Acumen 2024 Top Picks Analysts at Acumen Capital revealed “Top Ideas” for 2024 on Tuesday.
The list includes nine Canadian equities with a focus “on proven businesses that have historically shown solid execution against a well-articulated business plan.”
“In choosing our candidates, we utilize the following criteria: reasonable valuations in the context of historical trading ranges; strong free cash flow generation supported by recurring revenue; business model that can grow both organically and through acquisitions; strong balance sheet (or the ability to deleverage without external capital) to fund growth strategy internally; catalysts that may result in a step change in the business,” the firm said.
Their picks are:
* ADENTRA Inc. ) with a “buy” rating and $50 target. The average target on the Street is $39.33.
Analysts: “ADEN proved the strength of its business model in 2023. Despite a soft macro environment that weighed on sales, the Company maintained margins, reduced inventory, and paid down debt. We expect ADEN to benefit from a recovery in residential construction that may accelerate with potential interest rate cuts in 2024.”
* Alaris Equity Partners Income Trust with a “buy” rating and $21.50 target. Average: $19.92.
Analysts: “Despite a strong year in 2023 operationally, AD’s stock was volatile driven largely by increased interest rates and ended the year up marginally. We continue to see AD as significantly better positioned today than in the past, while the stock is trading near all-time lows relative to book value and is expected to continue trending higher in 2024.”
* Black Diamond Group Ltd. with a “buy” rating and $12 target. Average: $10.75.
Analysts: “BDI returns as a top pick for 2024 following a strong showing in 2023 (up almost 76 per cent). We look for continued outperformance this year driven by growth of high margin rental revenue, steadily improving WFS utilization, and scaling of the LodgeLink digital platform.”
* Calian Group Ltd. with a “buy” rating and $75 target. Average: $73.88.
Analysts: “Calian had a difficult second half of 2023 following its fiscal Q3 results that saw it miss expectations and adjust its IT and Cyberscecurity operations through some restructuring efforts. The company delivered solid Q4/FY23 results, and we believe its FY24 guidance is achievable given the strength in demand in many of its key markets including defense spending, healthcare, and cybersecurity. The company’s shares are trading well below historical norms and with execution of its strategy, we believe the shares are poised to recover in 2024.”
* Cargojet Inc. with a “buy” rating and $155 target. Average: $137.17.
Analysts: “CJT navigated a weak macro environment in 2023. The Company is expected to show an improvement in margins and strong FCF in 2024. We believe solid financial performance, combined with additional disclosure on progress towards its long-term targets and signs of the macro environment normalizing, will result in share price outperformance as multiples return to historic levels.”
* Gamehost Inc. with a “buy” rating and $13.75 target. Average: $13.75.
Analysts: “2023 was a strong year for GH on the back of strength in provincial consumer spending, adjustments made for inflation, and increased slot commissions. With activity levels in Alberta projected to remain strong along with low levels of unemployment, we believe GH is well positioned for continued outperformance in 2024.”
* Haivision Systems Inc. with a “buy” rating and $7.50 target. Average: $6.33.
Analysts: “HAI is expected to demonstrate strong financial results following a period of margin compression due to supply chain challenges and recent acquisitions. We expect the stock to outperform as Adj. EBITDA margins near 20 per cent. Our thesis is that this will result in a material rerating of the stock from current levels.”
* Hammond Power Solutions Inc. ) with a “buy” rating and $94 target. Average: $80.
Analysts: “Hammond has moved from a Dark Horse pick in 2022 to one of the top performing stocks, not only in our coverage universe, but in Canada, in 2023 with a return of 300 per cent. The company is returning to the 2024 Top Picks list as we anticipate strong growth in revenue and EBITDA as many of the demand drivers that pushed it higher over the past two years remain in place. Upgrading of electrical infrastructure, EV charging stations, data centre construction and upgrading due to higher computing power, industrial demand, and expansion of its distribution channels are all pushing revenue growth for the next several years. The company’s shares are just now attracting interest from many institutions, and we believe 2024 will be another rewarding year for shareholders.”
* K-Bro Linen Inc. with a “buy” rating and $46 target. Average: $43.88.
Analysts: “K-Bro Linen returns to our Top Pick report after a few years as we anticipate strong financial results this year will attract further investor interest. Management has done an excellent job navigating the challenges of the pandemic and has successfully renegotiated the bulk of its long-term contracts to improve margins back to historical levels. We believe the shares are attractively valued at current levels. The company has added to its market share in key Canadian markets in 2023 and we anticipate further acquisition opportunities could add some positive catalysts in 2024.”