The TSX index rose a strong 7.1% in the month of January while the S&P 500 index rose 6.2%. The Information Technology and Healthcare sectors advanced significantly, both of which were down significantly over the past year. As well, the Real Estate and Materials sectors contributed to results this month. This result seems to reflect receding inflation (6.3% annually in December) and reduced BOC interference (25 bps), strong employment, and continuing, although reduced, consumer spending, and reasonable earnings, all pointing to a soft economic landing. Supply chain issues are abating, and China is reopening both of which seem like positive events. While the war in Ukraine stumbles on, Europe seems to have weathered it better than expected. However, inflation remains high, employee wages are not up as much as inflation and the housing market continues to decline (house prices fell 1.6% in December). Moreover, the yield curve is strongly inverted (the Canadian 2-year bond yield is some 69 basis points higher than the 10-year yield) which often presages a recession.  With this background, the following table presents the top and bottom stock performers for a period of 34 days ending February 3^rd, 2023.

Enthusiast Gaming

The top performer was Enthusiastic Gaming Holdings Inc (EGLX)  whose stock was up 70.3% for the period and down 55.6% for the past year. This stock has had a choppy ride over the past year and recently was No 1 in November and worst in December. It peaked on February 15, 2022, at $4.67 and has fallen since to $0.74 at December 30^th, 2022. EGLX is building the largest media platform in the world for video game and esports fans to connect and engage with its approximately 300 million gaming enthusiasts worldwide. This company focuses on the younger generation ( Gen z and millennials). There were a number of announcements about new sponsors in late January starting with the Sour Patch Kids to extend NFL Tuesday Night Gaming programming in 2023, followed by Campbell Co of Canada, and Xbox. On February 2^nd, EGLX  announced plans to integrate AI to amplify game playing experience and noted its browser-based first-person shooter game EV.10 had won multiple awards. There were no financial announcements to account for the increase in the stock price.

Shopify Inc

The second best performer was Shopify Inc (SHOP) whose stock was up 50.9% for the period, but down 31% for the past year. The stock has been on a roller coaster ride this past year: it was the worst performer in April 2022, the best in July, and 2^nd best in November. 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 growing rapidly. Black Friday sales were a record: 52 million customers (up 12%) bought more than $3.5 million per minute at 12:01 PM EST on November 25.

There were a number of newspaper articles noting some strategic changes, on the back of substantial employee reductions earlier,  including a new subscription product, the introduction of stronger controls, and a greater focus on efficiency. On January 10th SHOP announced it was placing its enormous Toronto office space (348,103 sq ft) into the sublet market.

There were no Press releases during the period, but Morningstar put out a fairly strong recommendation on January 13th. It noted that SHOP is a leading platform for small and medium businesses with a narrow moat due to switching costs. It projected revenue growth would likely continue as the platform is attractive and the runway is long but warned that the business was exposed to the economic cycle. It should be noted that SHOP had $1.4 billion cash on hand as at September 30, 2022.

Real Matters

The third best performer was Real Matters Inc (REAL) whose stock was up 36.8% in the period and down 8.5% for the past year.  It provides residential real estate appraisal and title services to mortgage lenders in the United States and Canada as well as insurance inspection services in Canada. For the 1^st quarter of fiscal 2023, ended December 31, 2022, Revenues at $38.2 million were down $69.6 million, or 64.6%, pretty much in line with the previous quarter. Rising interest rates negatively impacted mortgage originations as the addressable markets for its products shrank a corresponding percent. Adjusted EBITDA at Negative $2.9 million was off 150% of which the US Title insurance segment, which relies heavily on mortgage refinancings, was the major contributor. A restructuring expense of $1.3 million was recorded in the quarter and a net loss of $0.06 per share was recorded. REAL had $45.1 million cash at December 31, 2022. The annual meeting on February 1^st perhaps gave a lift to the stock.

Pason Systems

The third worst performer was Pason Systems Inc (PSI) whose stock was down 6.15% for the period, but up 16.7% for the past year. It is a leading global provider of specialized data management systems for oil and gas drilling around the world. It also provides products and services for the solar power and energy storage industry through its subsidiary, Energy Toolbase. PSI’s financial results (reported on November 12^th) for the three and nine months ended September 30, 2022, have improved significantly over the prior year, due to increasing demand for the Company's products and technologies building on improved industry conditions. Revenue for the quarter at $92.5 million was up 60%; EBITDA at $50.7 million was up 104%; FFO at $36 million ($0.43 per deferred share) was up 80% and net income at $33.7 million ($0.41 per diluted share) was up 164%. Dividends at $0.08 per share were up 60%. The balance sheet remains strong with no interest-bearing debt and $206 million cash on hand. Revenue per Industry Day in the North American business unit was $871 in Q3 2022, a new quarterly record and an increase of 14% from the comparative period in 2021. Management gave a presentation in January 2023 in which it set out 3 objectives: defend oil and gas core business; enter adjacent spaces through continued investment in Intelligent Wellhead Systems; establish Energy Toolbase in the renewable energy space. The stock moves in line with perceived activity in the energy industry (rig count) and is volatile. In January 2023 it reached a low on the 4^th of $15.14 and a high of $16.80 on the 10^th, a spread of 11%.

Northland Power

The 2^nd worst performer was Northland Power Inc (NPI) whose stock was down 7.2% in the period and barely off 0.2% for the past year. Most of this loss occurred in the last half of January. NPI is a global power producer focused on developing, owning, and operating clean power infrastructure assets. While its focus is on offshore wind facilities, it has a significant investment in onshore renewables and regulated utility assets to bolster its cash flow. As well, it is embarked on a  storage project in Ontario and a green hydrogen opportunity on the east coast of Canada. For the 3 months that ended September 30. 2022 NPI reported (on November 9^th) revenues at $556 million, up 28.7% over the corresponding prior year period; Adjusted EBITDA at $290 million up 37.4%; Net income at $76 million compared to $5 million previously. It appears that inflation, supply chain constraints, and rising interest rates are impacting NPI’s most advanced projects. Management is projecting Adjusted EBITDA in 2023 in the range of $1.2 billion to $1.3 billion, down $500 million from its revised forecast primarily due to projected higher growth expenditures.

Trisura Group

The worst performer was Trisura Group  Ltd (TSU) whose stock was off 7% in the period, and 1.6% the past year. It was the second-best performer in October. It is a specialty insurance provider operating in the surety, risk solutions, corporate insurance, fronting, and reinsurance segments of the market. This stock bounces around considerably and will not be helped by the announced (February 9^th) delay in publishing its 4^th quarter 2022 results. Its results for the 3^rd quarter that ended September 30, 2022, were pretty good: Gross Premiums written at $644.8 million were up 59% over the comparable prior period, primarily in the USA; net income at $23.7 million up 48%, and Book value per share at $11.47 was up 35% primarily due to equity raise in the quarter of $144 million. The combined ratio was 81.6% and the consolidated loss ratio was 29.9%. There was $384 million cash on hand on September 30, 2022.

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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.