The invasion of Ukraine by Russia on February 24^th significantly raised the geopolitical risk premium level. This clearly exacerbated concerns over inflation and supply shortages, even as the COVID risks receded somewhat and the price of oil skyrocketed to more than $100. Accordingly, the period from February 11^th to March 11^th was characterized by sharp movements in the TSX Index, dropping significantly (-3.7%) on the 24^th of February and then climbing all the way back up to close on March 11th down only marginally at 0.4%. The top and bottom performers in our 5i Coverage List over the last month are listed on the table below.

Brookfield Renewable Partners (BEP.UN)

The top performer for the period was Brookfield Renewable Partners (BEP), up 21.68%, an improvement on the year-to-date result. This is one of the largest pure-play public renewable energy companies in the world with approximately 21,000 MW of capacity and another 15,000 MW under construction. It had a record year in 2021, with double-digit annual growth in cash flow from operations  (FFO) per unit for the tenth year in a row, providing for a 5% increase to unit distributions producing a yield of 3.19%. 50% of FFO came from hydro operations, 22% from wind, 15% from solar and 13% from energy transition (Storage etc), with 64% in North America, 19% in South America, 15% in Europe and 2% in Asia. Growth in Wind and Energy Transition were big growers in 2021. BEP’s goal is to grow 12% to 15% annually with the aim of accelerating the decarbonization of the electrical grid. It has disciplined and effective management, stable and diversified high-quality cash flows with a strong financial profile, operating against a welcoming market. Its outlook is improving.

Winpak Ltd (WPK)

In second place was Winpak Ltd (WPK) which grew at 16.26% for the period, a slight improvement on the year-to-date. It is a manufacturer and distributor of high-quality packaging materials and innovative packaging machinery for perishable foods, beverages and healthcare. Revenues for the 4^th quarter 2021 (published March 2) were up 31.6% compared to the same period in 2020, on increased volume of 12.3%, along with selling price increases and changes to product mix. There were sizable increases in raw material costs which were significantly recovered through contractual indexing programs with some 69% of its customers. As a result, earnings per share were up 10.2%. Year-end cash amounted to $377.5 million after a special $3 dividend in June 2021 for a total outlay of $159.4 million. In 2021 WPK successfully managed the effect of the COVID-19 pandemic, a difficult supply chain environment and limited availability of human resources. To the extent possible, it has implemented countermeasures to minimize the financial impact and disruptive nature of these issues. It enters 2022 with a foundation built for solid sales volume growth and enhanced profitability.

Northland Power Inc (NPI)

The third best performer in the period ended March 11^th  was Northland Power Inc (NPI) whose share price was up 15.3% almost twice the share performance year to date. NPI develops, constructs, and operates sustainable infrastructure projects across a range of clean and green technologies with a primary focus on off-shore wind. It has current net production capacity of 2817 MW and 344MW in construction to be completed in 2022. Strong 4^th quarter results underpinned recent share growth: Sales up 30% over the corresponding prior period (only up 2% for the full year) principally due to Spanish Portfolio acquisition in August 2021; free cash flow was up 146% and net income at $0.45 per share was up over 300%. As of December 31, 2021, NPI had access to $776 million of cash and liquidity including $748 million from a syndicated revolving facility.  It has a good pipeline of projects for the near term and for the longer term which as they come on stream, will add to the results. The management team is focused and has demonstrated disciplined capital allocation all of which should support continued growth.

Trisura Group Ltd (TSU)

The third-worst performer during the period ended March 11^th was Trisura Group Ltd (TSU) which was down 25.35%. It is an international specialty insurance provider operating in the surety, risk solutions, corporate insurance, fronting and reinsurance segments of the market. The share price dropped significantly on February 10^th with the production of the 4th quarter results. While revenues were up some 53% (in line with the entire year), expenses were up some 69% with the resulting net income for the quarter being down 6% while total year net income was up 93%. Put another way, earnings per share for the year 2021 were $1.49 of which $0.24 came from the 4^th quarter. On the positive side, TSU had a return on equity of 19% for the year. Currently, the stock is trading at a forward P/E ratio of almost 18 which is perhaps more in line with expectations given the riskier niche it occupies in the insurance business.

Lightspeed Commerce Inc (LSPD)

The second worst performer was Lightspeed Commerce Inc (LSPD) whose share price was down 29.18% for the period and 47.4% year to date, continuing a steady decline since mid-September 2021. LSPD offers a cloud-based point of sale (POS) system for retailers and restaurateurs. Its solutions enable users to manage end-to-end processes including inventory, loyalty, sales, and analytics. It provides a unique multi-channel solution that is attractive for many small businesses. This is born out by the revenue for the quarter ended December 31, 2021 at $152.7 million, up 165%. However, expenses were up significantly leading to operating losses of $78.6 million, 76% worse than the same period in 2020. These results together with some senior management shifts (Founder Dasilva moving to executive chairman), market shift away from technology, and a looming short seller, underpin recent share price movement. LSPD has an enormous cash holding ($966 million) and an enthusiastic market for its products. If it can better control its expenses this company should prosper going forward.

Shopify (SHOP)

The worst performer was Shopify (SHOP), down 36.3% in this period, and 60.15% year to date. This is a volatile stock with a high at $2140 in November 2021, falling fairly steadily to a recent low at $694. Results for the year ended December 31, 2021 were outstanding: Revenues at $4.6 billion were up 57.4%; EPS at $23.38 was up from $2.07 in the prior year period. The recent losses in the stock price reflect in part the general malaise afflicting technologies and an expensive valuation. SHOP is a leading provider of essential internet infrastructure for commerce, offering tools to start, grow, market, and manage a retail business of any size. It is particularly attractive to small businesses and occupies a nascent software niche that is growing rapidly. It also has a strong balance sheet with plenty of firepowers in terms of cash availability. However, given its market dominance and seemingly limitless addressable market, we think a change in market sentiment can quite easily change the direction of the stock. 

Take Care,

Disclosure: Analysts of 5i Research and authors responsible for this report do not have a financial or other interest in any of the securities mentioned. The i2i Fund does not have a financial or other interest in any of the securities mentioned.