Growth stocks took the backseat in 2022 when runaway inflation triggered aggressive interest rate hikes by the Bank of Canada. However, despite higher volatility this year, three names are riding high. These growth stocks are my favourites for October 2023.
Technology
TSX’s tech sector again leads after a below-par performance in 2022. The high-growth sector is the top performer thus far this year with a 32.99% positive return, and healthcare is a distant second (+11.48%). Meanwhile, Celestica (TSX: CLS) outperforms both the tech sector and the TSX with a +136.11% year-to-date gain ($36.03 per share).
The $4.3 billion company is a leader in high-reliability design, manufacturing and supply chain solutions at every stage of product development. Its end-to-end product lifecycle solutions support complex products across various markets, including aerospace and defence, communications, enterprise, healthcare, industrial, and smart energy.
Celestica’s president and chief executive officer (CEO), Rob Mionis, said the diversified portfolio drives revenue growth and margin expansion. Management expects revenue growth rates of 8% and 10% in 2023 and 2024, respectively.
Industrial
Hammond Power Solutions (TSX: HPS.A) is defying the massive headwinds this year. The $661.3 million manufactures dry-type transformers and offers reactor solutions. It caters to various industries and markets, such as industrial, commercial infrastructure, and renewable energy.
At $55.55 per share, current investors enjoy a year-to-date gain of 178.64% on top of a modest 1.15% dividend. A $5,000 investment on year-end 2022 would be worth $13,929.29 today. Market analysts recommend a strong buy rating. Their 12-month average price target is $71.67 (+29%).
In the second quarter (Q2) of 2023, sales grew 25.4% versus Q2 2022, reaching a record $172.45 million. Notably, net earnings climbed 105% year over year to $13.33 million. CEO Bill Hammond said, “The second quarter was noteworthy as we continued to deliver record financial results and experience strong demand from a wide range of end markets, which led to the largest week of bookings in the history of HPS.”
Energy
Valeura Energy (TSX: VLE) is out to deliver value and growth to its investors in 2023 and beyond. This small-cap stock is absurdly cheap ($3.07 per share) yet outperforms with a 46.89% year-to-date gain. According to management, the $312.2 million upstream oil and gas company from Calgary is now a strongly cash-generating business.
Management is actively pursuing a growth-oriented strategy in Southeast Asia and Turkey. Valeura is well positioned to pursue a longer-term deep, tight gas play in Turkey because of the significant land position in the Thrace basin. In Thailand, Valeura owns Mubadala Energy’s oil-producing portfolio, including operated working interests in the Jasmine/Ban Yen, Nong Yao, and Manora oil fields.
Valeura also holds an operated interest in the Wassana oil field in the offshore Gulf of Thailand. Q2 2023 is the first full quarter of production operations in Thailand. In the three months that ended June 30, 2023, net loss reached US$1.3 million. Its president and CEO, Sean Guest, said the quarter’s results mark a step change in the business.
Guest added that Valeura is beginning to see the benefits of operating synergies across the assembled portfolio. Given the 90-million-barrel production milestone achieved at the Jasmine oilfield, he maintains a positive long-term growth outlook.
Fat returns
This month, Celestica, Hammond Power Solutions, and Valeura Energy are excellent picks for growth investors. I expect them to finish strong and end the year with fat returns.
