While the TSX has followed world markets in giving back most of the gains it made in the previous nine months of this year, tech is actually holding up pretty well.
As our maple leaves turn colour, Canada’s technology sector has been notable for its lack of drama; Cormark analyst Richard Tse recently opined on a phenomenon that has seen certain companies that performed well in the bull market showing resilience in the recent downturn. The analyst spotted a commonality; these are techs that have matured to a point where their revenue is “sticky” because of long-term contracts, cloud, or maintenance revenue.
Tse recently highlighted four companies he sees as particularly attractive right now; OpenText (TSX:OTC), CGI Group (TSX:GIB.A), BSM Technologies (TSXV:GPS), and Constellation Software (TSX:CSU), none of whom make this list of laggards.
Investors who believe this October’s correction is a garden variety pullback and are looking for stocks on sale may want to start here. We count down five Canadian techs that are down this month.
1. Baylin Technologies (TSX:BYL) -33.4%
Price on September 30: $3.50
Price on October 20: $2.33
Pure-play antenna company Baylin’s October swoon comes despite the fact the company is in an expansive mood. The company last week announced it had expanded and upgraded the infrastructure antenna production capacity in its own factory in Wuxi, China. The company says three new production lines are built to meet the highest standards and the latest innovative technologies.
2. Avigilon (TSX:AVO) -19.6%
Price on September 30: $18.67
Price on October 20:$15.00
One time high-flier Avigilon has been beaten down to levels that make it extremely attractive, says Agilith Capital fund manager Patrick Horan. Apperaring on BNN’s “Market Call Tonight” recently, Horan said the company may have transitioned its investment profile from growth to value. “You’re getting it really inexpensive here,” said Horan. “I think its trading at 1.7 times sales, which is a discount to its peer group which is trading at 2.7 times sales, and its growing at double its peer group”.
3. Points International (TSX:PTS) -19.3%
Price on September 30: $19.50
Price on October 20: $15.73
Points International manages the back end of loyalty currencies, frequent flyer miles, hotel points, retailer rewards and credit card points. The company has more than fifty partners worldwide including Delta, BestBuy, Starbucks and PayPal. Last week, the company announced an expansion into the Asian market through a deal with Asia Miles, a travel and lifestyle reward program, and Points International’s recently acquired rewards offering, PointsHound. Points says it plans further international expansion with the PointsHound brand.
4. Webtech Wireless (TSX:WEW) -16.7%
Price on September 30: $1.74
Price on October 20: $1.45
Founded in 1999, Vancouver-based WebTech Wireless is a telematics location-based service provider that develops GPS vehicle tracking and telematics solutions. On October 9th, the company announced that it expected its Q3 revenue would fall to about $5.5-million, down from the $7-million topline the company posted in Q2. “”We recognize and are disappointed that our Q3 revenue performance fell far below expectations, for our shareholders, our board and the entire Webtech team,” said interim CEO Andrew Gutman. “With the Q3 revenue performance fresh in mind, our team is working hard across a number of fronts to turn around this revenue picture.
5. EXFO (TSX:EXF) -16.4%
Price on September 30: $4.70
Price on October 20: $3.93
Founded in 1985, Quebec City-based EXFO manufactures test and service assurance instruments for fixed and mobile telecom networks. On October 9th, the company reported its Q4, 2014 results. Revenue was $59.7-million, down from $63.9-million in Q3, and from $60.9-million in last year’s fourth quarter. The shortfall pulled the company’s annual sales down 4.7% per cent to $230.8-million. But CEO Germain Lamonde said things are looking up. “After a challenging first quarter, EXFO delivered bookings growth of 6 per cent to 10 per cent year over year in each of the last three quarters to close fiscal 2014 with a bookings increase of 3 per cent and a book-to-bill ratio of 1.04 compared with 0.96 in a more difficult 2013,” he said. “This bookings trend demonstrates we have passed an inflection point on the strength of several new products and solutions that are starting to have a consistent market impact.”