Two strong stocks have emerged

There were more gainers than losers in the first eight months of 2013, ended Aug. 31. It has also been a bull-market year, one in which “a rising tide lifts all stocks,” as the old market saying goes.

The list totals 212 stocks. This may seem short, but relatively few Toronto Stock Exchange (TSX) listings have traded for a decade. Oh, yes, there are many speculative mining and energy stocks that have been around that long, too. But it’s known that those in that latter group are volatile.

Among the 25 stocks with the lowest price stability over 10 years (that is, the most volatile), 13 have gained in this bull market year.

One stock disappeared in a takeover and another was so reorganized that it was unrecognizable as the same stock. The stock that disappeared – Wescast Industries Inc. – was taken over at $11 a share, a higher price than its yearend 2012 price. The reorganized stock is Petrobank Energy & Resources Ltd. It spun off its controlling interest in PetroBaaken Energy Ltd. to its shareholders, effective as of the 2012 yearend.

That means that 10 of the least stable stocks dropped this year.

Among this year’s gainers, there are two stocks that may bear further examination: Patheon Inc. and Points International Ltd. Both are small-caps, with Patheon at $858 million in market capitalization and Points International at $367 million in market cap.

Both stocks have struggled in the past half-dozen years. Their sales and earnings are up sharply this year – perhaps a precursor to steady earnings and steadier stock market performance.

Points International’s stock market trend reversed to trend upward in 2010, while Patheon shares ended an eight-year decline in 2012.

The biggest winner was Points International, whose business is managing customer rewards programs, mainly for airlines and hotel chains in the U.S. and Europe. Only 1% of its business in Canada; and because of the stock’s Nasdaq listing, only 10% of stock trading occurs on the TSX.

In the first half of this year, Points International’s revenue gained by 22% – and the company expects full-year revenue will be $200 million. Sales per share of Points International have grown at the rate of 25% a year over the past five years.

The other big winner is Patheon, a reviving stock. This company is an outsourcing manufacturer of pharmaceuticals – the third-largest in the world, according to company estimates. Patheon also provides development services to the pharmaceutical industry.

In the first nine months of Patheon’s 2013 fiscal year (which ends in October), sales jumped by 36% to US$733 million. Gross profit rose by 64%. In the six fiscal years between 2007 and 2012, Patheon reported a net loss each year, but generated positive cash flow each time.

A controlling interest by JLL Patheon Holdings LLC reduces Patheon’s public float to 44% of the shares outstanding.

The list of “losers” includes one major headliner, BlackBerry Ltd., which was down by 10% in the first eight months of the year and down by as much as 32% after its planned buyout was announced in September.

Of the others, Major Drilling Group International Inc., Wi-LAN Inc., Seabridge Gold Inc., BlackPearl Resources Inc., Kingsway Financial Services Inc. and HudBay Minerals Inc. all suffered the largest share-price losses in the eight months ended Aug. 31.

The prevalence of resources stocks in the “down” column is no surprise, of course, given the drop in resources prices generally and the possible end of the “resources bull market.”

There is one other performance anomaly: QLT Inc. On the face of it, QLT’s shares have plunged. But that’s because the biotech firm returned $4.11 a share of capital to stockholders in June. The stock’s post-payout price drop reflected that. Add the return of capital amount to the current price, and QLT shows a strong gain. That’s what’s shown in the table (at right).

Among the volatile stocks gaining strongly this year and over the past year, standouts include one big name, Bombardier Inc., and a quartet of sometimes popular, sometimes scorned companies: Com Dev International Ltd., Imax Corp., Intertape Polymer Group Inc. and Valeant Pharmaceuticals International Inc.

Price change, year-to-date(%) / 12-month price change (%)

BlackBerry Ltd. -10 / 62

BlackPearl Resources Inc. -45 / -35

Bombardier Inc. B 27 / 37

Brick Brewing Co. -5 / -16

Cardiome Pharma Corp.* 10 / 34

Com Dev International Ltd. 31 / 38

HudBay Minerals Inc. -32 / -25

Imax Corp. 29 / 44

Intertape Polymer Group Inc. 81 / 104

Kingsway Financial Services Inc. -22 / 54

Major Drilling Group International Inc. -31 / -28

Martinrea International Inc. 53 / 50

Metalore Resources Ltd. -8 / -10

Patheon Inc. 91 / 132

Petrobank Energy & Resources Ltd.** n/c / n/c

Points International Ltd. 110 / 88

QLT Inc. 9 / 15

Savanna Energy Services Corp. 8 / 6

Seabridge Gold Inc. -15 / -8

Thompson Creek Metals Co. -6 / 39

Uranium One Inc. 18 / 17

Valeant Pharmaceuticals International Inc. 75 / 105

Wescast Industries Inc.# n/c / n/c

Westport Innovations Inc. 10 / -17

Wi-Lan Inc. -24 / -33

Data for periods ended Aug. 31, 2013; n/c = not comparable

*Shares were consolidated one for five in April

**Reorganized at yearend 2012

#Taken over in March

Source: Financial Post Annual Dividend RecordInvestment Executive Chart

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