Stock Up Sale
Not all momentum stocks are overvalued, speculative plays that are massive pullbacks waiting to happen. In certain cases, some of these “sexy” stocks are winners that keep on winning, with the ability to meet and exceed continuously increasing expectations.
Consider Quebecor (TSX:QBR.B), and Boyd Group Income Fund (TSX:BYD.UN), two hot Canadian stocks that have surged 33% and 35% over the past year. And when you consider that each stock’s valuation isn’t what you’d consider ridiculously expensive, I believe they can and probably will continue chugging along in the years ahead.
Quebecor
Unless you’re from Quebec, you’ve probably never heard of Quebecor: the diversified telecom behemoth that’s built a pretty wide moat for itself around its home province of Quebec. With such a narrow focus on the Quebec market, I like to think of Quebecor as a company with monopoly-like characteristics.
You see, Quebecor isn’t trying to take over the country with Vidéotron, the company’s mainstay telecom brand. Instead, the company has identified its circle of competence, which borders the province of Quebec, and is staying within it.
The company’s reluctance to expand beyond the confines of Quebec (with the exception of various communities in New Brunswick) may be indicative of a company that won’t be able to support attractive top-line growth. And while revenues haven’t been surging relative to other high-growth momentum stocks, management has continued to improve the experience and number of offerings for its existing customer base, beefing up its gross margins and free cash flows in the process.
With plenty of growth potential behind the rolling out of new and improved infrastructure in the numerous remote locations in Quebec, there are still many opportunities to grow the subscriber count and average revenues per user. Moreover, I think many Main Street analysts may be overlooking Quebecor’s subscriber-retention rates. With few competitors in the Quebec market that can provide the same bang for the buck, Quebecor is seen as the only option for many Quebecois.
Quebecor doesn’t need to expand across Canada, Quebec is a big enough market as it is, and with Quebecor’s French-focused offerings, it doesn’t really make sense to pursue Anglophone markets just to bolster the top line.
Quebecor stock has been roaring higher for years now, and as one of the few companies that can consistently walk the walk after talking the talk, the stock is a solid bet, even as it hovers at all-time highs.
Boyd Group
Boyd’s in the ridiculously boring business of collision auto-repair shops. While the business of the fix-up shops may be boring and lacking in growth, the company’s synergy-driving growth-by-acquisition model has been an incredible source of low-risk growth that’s resulted in substantial momentum that really seems unstoppable.
Boyd’s in a unique position. It has the know-how to drive substantial efficiencies that mom-and-pop repair shops would never be able to obtain on their own. This expertise has allowed Boyd to consolidate the fragmented North American auto repair shop scene at an astounding rate. The company is growing remarkably fast, and unlike many other “sexy” stocks, it’s doing so profitably.
If you’re a Fool follower, you may know that I’ve pounded the table on the stock many, many times over the past few years. And with a proven EPS growth model that’s not slowing down, it’s in the best interest of Fools to give the company and the stock the respect it rightfully deserves.
Stay hungry. Stay Foolish.
