With inflation reaching 8.1 per cent in June, investors are keen on protecting their portfolios from rising costs.
Companies across the Canadian market are grappling with an abundance of demand – due to mass vaccination efforts – while being unable to fulfill it on account of war and pandemic-related supply chain disruptions. The net result is rising prices across the board, cutting profits and dampening future outlooks.
The Bank of Canada is amid a monetary tightening cycle, removing liquidity by raising borrowing costs to slow inflation down toward its 2-per-cent target. Once achieved, this reduction should allow prices to normalize from commodities to finished products on store shelves.
In the meantime, companies are left to maneuver through an environment where investors are less likely to put their hard-earned dollars behind a compelling story in the absence of accretive earnings, cash flows and customer bases.
The question of the day is what kinds of businesses are best equipped to thrive through an ever-changing market affected by national and global socio-political realities?
One answer is what are endearingly referred to as ‘boring businesses’, or those operating in industries unlikely to be affected by disruption or constant news coverage. Think self-storage, widget manufacturers, or logistics service providers. Shielded from the volatility of investor sentiment, exemplars with ample reserves, a profitable track record and an established market can simply carry on under the radar creating value for shareholders. A sleeve of these businesses can reinforce any portfolio to help it thrive through the peaks and valleys of an investment lifetime.
Another, perhaps more exciting, answer involves businesses focused on disrupting their industries by offering a glimpse into the future today. Leading members of this class of forward-looking ventures are characterized by the following traits:
First-mover advantage, which means the ability to establish market dominance in terms of footprint, innovation and brand resonance before competitors can try to claim a piece of the pie.
Moats, or competitive advantages, ensure the companies can withstand different macroeconomic climates and the inevitable appearance of competitors once they catch wind of the disruption’s money-making potential. Moats include being the lowest-cost provider, expensive barriers to entry, and switching costs that don’t merit customers’ time compared to the benefits they’re already receiving.
Market size and longevity refer to the minimum demand for disrupters to survive as going concerns and generate long-term returns over the risk-free rate. This is the most tenuous aspect of businesses founded on innovation because there is never a guarantee that the future they envision will come to pass. Investors should perform thorough due diligence to determine where a given industry is likely to pivot next, as well as whether or not a business can help to orchestrate this pivot before committing to an allocation.
Suppose your research is successful in identifying the drivers of new and lasting trends. In that case, periodic fluctuations in the cost of living should be but a blip on your way to fulfilling your financial goals.
Let’s now take a closer look at recent news from three future-focused issuers that garnered the most attention from our readers over the past week. Each is founded on cutting-edge technology, paving the way for monumental shifts in banking, plant-based goods and augmented reality respectively.
Nextech AR Solutions (CSE:NTAR) (OTCQB:NEXCF) updates proposed spin out of ARway
Nextech has entered into an arrangement agreement with subsidiary 1000259749 Ontario Inc. and 1373222 B.C. Ltd.
The agreement concerns the spin out of the ARway platform to 1000259749 Ontario Inc.
ARway is a spatial computing platform that offers augmented reality mapping solutions.
Nextech would receive 16,000,000 common shares of the new issuer with 4,000,000 shares going to Nextech shareholders. This represents a 25-per-cent increase from the 3,200,000 shares previously announced.
CEO Evan Gappelberg sat down with Sabrina Cuthbert to discuss the proposed spin-out.
Nextech AR Solutions is a metaverse company active in augmented reality, 3D modelling, holograms and 360° portals.
Nextech AR Solutions (NTAR) closed up by 18.18 per cent over the past week trading at $0.91 per share.
good natured Products (TSXV:GDNP) releases preliminary results for Q2 2022
The company expects revenue between $24M and $26M, up approximately 95-110 per cent YoY.
It expects a gross margin of 24-26 per cent, which is within its targeted range.
Revenue growth was driven by new customers, unit price increases and contributions from the Ex-Tech Plastics acquisition.
The company plans to release full Q2 2022 results later this month.
CEO Paul Antoniadis spoke with Dave Jackson about the results.
good natured Products offers a broad assortment of plant-based products made from rapidly renewable resources.
good natured Products (GDNP) closed up by 2.5 per cent over the past week trading at $0.41 per share.
RevoluGROUP Canada’s (TSXV:REVO) RevoluPAY becomes Visa Affiliate Member
RevoluGROUP Canada’s banking app RevoluPAY is now a fully-fledged Visa Affiliate Member.
RevoluPay may now issue Visa cards and disburse and acquire payments across the Visa payments system.
CEO Steve Marshall joined Daniella Atkinson to discuss the news.
RevoluGROUP Canada is a neobank deploying advanced technologies in the fintech sector.
RevoluGROUP Canada (REVO) closed up by 5.26 per cent over the past week trading at $0.20 per share.
We’ll see you next Friday afternoon for insights into the week’s market movers on The Market Herald Canada.
