No bear for these stocks
Winpak, Loblaw, and Cameco buck the trend
Let’s not mince words: It’s been a lousy year to be an investor. Everything seems to be down: Stocks, bonds, gold, cryptos, real estate – even cash, if you consider the loss of buying power due to rising inflation.
Sometimes, you just can’t make a buck. This year proves the point.
Well, almost. The TSX has been hammered so far in 2022, down over 8% year to date. That’s not a bear market (a loss of 20% or more), and it’s up from correction territory (a loss of 10%+) a little over a month ago. Almost every sector except energy is in the red.
But there are a few non-fossil fuel stocks that have bucked the trend. Here are three from the recommended list of my Internet Wealth Builder newsletter.
Winpak boxes up profits
Winpak Ltd. (TSX: WPK). Winnipeg-based Winpak is a manufacturer of packaging and packaging machinery. Its products are used primarily in food, beverage, and healthcare applications. Its modified atmosphere packaging is used to extend the shelf life of perishable goods such as meats, poultry, and cheeses as well as healthcare products.
The stock was first recommended in August 2021 at $41.08. It drifted down to $37.17 at the end of December but has since rebounded strongly. It closed Oct. 31 at $41.52, up almost 12% year-to-date.
The stock is doing well because the company is doing well. Second quarter results showed an increase of 27% in revenue from the year before, to $310.3 million from almost $244 million in 2021. Note that the company reports in U.S. currency. For the first six months of the fiscal year, revenue was $586.2 million, up from $468.8 million.
EBITDA in the second quarter was $58.7 million compared with $49.8 million last year. For the six-month period, it was $116.6 million, up from $96.4 million in 2021.
Net income in the quarter was $34.1 million ($0.52 per diluted share), up from $29.4 million ($0.44 a share) the year before. First-half profits were $68 million ($1.04 per share) compared with $54.7 million ($0.82 a share) last year.
Despite supply chain problems, labour shortages, and higher prices for raw materials, the company expressed optimism that sales growth will continue at a comparable rate for the rest of the year.
Loblaw sells (lots) of groceries
Loblaw Companies Ltd. (TSX: L). It’s been a good year to be in the groceries business. The shares of all the big players are in the black or close to it year-to-date. But Loblaw is far ahead of its competitors when it comes to share price. The stock ended 2021 at $103.64. It closed Oct. 31 at $111.62, for a gain of 8% so far in 2022. Investors have also benefitted from an 11% rise in the quarterly dividend, to $0.405 ($1.62 a year).
The company reported strong second-quarter results. Revenue was $1.3 billion, an increase of $356 million, or 2.9%, over last year. Operating income was $742 million, a decrease of $10 million, or 1.3% from 2021, as a result of a commodity tax matter related to President’s Choice Bank. Adjusted EBITDA was $1,499 million, an increase of $128 million, or 9.3%, from a year ago.
All this resulted in adjusted net earnings of $566 million, an increase of $102 million, or 22.0%, from a year ago. On a per share basis, the company earned $1.69, an increase of $0.34, or 25.2%, from the same quarter a year ago.
Cameco cooks up yellow cake for a voracious market
Cameco Inc. (TSX: CCO). Uranium prices have fallen from their mid-April peak of about US$65 per pound to around US$52 now. Obviously, that hasn’t helped the share price of Cameco, which is one of the world’s major uranium producers. The stock was trading at around $41 at the time the uranium price peaked. It has since pulled back to $32.31, but that’s still 17% ahead of its 2021 exit price of $27.58.
There’s a reason why the future of Canadian uranium is looking a little brighter than it did a year ago: Russia. The attack on Ukraine and the subsequent sanctions have radically changed the energy picture in Europe. The European Union has said it may have to ration natural gas next winter. The projected squeeze has prompted Germany to revisit the planned closure of its remaining nuclear facilities, which then-Chancellor Angela Merkel had ordered closed.
Even more significant, the European Commission recently proclaimed that nuclear and natural gas are “clean” energy sources. It’s unclear what this will eventually mean for Europe’s efforts to achieve carbon-neutrality, but the announcement was positive news for uranium producers.
One other point to consider is that Russia has been one of the world’s major uranium suppliers. The imposition of sanctions may dramatically change that, to Cameco’s advantage.
“With Russia’s invasion of Ukraine, whether because of sanctions or because of conflict with company values, the industry now faces the challenge of disentangling its supply chain from dependence on Russian nuclear fuel supplies,” said Cameco CEO Tim Gitzel in May. “It is still early days, but we are seeing what we believe is an unprecedented geopolitical realignment occurring in the nuclear fuel cycle.”
The company reported adjusted third-quarter earnings of $10 million ($0.10 per share), compared to a loss of $54 million (-$0.14 per share) in the same quarter last year.
Even with the recent pull-back, the stock’s trading range this year is higher than at any time since 2011.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website. To take advantage of a 50% saving on a trial subscription and receive the special report “The Tumultuous Twenties,” go to https://bit.ly/bwGP20s.
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Notes and Disclaimer
Content © 2022 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.