Ballard (TSX:BLDP) and Cronos (TSX:CRON): 2 Inflation-Proof Stocks for Investors  

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Ballard (TSX:BLDP) and Cronos (TSX:CRON): 2 Inflation-Proof Stocks for Investors  

 Ballard (TSX:BLDP) and Cronos (TSX:CRON): 2 Inflation-Proof Stocks for Investors  

Summary

  • As per TSX30 list 2020, Shopify (TSX: SHOP), Ballard (TSX: BLDP) and Cronos (TSX: CRON) are the top performing stocks on the Canadian stock exchange.
  • Cleantech firm Ballard’s stock price (dividend-adjusted) grew by 459 per cent over three years.
  • Cannabinoid firm Cronos stock price (dividend-adjusted) grew by 378 per cent over three years; it is also list on TSX’s list of undervalued stocks for low price to earnings ratio.

Pandemic forced stock markets to sink to unseen depths in March this year. Since then, investors are constantly gauging the market ecosystem through the country’s economic outlook, fiscal deficit (accrued due to economic stimulus for pandemic) and jobs data. To guide investors under these circumstances, the Toronto Stock Exchange recently released the TSX30 list 2020 which ranks Shopify (TSX: SHOP), Ballard (TSX: BLDP) and Cronos (TSX: CRON) as the top three performing stock.

The list names the best performing stocks on the benchmark Canadian index over a three-year period, based on share price appreciation, sustained excellence, market capitalization, etc.

Stocks of Shopify, Canada’s largest e-commerce platform, cruised through the pandemic with a red-hot rally. Its stock surged by nearly 165 per cent this year. After a brief bump in the beginning of September, Shopify share price is up by 1.3 per cent over a month’s time.

Much has been written and discussed about Shopify in our previous articles. So, today, we look at clean technology stock Ballard and cannabis stock Cronos, and their recent performances.

Ballard Power Systems Inc (TSX: BLDP)

Stocks of Ballard Power, the supplier of green energy solutions and clean fuel cell, have surged by nearly 119 per cent this year. The stocks gained 87.5 per cent in the last six months but dropped by seven per cent in the last one month.

The company’s market capitalization is C$ 4.9 billion and the shares are currently trading around C$ 20 apiece. As per data on the TSX, Ballard stocks price-to-cash flow ratio is nearly 140 while the price-to-book ratio is 12.6.

Ballard’s three-year price chart (Source: Refinitiv, Thomson Reuters)

In its second quarter 2020 financial report (ending June 30, 2020), the company’s top line grew to US$ 25.8 million from US$ 23.65 million same quarter last year. But its net loss expanded to C$ 11.4 million from C$ 6.97 million in Q2 2019.

Ballard recently closed a cross-border at-the-market equity program, raising gross proceeds of US$ 250 million.

Clean fuel cell vehicles are expected to replace fossil fuel vehicles in near future and Ballard is focusing on ways to capitalize this. China is one of the leading markets for the company where the company aims to launch one million fuel cell electric vehicles (FCEVs) and 1,000 Hydrogen Refueling Stations (HRS) by 2030. Europe and California are two other key markets for he cleantech organization. Ballard is also investing in the emerging marine market.

The 40-year-old company employs 900 people and aims to deliver “valuable and innovative solutions” through its hydrogen and fuel cell expertise. It has over 1400 patents and applications and has delivered over 670-megawatt fuel cell products. Its solutions have powered 1000+ transit buses, 2200+ trucks and 12000 forklifts. It also has four train projects and five ships in development.

As per the latest TSX30 rankings, Ballard’s stock price (dividend-adjusted) grew by 459 per cent over three years, emerging as the second-best performing stock on the list.

Cronos Group Inc. (TSX: CRON)

Apart from making to the third spot on TSX30 rankings of 2020, Cronos stock is also list on TSX’s list of undervalued stocks for low price to earnings ratio. The life science stock price (dividend-adjusted) grew by 378 per cent over three years.

However, the cannabinoid stocks are currently down 32 per cent year-to-date and has plunged by nearly 20 per cent in the last three months. The company’s market capitalization is C$ 2.34 billion and the stock is currently trading at C$ 6.69. As per data on TSX, its present price-to-earnings ratio is 3, price-to-book ratio is 1.05, return on equity is almost 50 per cent and return on asset is nearly 33 per cent.

Cronos’ three-year price chart (Source: Refinitiv, Thomson Reuters)

In its second quarter financial report (ending June 30, 2020), the company posted net revenue US$ 9.88 million, up 29 per cent from same quarter last year. Gross loss narrowed down to US$ 3 million from US$ 4.1 million in Q2 2019.

Cronos Group has market presence in five continents, including North America, South America, Asia, Europe and Australia. Its product portfolio includes health and wellness platform PEACE NATURALS™, CBD brands Lord Jones™ and PEACE+™, and adult-use brands COVE™ and Spinach™.

Inflation and COVID-19

For many investors, inflation – indicated by the consumer price index (CPI) – has emerged as a critical criterion. Inflation in Canada improved in June, returning to positive territory after markets were lifted by pent-up demand and easing of restrictions. However, in August, it remained flat, rising by just 0.1 per cent as compared to a year ago.

The benchmark interest rate is currently near zero-level, which means low yields on bond investments, as opposed to equities that are rallying.

One way for equity investors to gauge future inflation is to watch the velocity of money flow. Despite the federal stimulus, Canada is yet to reach the pre-pandemic levels of employment. Moreover, many provinces are reimposing lockdown over second pandemic wave fears.

This means, there could still be a decline in employment and household income that can contribute to the low demand creating deflationary pressures.

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