Equity analysts at Laurentian Bank Securities are taking a “more conservative approach” toward Canadian equities heading into 2023, citing “the backdrop of persistent inflation, talk of further interest rate hikes, and the ongoing debate around a potential recession.”
In a research report released Wednesday, the firm released their “Preferred Picks” for 2023, a group of six stocks deemed their best investment ideas for the year ahead based on “sound business opportunities, healthy balance sheets and cash flow generation, and positive organic growth/net asset value.”
Laurentian’s picks for 2022 have resulted in a loss of 41 per cent thus far on an equal-weighted basis, underperforming the TSX Composite Index by 34.2 per cent and the TSX Small Cap Index by 23.1 per cent. They attributed the underperformance to “persistent inflation-fighting interest rate hikes from the Federal Reserve that dampened the performance of Mining, Real Estate and Technology stocks, along with the lack of Energy sector exposure (18 per cent of TSX Composite) which had a strong performance of 48 per cent year-to-date.”
“Our top picks for 2022 were Hroux-Devtek Inc. , Sylogist Ltd. , Pure Gold Mining Inc., Major Drilling Group International Inc. , Galway Metals Inc. , WSP Global Inc. , Boardwalk REIT , Northwest Healthcare Properties REIT and Pet Valu Holdings Ltd. ,” said Cameron Baker, Laurentian’s Head of Equities. “Among these, Major Drilling Group International Inc., one of the world’s largest drilling services companies, generated the highest return (YTD total return of 20.5 per cent), mainly due to continued strong demand and pricing for specialized drilling services.”
The firm’s picks for the next year are:
Mining Services
Major Drilling Group International Inc. with a “buy” rating and $17.50 target. The average is $16.30.
Analyst Ryan Hanley: “We believe that the company remains well positioned to take advantage of growing levels of demand for drilling services given its experienced team, strong balance sheet, and global fleet consisting of 603 drill rigs. Additionally, we believe that MDI offers investors exposure to the mining sector without having to take on single company, single asset, or exploration risk.”