Move over Big Oil (and, indeed, “Small Oil”), because an upcoming generation of investors may soon be favouring renewables such as the stocks below. With specialist healthcare and high-growth tech thrown into the mix, let’s take a look at a “community-minded” investment strategy that ties progressiveness to performance.
Swap out Big Oil for renewables
For a renewable energy stock with some geographical diversification, Boralex (TSX: BLX) makes a strong play. While its track record leaves something to be desired in terms of earnings growth, and its balance sheet is not for the fainthearted (see a level of debt compared to net worth that’s jumped from 240.2% five years ago to the current 382.1%), there is much to recommend this TSX index green energy ticker.
A P/B of 1.9 times book shows acceptable value in terms of real-world assets, while a dividend yield of 3.48% makes this stock suitable for a long-range investment, such as a TFSA or RRSP. Perhaps the main draw, though, would be a significantly high 107.5% expected annual growth in earnings.
An alternative might be Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN), which outperformed the Canadian integrated utilities sector with one-year returns of 25%. Its track record could be better, with a negative one-year past earnings-growth rate only marginally rescued by a five-year average of 9.9%, and its past-year ROE of just 2% doesn’t scream quality. However, a dividend yield of 4.47% matched with a 24.2% expected annual growth in earnings makes for a long-term winner.
Balance energy stocks with niche healthcare and high-flying tech
Focus on stocks such as Theratechnologies (TSX: TH), which has a focus on medical treatments for HIV patients. This specialist pharma stock brought in year-on-year returns of almost 300%, so if it’s a high-flying healthcare stock on the TSX index you’re after, you may have just found it.
While a one-year past earnings growth of 74.8% ameliorates a slightly negative five-year average past earnings-growth rate, a debt level of 145.3% of net worth is a more serious problem, though would-be investors will also have to weigh a 46.3% projected three-year return on equity and 40.7% expected annual growth in earnings against a high P/B of 13.4 times book.
Alternatively, while you’re stacking shares in green energy, why not throw in a high-growth stock from the tech sector, such as Questor Technology (TSX:QST)? With 63% year-on-year returns that smashed the competition, Questor Technology has an outstanding track record, is debt-free, and has significantly high growth potential.
A one-year past earnings growth of 85.4% and five-year average growth of 22.6% characterize a solid track record, while a past-year ROE of 27% makes Questor Technology stand out in terms of quality. It could fare better on market ratios, though a P/E of 18.1 times earnings and P/B of 4.9 times book aren’t bad for a tech stock.
The bottom line
Algonquin Power & Utilities is a little overvalued at present with its P/E of 74.6 times earnings, though a P/B of 1.9 times book may sneak this TSX index star stock past a value investor’s radar. Questor Technology’s 31.6% expected annual growth in earnings should satisfy the growth investor looking to supplement a green energy portfolio.
