Canada’s primary stock market displays resiliency, notwithstanding the rollercoaster ride thus far in 2023. Unfortunately, people tend to overlook lesser-known companies in times of uncertainty. The year-to-date gains of four neglected TSX stocks could be higher if only investors give them a second look.
Real estate
InterRent (TSX: IIP.UN) is a top pick if you want exposure to the real estate sector and an alternative to buying properties for investment purposes. At $13.17 per share, the stock is up 3.8% year to date and pays a decent 2.69% dividend.
This $1.9 billion growth-oriented real estate investment trust (REIT) owns income-producing multi-residential properties in urban areas with stable market vacancies. Because of strong demand in Q1 2023, the average rent and occupancy rate rose 7.1% and 130 basis points to $1,504 and 96.8% versus Q1 2022.
Notably, the same-property net operating income (NOI) climbed 11.4% to $35.7 million from a year ago. Brad Cutsey, InterRent’s President and CEO, said, “We are pleased to see further signs of market improvement with the Bank of Canada pausing rate hikes and a modest pick-up in transaction activity.”
Foodservice
High Liner Foods (TSX: HLF) delivered impressive financial results in Q1 2023 despite inflationary and recession pressures on consumers. In the 13 weeks that ended April 1, 2023, sales and adjusted net income increased 11.7% and 9.1% to $329.2 million and $16.4 million versus Q1 2022, respectively.
The $480.4 million company processes and markets value-added frozen seafood to North American customers, including food retailers and food service distributors. Its President and CEO, Rod Hepponstall, said, “Q1 2023 was another strong quarter for High Liner Foods marking eight consecutive quarters of Adjusted EBITDA growth.”
Hepponstall adds that apart from the continued growth in the food service business, High Liner continues to win market share in casual dining, quick-service restaurant, and fast-growing popular species such as shrimp. The share price is $14.40 (+5.5% year to date), while the dividend yield is 3.54%.
Specialty business services
K-Bro Linen (TSX: KBL) operates laundry and linen processing facilities, and provides laundry and textile rental services. This $336.2 million company caters to healthcare institutions, hotels, and other commercial accounts. At $31.21, the stock is soaring this year (+15.95%) and is attractive for its 3.82% dividend.
In Q1 2023, net income reached $2 million compared to the $446,000 net loss in Q1 2022. K-Bro’s President and CEO, Linda McCurdy, credits the continuing growth in healthcare revenue and significant increases in hospitality growth. She also notes the improvements in profitability and margins and expects to return to the pre-pandemic margin profile in the second half of 2023.
A strong foundation for profitable growth
ATS Corporation (TSX: ATS) defies the headwinds, as evidenced by its 40% year-to-date gain ($58.93 per share). The $5.4 billion company provides industry-leading automation solutions to multinational clients in various sectors, including consumer products, energy, food and beverage, life sciences, and transportation.
In fiscal 2023, consolidated revenue and net income rose 18.1% and 5.2% year over year to $2.6 billion and $127.7 million, respectively, versus fiscal 2022. Because of the impressive revenue growth, market analysts recommend a buy rating. Their 12-month average price forecast is $70, an 18.8% increase from the current share price.
Valuable addition
InterRent, High Liner Foods, K-Bro Linen, and ATS Corporation are strong buys based on their impressive business performance amid a challenging environment. They could deliver superior returns than blue-chip firms or market heavyweights.
