In the stock market, price
leaders tend to remain leaders, and there is always a reason for it. Most often, company fundamentals are improving smartly, or the market anticipates they will.

Outside the resources sectors, six stocks in particular have made sterling gains in the past six months. Examination of their fundamentals suggests investors have reason to believe their superior performance can continue. Mind you, other factors are also at work, but they are icing on the cake.

The stocks in question, in order of recent relative performance, are: Telus Corp., Com Dev International Ltd., La Senza Corp., Rogers Communications Inc., Dundee Corp. and Cott Corp.

One way or another, they are recovery companies, either rising from unprofitability or realizing the results of past investments. (The boost for Telus, of course, was its plan to convert to an income trust, which is now likely to be abandoned.)

Their interim results during 2006 reveal sharp improvement in several fundamentals, including return on equity, revenue, cash-flow generation and discretionary cash flow. Such similarities exist despite differences in the industries in which they operate. Cott is an exception to these generalities, but this company has appeal as a potential turnaround.

The above table lists key details, but here are other points to note:

> Telus Corp. has had a long haul to respectable profitability. Telecom industry consolidation has helped, of course. In 2002, Telus showed a loss, but profitability has improved slowly. Interim results this year are markedly better. Note the 18% rise year-over-year in the latest quarter’s cash flow.

> Com Dev International Ltd. has made breakthrough sales in the space communications industry. After several years of losses, it made a small return in the fiscal year ended Oct. 31, 2004, a little more in fiscal 2005, then exploded in the 2006 fiscal year. It’s now generating cash rather than consuming it.

> La Senza Corp. is an example of how a niche retailer can prosper. It has transformed itself from apparel to lingerie retailer. In doing so, it shed its original corporate name, Suzy Shier. (The Suzy Shier brand name is still in existence; La Senza sold the stores to a member of the YM Inc. group in 2003.) The big payoff is occurring in the current fiscal year, which ends in January 2007. Up to fiscal 2003, La Senza suffered a series of losses.

> Rogers Communications Inc. is finally benefiting from consolidation in the telecom industry and broadening its product line. Note the big gain in latest-quarter revenue. The significant change is in discretionary cash flow — what’s left after capital spending and paying dividends. Rogers has cash left over this year.

> Dundee Corp. is a financial conglomerate and money-management firm with a large interest in real estate and resources. The resources factor has undeniably helped Dundee’s stock, but the firm seems to be firing on all cylinders. Note the big revenue growth. Cash flow, however, is negative, the result of a major factor: a big increase in client accounts receivable.

> Cott Corp. , a beverage producer, is the exception in this group of price-gain leaders. It is, however, in the middle of major changes to restore profitability. The market clearly has in mind its previous lush returns, such as the 35% return on equity in 2003. IE