Sunday, 24 January 2016

Speculative Growth Defined

So the first category in my portfolio is Speculative Growth. How do I define that, and how do these fit in? Well, the idea is that these are stocks with the potential for significant growth, but on a very speculative basis. I have these in an account outside any tax shelters, so if I lose money, I can use that against any gains I experience as well. So essentially, this will contain most of my higher risk bets.

So why each one?

Canopy Growth Corporation (TSXV:CGC) and Organigram (TSXV:OGI) are both Canadian medical marijuana companies. Canopy is by far the largest in the space, having recently purchased Bedrocan, another operator in this space.

The rationale here is fairly straight forward. Canada's new Government announced their intention to legalize recreational marijuana. While medical marijuana is currently legal, no matter how legalization is implemented, current players in the marijuana space stand to significantly benefit.

I picked these two up before the last election so I've already seen some good gains, but they are here because of the potential. Canopy I picked because it's well run, well capitalized, and has already demonstrated it wants to lead the way in this space. Organigram is smaller, but it's the only operator east of Quebec, it's the only fully bilingual one, and it's the only one certified as an organic grower, while also being well capitalized. I figure in the new market, these are two that stand to thrive and survive.

Prairie Sky Royalty (TSX:PSK) is a bet on future oil price recovery. I may have bought too early, but their model offers a higher potential return over time than your traditional oil company. They don't actual drill or produce, they own the land rights on which production takes place, and get a cut of every barrel of oil. So they are less tied to the ups and downs of the oil market, have no capital expenses beyond purchasing more land rights, and stand to benefit tremendously in any market upswings.

Sherrit International (TSX:S) is a bit of a commodities bet, as well as one on normalized relations with Cuba. They are nickel/cobalt producer with operations in Cuba and Madagascar, with oil and electricity operations in Cuba as well. In addition to the commmodities/Cuba bets, it's also a bit of tie in with growing demand for electric vehicles, which could drive up the price of cobalt. The question is if they'll be able to navigate the low commodity price environment long enough to take advantage of those areas.

Superior Plus (TSX:SPB) has been a long term bet of mine that's already paid off handsomely (I tripled my holdings at one point when they were trading below $6 several years ago), though it's still a bet long term. I've long wagered they'd get their debt issues under control (they have) and since then they've now almost finalized a deal to buy Canexus (TSX:CUS), a struggling chemicals manufacturer, which now gives Superior Plus a significant increase in production capacity in that space.

TELUS (TSX:T) is a strange pick for 'speculative growth' you might think. Solid dividend that has shown steady increases over time, in an industry where it's one of three dominant players with little room for explosive growth.

However, they operate in digital Health records, and that is a space where they could conceivable grow by leaps and bounds over the next decade as Canadian Provinces look to streamline record keeping and lower costs.

So, there we go, a peek into my Speculative Growth space.

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