These are strange days indeed, when a financial company, not a mining or tech stock, posts the best returns on the S&P/TSX composite index. But then Element Financial, which is up nearly 120% over the past 12 months, is not your typical financial sector stock. As John Aiken, a Barclays Capital analyst, puts it, “This is not the company you put grandmother into.”
It’s growth-seeking investors who will want a piece of this business. Earnings are growing around 20% a year, and Steve Hudson, Element’s CEO and founder, is a star executive who sold another lender, Newcourt Credit Group, for more than $2 billion in 1999. The Toronto-based company leases industrial equipment, such as tractors, private jets and construction machinery. One reason it’s done so well since it listed in December 2011 is that it has barely any competition.
There used to be more leasing companies, says Aiken, but big ones like GE reduced their exposure to the sector during the recession, and smaller players went out of business. Now, many companies that curbed equipment spending after the recession are starting to buy again. That growth story, coupled with Element’s inclusion in the TSX composite this year, means “it’s getting broader attention,” says Tyler Hewitt, a BMO portfolio manager.
Investors may have missed the “easy money,” says Aiken, but there’s still more upside coming. “Their growth is almost unheard of in the financial sector,” he says.