The TSE Index was up 1.02% in the month of August, up 11.39% YTD and 15.05% over the past year. Canadian GDP was up 0.50% in the third quarter of 2024 and 0.50% for the full year; in the USA the GDP was up 3.00% in the third quarter and 3.10% for the full year. The Canadian inflation rate was up 2.50% annually and the US inflation rate was 2.90% annually in August 2024. With this background, the following Table presents the highest and lowest performers for the month of August 2024.

TerraVest Industries Inc. (TVK)

The top performer of August was TerraVest Industries Inc. (TVK) whose stock price rose 18% on the month, 118% year-to-date, and 173% from the year prior. TVK’s momentum over the last year has been exceptional, consistently breaking all-time highs, recently touching $97.51. One-year ago the stock was trading around $30, and it feels like the stock has gone up only since.

TVK operates as a diversified industrial company that produces and markets goods and services to a variety of different end markets including agriculture, energy, mining, transportation, etc. The company has a broad portfolio of businesses that they have acquired over the years. For example, one of its primary businesses is to provide HVAC (home heating and cooling products) equipment such as refined fuel tanks, air conditioning equipment and control, etc. for commercial and residential customers.

TVK’s big jump in August was earnings driven. The company reported strong third quarter results. Sales were $238.1 million beating estimates $223 million. EBITDA of $49.1 million nicely beat estimates of $40.2 million. Sales rose more than 50% and EBITDA more than doubled year-over-year. Gross margin of 29% increased 6.8 percentage points. Strong organic growth and higher margins helped the results. TVK continues to be a big winner and it is good to see that the run-up has been fundamentally driven.

Shopify Inc. (SHOP)

The second-best performer of August was Shopify Inc. (SHOP) whose stock price was up 18% on the month, down 3% year-to-date, and up 23% over the past year. Needless to say, SHOP has been very volatile over the last year, appearing as one of the biggest losers over numerous previous editions of this blog. The stock has a 52-week range of $63.16-$123.20.

Shopify (SHOP) is a leading global commerce company that provides essential internet infrastructure for commerce, offering tools to start, scale, market, and run a business. SHOP has transformed since inception in 2004, initially as a platform to help small businesses set up online stores. SHOP now provides all types of merchants with an all-in-one solution spanning a multi-channel front end, a single integrated back end, and infrastructure for data-informed decisions.

After numerous months of SHOP’s shares being under pressure, the stock recovered with a big August. We had previously highlighted how some of the first quarter reaction was overdone and expected a recovery. Second quarter results released in the beginning of August were strong, guidance was upped, and many of investor concerns were shaken off. The stock jumped almost 20% the day results were released, and we are positive in our SHOP outlook.

For the quarter, SHOP reported EPS of 26c beating estimates of 20c and growing from 14c in the year prior. Revenue was $2.05 billion growing 21% (or 25% adjusting for the sale of the logistics business) year-over-year and beating estimates of $2.01 billion. Gross profit dollars grew 25% to $1.0 billion. Gross margin for the quarter was 51.1% compared to 49.3%. Free cash flow margin was 16% compared to 6% a year prior. Growth was driven by higher GMV, increased merchants, and increased penetration of Shopify Payments while profitability continued to expand.

H&R Real Estate Investment Trust (HR.UN)

The third-best performer of August was H&R Real Estate Investment Trust (HR.UN) whose stock price was up 10% on the month, up 6% year-to-date, and down 1% over the past year. HR.UN has seen extreme price swings historically, with a beta of 1.97.

H&R Real Estate Investment Trust (HR.UN) is one of Canada’s largest Real Estate Investment Trusts (REITs). HR.UN is in the midst of a strategic repositioning plan, as the stock has struggled since COVID-19 due to heavy weighting in the office and retail divisions. The Trust is planning on fully exiting Office and Retail over time by reinvesting proceeds into Residential and Industrial properties.

While HR.UN did report Q2 earnings in August, the reaction was quite muted. There was no company specific information corresponding to the big jump in share price over a week later.

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Kinaxis Inc. (KXS)

The worst performer of the month was Kinaxis Inc.(KXS) whose stock price was down 13% on the month, down 1% year-to-date, and down 12% over the past year. There has been some frustration around KXS over the last year with its choppy performance. The stock has a 52-week range of $129-$172.83.

Kinaxis (KXS) provides cloud-based SaaS solutions that combine human intelligence with artificial intelligence to assist companies with concurrent planning and supply chain management. The company serves a list of high-quality, blue-chip customers, including Global Fortune 100, Fortune 500 and other large and mid-size companies. In addition to the SaaS platform, KXS also provides professional services to numerous industries.

The stock dropped significantly at the end of August on news that its CEO will retire at year-end, and it’s CSO will be leaving the company for a new opportunity. The stock dropped more than 11% on this news. While certainly not great optics, we think the drop was somewhat overdone. KXS reiterated 2024 fiscal guidance and the shake-up in leadership could be the result of the company trying to become more of a global name, requiring new/different skillsets.

ATS Corporation (ATS)

The second worst performer of August was ATS Corporation (ATS) whose stock price was down 13% on the month, down 37% year-to-date, and down 39% over the past year. ATS has traded in a wide 52-week range $218-$324, seeing plenty of volatility. ATS has been on a somewhat troubling downward trend with a 52-week range of $34.68-$61.56. The stock has not crossed or reached 52-week high levels in 2024.

ATS is an industry-leading automation solutions provider to many of the world's most successful companies. ATS uses its extensive knowledge base and global capabilities in custom automation, to address the sophisticated manufacturing automation systems and service needs of multinational customers.

ATS reported fiscal first quarter results in the beginning of August. The results were weak with revenue and EPS missing estimates and organic growth declining. The stock did, however, get a positive initial reaction to the results as booking were up 18% year-over-year and the company announced an acquisition. This signalled that demand maybe being pushed into the latter half of the year. The stock did sell off in the days following, and later in the month, ATS closed a $400 million CAD private placement of senior unsecured notes (upsized from the initial $100 million announced). Net proceeds from the transaction would be used to pay outstanding amounts owed under the company’s revolver. 

Pason Systems Inc. (PSI)

The third-worst performer of the month was Pason Systems Inc.(PSI) whose stock price was down 13% on the month, down 12% year-to-date, and up 3% over the past year.

Pason Systems Inc.(PSI) is a leading global provider for data management systems for oil and gas drilling. PSI has a 40 plus year track record of offering end-to-end data management solutions enabling secure access to critical drilling operations information and decision making in real time. PSI’s wide variety of solution offerings enable collaboration between drilling rigs and offices. Additionally, PSI provides products and services for solar power and energy storage in North America.

The weak month was earnings driven as PSI reported EPS of 14c missing estimates of 20c. Revenue beat estimates of $93.67 million coming in at $95.86 million and displaying a 13% year-over-year increase. Adjusted EBITDA was $33.1 million on a margin of 34.6%, down from 44.7% in the prior year period. Adjusted EBITDA was down due to a 13% decline in North American drilling activity and weaker margins as a result of the inclusion of the IWS acquisition. Not a great quarter from PSI, but it did a decent job shielding itself from a weak drilling market and some of its smaller segments provided offsetting revenue growth.

Take Care,