Two Growth Stocks in a Moribund Market

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It wasn't too long ago when we were starving for growth stocks. The beautiful thing about cycles, though, is they change.

Current market conditions are looking great in the U.S., but Canada is still fighting the flu. We had a few good weeks, but we remain almost 400 points away from breaking a record on the

Toronto Stock Exchange's

main index. If the TSE were a stock, we wouldn't buy it based on the chart.

Through our research we have found stocks that are performing extremely well despite the market conditions. The first of two of our favorites is

Mitel Corp.

(MLT:Toronto). MLT designs and markets systems, subsystems and microelectronic components for sale to world markets. Its products include voice communication systems, networked voice and data systems and client/server telecom products. On the fundamental side MLT's EPS for 1997 was 44 Canadian cents; for 1998 the number expected is 81 Canadian cents. That 1998 number includes its recent purchase,

Plessy Semiconductors Group

. This acquisition adds to MLT's already significant semiconductor operation, ranking MLT among the top 10 networking and telecommunications semiconductor companies in the world.

We originally got excited about MLT back in September '97, purchasing shares at around C$10.30 on a breakout that stemmed from some strong earnings. We held it as a trading range developed between C$10 and C$12.80. The real action started in February when it gapped up on good earnings and the momentum was carried further with the announcement of the Plessy acquisition. The stock got as high as C$17.45 but has pulled back a bit and is trading around C$16.60 (see (see

chart

). We would like to see a little healthy consolidation before it makes another run.

Our second favorite is

Trilon Financial

(TFC.A:Toronto). The company's services include investment banking, real estate brokerage, commercial and lending, leasing and insurance. Its customers include individual, institutional and corporate customers. Fundamentally the company is growing very nicely. it reported profit before gains rose to C$28 million, or 15 Canadian cents a share, in 1997, up from C$25 million, or 12 Canadian cents a share, in the previous year. Gains totaled C$668 million, or C$4.14 a share, giving the company net income of C$789 million, or C$4.79 a share. We believe along with the CEO that 1997 marks a new beginning for Trilon. We first started to accumulate stock at the end of September around C$10.40. TFC.A, much like MLT, put in a trading range or consolidation until breaking out at the end of January 1998. We actually bought more around C$12.85 (see

chart

).

Both of these stocks have good growth profiles, and their charts are actually very similar. They are both putting up good numbers, reporting new and positive information and continuously attaining new highs. We will be very bullish on these two stocks as long as their growth profile remains intact.

Greg Guichon and Michael Soni, along with their team, manage money internationally on behalf of high-net-worth individuals and institutions. At time of publication they are long Mitel and Trilon. Guichon and Soni, who are based in Toronto, invest exclusively in Canadian stocks. Their column appears every Monday in TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stock. Your email is welcome and may be sent to

michael_soni@scotia-mcleod.com.