Canada’s primary stock market has been resilient this year, although the threat of more rate hikes could further heighten volatility. Nonetheless, the TSX has produced winning investments in 2023.
Celestica (TSX: CLS), North American Construction Group (TSX: NOA), or NACG, Ag Growth International (TSX: AFN), and Stella-Jones (TSX: SJ) have market-beating returns but still have plenty of room to run. The four stocks should be on investors’ watchlists, if not buy lists, this September.
Tech sensation
Celestica is the tech sensation in 2023, beating e-commerce giant Shopify year to date with its astounding 108.91% return ($31.88 per share). The $3.8 billion electronics component company provides end-to-end product lifecycle solutions and related supply chain services.
It caters to markets such as aerospace & defence, capital equipment, communications, energy, health technology, and industrial & smart energy. Its president and chief executive officer (CEO) Rob Mionis said, “Our diversified portfolio is driving revenue growth and margin expansion despite softness in the Semi Capital Equipment market.”
In the first six months of 2023, revenue and net earnings increased 15% and 39.7% year over year to $3.77 billion and $80.2 million. Mionis expects the strong performance to continue into 2024 because all its markets are well positioned for growth.
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Strong fundamentals
NACG operates in Canada’s resources and construction industries, and the stock enjoys investors’ confidence amid the challenging environment. At $32.41 per share, they are up 81.29% year to date.
The $866.62 million company energy constituent owns a large, diverse equipment fleet and is considered a construction and mining heavyweight in the region. Besides Canada and the United States, NACG operates in the continent down under. It recently announced a definitive agreement to acquire MacKellar Group, Australia’s largest privately owned mining equipment and services provider.
Business fundamentals remain strong, as evidenced by the financial results thus far in 2023. In the first half of this year, revenue and net income rose 26.5% and 61.8% year over year to $436.2 million and $34.1 million. Besides the continuing demand for heavy construction and earth-moving services, management expects commodity prices in their markets to remain stable for the rest of the year.
Viable options
Ag Growth International and Stella-Jones deserve consideration for their sustained business momentum. The former supplies the world’s food infrastructure, while the latter is North America’s premier provider of pressure-treated wood products. The stocks’ year-to-date gains are 33.6% ($57.59 per share) and 30.27% ($62.46 per share), respectively.
In the first half of 2023, AGI’s profit soared 116.6% to $39.7 million versus the same period in 2022. Its president and CEO Paul Householder anticipates sustained margin expansion through 2024 due to manufacturing efficiency, centralized procurement, structured pricing programs, and workforce optimization.
Stella-Jones’s three-year growth plan is underway, and it benefits from the accelerating demand for infrastructure-related products. In the second quarter (Q2) of 2023, sales and net income increased 7.2% and 6.4% to $972 million and $100 million compared to Q2 2022.
Its president and CEO Eric Vachon said Stella-Jones continues to benefit from higher pricing dynamics for utility poles, railway ties, and industrial products. The company also has the agility to manage capital projects, acquisitions, and strong organic growth.
Stellar performances
The stellar performances of the four stocks indicate that not all companies are totally sensitive to higher borrowing costs. Except for high-flying Celestica, NACG (1.2%), Ag Growth International (1%), and Stella-Jones (1.46%) pay modest dividends. Take your pick.
