The TSX has lost nearly 3% (573.76 points) in the last six days of May 2023 and is starting June with a minimal 0.97% year-to-date gain. Four primary sectors out of 11, led by energy, are in negative territory. But despite the downward trend, buying opportunities exist especially growth stocks with serious breakout potential.
Consider taking positions in Headwater Exploration (TSX: HWX), Bombardier (TSX: BBD.B), and Spin Master (TSX: TOY). The three stocks could deliver superior returns this year, as they continue to outpace the market amid the elevated volatility.
Top performer
Energy (-10.25%) is the worst-performing sector entering June, although Headwater Exploration defies the general sector weakness. At $6.48 per share, this energy constituent is up 11.19% year to date. Based on market analysts’ price forecasts, the return potential in one year is between 23.5% ($8) and 46.6% ($9.50).
If you invest today, the $1.52 billion resource company also pays a lucrative 6.36% dividend (quarterly payout). Headwater is one of Canada’s petroleum and natural gas producers. It operates in Marten Hills, Alberta, boasting high-quality oil production, reserves, and lands, and McCully Field, New Brunswick, maintains low-decline natural gas production and reserves.
In the first quarter (Q1) of 2023, revenue and net income declined 12.6% and 29.2% to $104.2 million and $29.97 million versus Q1 2022. According to management, Headwater can navigate the extreme volatility in commodity prices because of positive working capital. It can execute a focused business plan and deliver stable dividend streams.
Thriving business
Bombardier manufactures business aircraft and private jets while maintaining service centres globally to provide robust customer support. The $5.13 billion company caters to governments, fractional ownership providers, and multinational corporations — not to mention private individuals.
The business thrives, evidenced by the strong results in Q1 2023. In the three quarters ending March 31, 2023, revenue rose 17% to $1.45 billion compared to the same quarter last year. Notably, net income topped $302 million versus the $287 million net loss in Q1 2022.
Besides the projected 15% increase in deliveries in 2023, Bombardier can ramp up production to build inventory when its new global production facility opens by year-end. Market analysts’ average and high price targets in 12 months are $77.82 and $103.07. BBD.B trades at $53.82 per share (+2.97 year to date).
Breakthrough innovation
Spin Master will leverage the power of its three creative centres to capture market share, deliver profitable growth, and create long-term shareholder value. The $3.51 billion children’s entertainment company plans to bring breakthrough innovation to the toy aisle, including new launches within its core and licensed brand portfolios.
Despite incurring a net loss of US$1.9 million in Q1 2023 compared to the US$45.6 million net income in Q1 2022, management said Spin Mater is well positioned to execute its strategy, invest in innovation, expand, and pursue acquisitions. Its chief financial officer Mark Segal expects retail inventory headwinds to be over by the end of Q2 2023.
Market analysts see a potential price gain of at least 29.88% to $44.03 from $33.90 (+1.91% year to date). The overall return could be higher if you include the 0.68% dividend.
Exciting prospects
Headwater Exploration, Bombardier, and Spin Master are exciting prospects in today’s declining market. The stocks could deliver superior returns if the businesses can buck existing market trends.
