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  David Fawcett, MA, CFADavid Fawcett, MA, CFA • 2nd • 2nd Founder of Epic Capital ManagementFounder of Epic Capital Management 17h •

17 hours ago

 

 

 

Market Starting to Recognize our Canadian Growth Stocks

We dubbed 2023 as "Small-Cap Armageddon" for the Canadian SMID sector, with valuations hitting historical lows. This presented an excellent opportunity to acquire high-quality growth stocks at highly attractive prices. During this time, we built an exciting portfolio, with two of our larger positions being Kraken Robotics and MDA Space. Our cost basis was approximately $0.45 per share for Kraken and $10 per share for MDA. As of yesterday, these stocks closed at $1.80 and $19.21, respectively, showcasing significant returns. Highlights of our investment thesis and high conviction were outlined in our eight posts on MDA and seven on Kraken. We still believe we're in the very early stages of a re-rating in the Canadian SMID sector, and that the recent price action is only just the beginning. We look forward to highlighting additional core portfolio investments that we’ve been less public about as they execute on their growth goals.

We initially posted about Kraken Robotics just under a year ago with the headline "The market appears not to believe Kraken Robotics’ 40% CAGR in revenue growth – We do!". At the time, the stock was trading around $0.45 per share. Since then, we’ve discussed various bullish aspects of the company and the significant sector tailwinds. Just last week, Kraken raised over $50 million at $1.60 per share for growth-oriented capex, further solidifying its growth trajectory. We’ll be visiting their facilities on the East Coast at the end of the month and remain optimistic about the company’s potential, given its impressive $1 billion pipeline.

MDA was another stock we highlighted about a year ago, citing significant growth opportunities that were largely being ignored by the market. We followed up with additional posts detailing supportive growth data points around their satellite and robotics segments, such as their high-volume satellite production ramp up, with a goal of producing two satellites per day by 2026. Earlier this month, RBC added MDA to their Canadian Small Cap Conviction List.

Despite the impressive gains so far, we believe both stocks—particularly MDA—have substantial upside potential ahead. It's equally exciting to see the overall Canadian SMID sector performing better, and we look forward to other names in our portfolio participating in meaningful performance as well.