When selecting investment options, we often have a tendency to select larger, more popular investments. While this strategy can lead to some fairly significant gains, it does little to help diversify a portfolio across a broad segment of the economy. Unfortunately, this means that there are many intriguing investments with their own opportunities that are often dismissed entirely by many of us. Here are three interesting investment options that fit that under-the-radar description. Cargojet (TSX:CJT) provides overnight air cargo services to points across North America, transporting over 1.3 million pounds of cargo nightly, which allows the company to dominate the…
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When selecting investment options, we often have a tendency to select larger, more popular investments. While this strategy can lead to some fairly significant gains, it does little to help diversify a portfolio across a broad segment of the economy. Unfortunately, this means that there are many intriguing investments with their own opportunities that are often dismissed entirely by many of us.
Here are three interesting investment options that fit that under-the-radar description.
Cargojet (TSX:CJT) provides overnight air cargo services to points across North America, transporting over 1.3 million pounds of cargo nightly, which allows the company to dominate the overnight air cargo market in Canada. Interestingly, investors often mistakenly dismiss the opportunity in the air cargo market in lieu of traditional airline investments.
The primary beneficiary of Cargojet’s overnight delivery service is the booming e-commerce segment of the economy. As shoppers increasingly turn to online sales channels, the necessity of Cargojet to help fulfill those orders is paramount.
In terms of results, Cargojet announced results for the fourth fiscal ending December 31, 2018, last week that showcased strong growth prospects. Specifically, revenues saw a 12.2% increase over the same period last year to $132.6 million, while adjusted EBITDA saw an equally impressive 7.8% increase to $40.2 million.
In addition Cargojet’s favourable market position and positive results, the company also offers investors a quarterly dividend, which while only providing a yield of 1.00% currently, has seen a steady stream of annual upticks over the course of the past three years.
Surge energy (TSX:SGY) is an energy sector investment that can best be described as a diamond in the rough. Despite the fact that the company has a small footprint when compared to the other players in the energy sector, Surge has impressively increased its output by over 80% in the past few years while concurrently keeping its operational costs and debt in line. The energy producer’s composition for this year stands at a mix of 84% between oil and liquids and 16% allocated towards natural gas production.
Despite that impressive growth and surge actively pursuing accretive acquisitions, the company’s stock price has fallen over the course of the past year by 28%, which can be largely attributed to the fact that production on a per-share basis has dropped nearly 5%.
One of the most interesting aspects relating to Surge comes in the form of its monthly dividend, which provides a very appetizing 7.14% yield. While critics have been skeptical of Surge’s ability to continue paying out that yield, the company has generated a cash flow of over $120 million over the trailing four quarters.
Meg Energy (TSX:MEG) is another interesting company of note from the energy sector. If the company sounds familiar, that’s probably because you might recall Meg is the company that declined the $6.4 billion hostile takeover bid from Husky Energy last fall. Since then, shares of Meg have dropped over 35%, and not just because of the premium that was attached to the now-failed deal. In fact, looking back over a longer five-year period reveals a dismal 84% drop in share price, which can be traced back to stunning losses and share dilution over the years.
Is there an opportunity to be realized through investing in Meg? Management believes that there is an opportunity, and is forecasting nearly $800 million through free cash flow and cash on hand through the end of the year. Looking further out, the company believes that figure can double within the next four years to $1.6 billion, which is coincidentally the market cap of the company.
The assumptions that the company is making are based on the production of 100,000 barrels per day and crude prices falling in the range of US$50 to US$70 per barrel. On the low end of that estimate, Meg could bring in $300 million this year, instead of that much higher $800 million figure. To be fair, Meg did post a $90.4 million profit in the most recent quarter, a notable improvement over the $138.3 million loss in the prior quarter.
In short, the stock is a risky one, but as any investor will tell you, risk and reward go hand in hand, so a small investment might be warranted for those investors willing to take on that risk.
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Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool owns shares of CARGOJET INC.