connect with utilities and have it ready in about six months, whereas it would take closer to two years with conventional construction.” Like all firms linked to the energy industry, though, it would face headwinds if commodity prices fell dramatically.