It can be tougher to find some hidden gems in a market when the consumer economy has been struggling. Like many other countries, Canadian consumers have been facing the two-pronged assault of higher inflation levels plus higher interest rates, which is causing them to reign in spending.
That said, Canadian headline consumer inflation eased during the first half of last year, falling below 3% in June 2023, but accelerating again in the summer months. Food inflation has begun to moderate, and household net worth has also continued to increase. Mortgage borrowing in Canada is now at its lowest level in 18 years, as consumers shy away from the expensive practice of borrowing to buy a home!
Below, however, is a list of TSX companies I’ve identified which seem to be in excellent shape as we move into 2024. All have a high degree of exposure to the Canadian consumer.
Global Education Communities Corp [TSX:GEC]
If you’re interested in Canadian micro-caps, this is a small but perfectly formed company. It is one of the largest education and student housing investment companies in Canada. It operates business and language colleges, student-centric rental apartments and recruitment centres. It has 41 locations, many not in Canada itself. It recently reported +21% total revenues, much of that coming out of rental revenues. EBITDA came out at +250%. CEO Toby Chu thinks the company will do even better once interest rates start coming down.
Nova Cannabis Inc TSX:NOVC
Although cannabis has earned something of a bad name for itself among Canadian investors, there are still a few well-managed gems out there. Nova Cannabis, which owns the Value Buds brand in the Canadian retail sector, recorded record revenues in its last set of numbers on 8 November. It continues to break records in net earnings, revenue, gross margin, and adjusted EBITDA. It seems to be leaving the rest of the Canadian cannabis sector in its dust. The company says its strategy is to be the largest, fastest growing AND most profitable cannabis retailer in Canada. I wouldn’t bet against it.
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Lassonde Industries TSX:LAS.A
Moving onto the larger stocks, Lassonde Industries currently has a market cap of CAD 742m, give or take. It is a highly values-driven foods business which was founded by a husband and wife team who wanted to help local farmers make more efficient use of their local crops. It is still managed by the same family, three generations later! It listed in Canada in 1987. It remains surprisingly small for a stock with such high quality metrics. It covers a number of different verticals in Canadian foods, including fruit juices, sauces, soups and snacks (e.g. SunRype). It also has a wines division – Arista Wines – in Quebec.
D-BOX Technologies Inc TSX:DBO
D-BOX is a consumer-facing tech company that is pushing out the boundaries in immersive entertainment experiences. Think virtual reality, but then think additional motion, vibration and texture effects to convince the body you are really there. It has applications in movies, video games, relaxation therapies and virtual reality, as well as themed professional simulations. The latest numbers for Q2 saw revenues up 77% with system sales revenues up 99%. D-BOX is till a tiny, Quebec-based tech company, but it is likely to grow very fast.
Gamehost Inc TSX:GH
Gamehost does not put out an awful lot of news, other than to tell investors it is increasing their dividends. The company operates squarely in the very cash rich casino space, with several lucrative properties in Alberta, combining in some cases hotels with casinos attached. These are the sorts of stocks you like to hold in the current economic and political environment, as they seem to perform consistently even during downturns. Not surprisingly, Gamehost reported operating revenue up 18% on 19 December (Q3 financial results). ALL company assets reported year over year gains in cashflow, revenue and margins.
