Despite the pandemic-induced selloff in March 2020, the TSX closed 2020 with 2.17% overall gain. The technology sector was also the top performer during the COVID year. However, energy is almost sure to finish strong and be the winning sector in 2021.
Next year promises to be exciting, because constituents from either sector could deliver explosive returns. According to JP Morgan Global Equity Research, oil prices could overshoot US$125 per barrel in 2022 due to capacity-led shortfalls in OPEC+ production.
Meanwhile, International Data Corporation (IDC) said the technology industry is on pace to exceed $5.3 trillion in 2022. Tech budgets will likely increase by leaps and bounds over the 2019 pre-pandemic levels.
High-growth energy stocks
Two energy stocks have, so far, produced mind-boggling returns. Meg Energy (TSX:MEG) is up 156.40%, while Crew Energy (TSX:CR) is red hot with its 408.93% year-to-date gain. If the momentum extends to next year, the potential returns could be enormous.
MEG is a $3.31 billion energy company known for developing oil recovery projects. It utilizes steam-assisted gravity drainage extraction methods to improve oil recovery and lower carbon emissions. After three quarters in 2021, net cash from operating activities increased 141.4% year over year to $449 million.
The pure-play oil sands producer ended Q3 2021 with a free cash flow of $155 million. MEG’s president and CEO Derek Evans said it was another strong quarterly performance. Based on analysts’ forecasts, the share price of $11.14 could climb between 29.7% and 75.3% in 12 months.
Crew is a $438.38 million natural gas company building its future on the natural gas and liquid-rich assets in the vast Montney land base. Like MEG, Crew benefits from the positive market developments, particularly rising commodity prices. In Q3 2021, management reported $176.2 million in net income versus the $21.1 million net loss in Q3 2020.
Because of the improving market conditions, Crew’s adjusted funds flow increased 236.3% year over year to $86.03 million. Market analysts are bullish and forecast an upside potential of up to 110.5% (max) from $2.85 to $6 per share.
Emerging tech superstars
Converge Technology Solutions (TSX:CTS) is a software-enabled IT & cloud solutions provider. At $11.09 per share, investors enjoy a 123.4% year-to-date gain. It carries a buy rating from analysts who have a 12-month average price target of $13.78 (+24.3%). However, the price could reach a max of $18.25 (+64.6%).
In Q3 2021, the $2.31 billion tech firm reported year-over-year top- and bottom-line growth of 93.5% and 500.1%. Notably, the $48.1 million cash flow generated from operations represented an 86% growth from Q3 2020.
Quarterhill (TSX:QTRH) isn’t a high-flyer but is a dividend payer (1.98%). The tech stock trades at $2.57 per share (+1.90% year to date), although the upside potential is between 41.2% and 55.6% based on analysts’ forecasts. This $287.88 million growth-oriented company operates in the Intelligent Transportation System (ITS) industry.
Despite the $26.66 million net loss year to date, management is confident about its business growth due to significant tailwinds. The acquisition of ET, an ITS leader in tolling, should bring scale to the business, according to Quarterhill’s president and CEO, Paul Hill. It also places the company in vertical-tolling and gives it a second ITS platform.
Because of the positive outlooks for the energy and technology industries, stocks in either sector are potential multi-baggers in 2022.