This week is the fifth annual Pathfinder Asset Management fishing trip, held in the remote Kyuquot Sound on Vancouver Island’s Northwest coast.
The event welcomes capital markets professionals from across the country, including fund managers, CEOs and dealmakers.
The trip is hosted by Pathfinder founder and noted tech enthusiast Doug Johnson, who oversees the Pathfinder Partners’ Fund which invests in smallcap technology and special situations. Four years ago, in Kelowna, Johnson told Cantech Letter that the sector rotation to technology had just begun, a prediction that turned out to be salient.
“In Canada, we have been spoiled by an incredible commodity market for fifteen years,” Johnson said. When you talked to brokers about tech or special situations in the past they weren’t interested, but that is now changing.”
Today, after fishing for Spring salmon and halibut near the Ouokinsh and Crowther canyons, Johnson shared his top three technology sector picks for the third quarter of 2017.
Johnson’s first pick is Posera (TSX:PAY). Pathfinder has owned the stock in the firm’s Partners’ Fund since 2014. Johnson says Posera, which is a technology solutions provider to the hospitality industry, is attractive because it has a base business with two attractive franchises in Maitre’D, a restaurant point of sale system and FingerPrints, a similar offering geared towards quick service chains. These legacy businesses allow the company to pursue its SecureTablePay offering, a new part of its business that restaurants across the U.S. are rolling out with the advent of chip and pin cards.
Johnson says Posera is cheap because is has partnered with Vantive and Ingenico, two of the largest payment processors in the United States, who will be selling Posera’s solutions. Pathfinder thinks the stock is undervalued because investors are essentially getting the upside of SecureTablePay for free.
His second pick is Imaflex (TSXV:IFX). Johnson says Imaflex, which manufactures flexible packaging for a variety of applications and has expertise in agricultural film solutions, is cheap because, similar to Posera, is has lower-margin legacy business manufacturing plastic films that support its current valuation. But the company has developed two new proprietary products that Pathfinder believes could disrupt the agricultural mulch film market, a space Johnson thinks could be worth hundreds of millions to Imaflex.
His third pick will be familiar to those who follow Johnson closely. He believes Flyht (TSXV:FLY) is undervalued, even as the stock has not made a significant move since he last recommended it to readers of this site four years ago.
“I know I sound like a broken record,” Johnson says. “But this company has recently turned a corner, growing revenue by 40 per cent and logging four consecutive quarters of profitability”
Johnson notes that Flyht has made significant changes to personnel, adding a new CEO in Tom Schmutz and revamping its board.
“It’s beginning to look like there is light at the end of the tunnel for Flyht,” he says. “Our only hope is that it is not a train.”
Pathfinder Asset Management’s Partners Fund has a one-year return on investment of 31.2 per cent and a four year return of 27.6 per cent.