Buy low, sell high is the simplest investment strategy out there. But with some pundits talking seriously about the prospect of an American recession, how safe is a high-stakes capital gains play right now? The following four stocks represent some of the highest growth potential on the TSX, and are taken from four diverse industries that could outride a downturn: energy, healthcare, tech, and cannabis.
Questor Technology (TSX:QST)
A clean air tech stock with decent geographical spread, Questor Technologies saw significant three-year returns of 317.3%. A future three-year ROE of 31.9% looks set to follow on from a 27% past-year return on equity signifies a high-quality stock that can be held for the long-term in the knowledge that Questor Technologies knows how to put shareholders’ funds to efficient use.
Up 0.44% in the last five days, and with a past-year earnings growth of 119.1%, this stock has a flawless balance sheet, decent valuation (see a P/E of 18.2 times earnings with a 42% discount off its value per future cash flow), and is looking at a 35.3% expected annual growth in earnings.
Canacol Energy (TSX:CNE)
Specializing in Colombian petroleum and natural gas, Canacol Energy offers a non-North America-centric play in the energy space. With a one-year past earnings growth of 85.3% and projected 120.8% annual growth in earnings over the next one to three years, it’s an outperforming stock more than suitable for a capital gains investor.
One thing to be aware of here would be a level of debt to net worth which has gone up over the last half a decade from 68.1% to 175.8%. Meanwhile, value indicators are mixed for Canacol Energy, with a P/B of 2.9 times book signifying overvaluation in terms of assets, though it’s discounted by more than 50% against its future cash flow value.
A leading TSX index pharma stock focused on HIV patients, Theratechnologies is up 2.27% in the last five days. One of the most recession-resistant stocks in the high-growth patch, Theratechnologies nevertheless has some mixed stats. While a projected future ROE of 43% is significant for the TSX, and its one-year past earnings growth of 67.4% is solid, its debt of 140.6% of net worth and high P/B of 11.8 times book are red flags.
The Green Organic Dutchman Holdings (TSX:TGOD)
Looking for a cannabinoid-based research and development stock on the TSX index? The Green Organic Dutchman Holdings has got you covered. Up 1.26% in the last five days and 90 day returns of 86.7%, this outperforming stock has a squeaky clean balance sheet, indicated by debt of just 0.3% of net worth. Trading at an 18% discount and with a P/B ratio of 3.1 times book, value could be better here, but overall it’s not bad for a high-growth stock in this space.
The bottom line
Meanwhile, Green Organic Dutchman Holdings’ 52.9% expected annual growth in earnings deserves the attention of a high-growth TSX index investor seeking exposure to Canadian cannabis. Theratechnologies’ 37.3% expected annual growth in earnings likewise indicates a solid play for capital gains in a downturn-ready sector, while geographical diversification provides the added safety in Canacol Energy and Questor Technology.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Questor Technology Inc.