INVESTING OUTLOOK 2016
The year’s big stock winners and losers.
From an aerial view, equity markets in Canada were a big, bloody mess. The S&P/TSX composite index has tumbled 11 per cent since January amid a decline in oil prices that has forced producers to shutter or delay projects, cut their workforces and reduce spending. Just three of the benchmark’s 10 sector groups ended in positive territory. Likewise, the S& P/ TSX Venture composite index, which is exposed heavily to resources, plunged 28 per cent. Many investors avoided taking long positions in Canada — or actively bet against it. And if oil prices keep falling and household debt loads continue to run amok, the worst may be yet to come.
THE BIGGEST LOSERS
WORST OF THE WORST
The trophy for the worst-performing stock on the S& P/ TSX goes to Calgary’s Paramount Resources Ltd., whose shares lost 80.6 per cent of their value in the past 12 months. The company that explores for crude oil and natural gas fell more than either embattled Bombardier Inc. (down 67 per cent) or Teck Resources Ltd. (off 68 per cent) On the Venture exchange, where smaller, emerging companies go to list, shares of educational company KGIC Inc. finished in last place, slumping 93.4 per cent. Formerly Loyalist Group Ltd., KGIC said this month that it can only continue as a going concern if it can secure a source of additional funding.
CARNAGE IN THE OILPATCH
It will come as no surprise to anyone that the worst- performing sector within the country’s senior index was energy, which floundered 27 per cent. The losses might have been worse if not for the plummeting loonie, since most firms export to the U. S. Just six of the group’s 55 stocks concluded the year in the black. Shares of Calgary’s Parex Resources Inc., which focuses primarily on oil exploration and production in South America, rose 28.8 per cent. But, the outlook doesn’t get any rosier since companies have been sketching their strategies and spending plans for 2016 at much higher prices. “That reality tells us producers will be forced to further right- size 2016 capital budgets,” analysts at BMO Capital Markets told clients in a recent research note. “Few producers can grow under our current price forecast or, put differently, can afford to outspend cash flow.” This is why holding liquid assets is critical.
FOR U. S. RETAILERS, THE BOX IS TOO BIG
Shoppers can buy most things online and these e- tailers save a lot on overhead by being virtual. This truth is finally catching up to large U.S. retailers such as Macy’s Inc., whose shares fell 46 per cent in 2015, Nordstrom Inc., down 36 per cent, Wal
Mart Stores Inc., off 30 per cent, and Kohl’s Corp, which dropped 23 per cent. What’s more, not every bricks-and-mortar retailer struggled this year. Shares of athletic footwear chain Foot Locker Inc., for example, have jumped 19 per cent.
YOU CAN’T BANK ON THAT
The bears have been gorging on Canada’s biggest banks, even as they raised their quarterly dividends and generated total profits of $ 34.9 billion, an increase of roughly five per cent from 2014. Royal Bank of Canada, for example, said it generated yearly net income of $ 10 billion, topping that mark for the first time in history. Investors were not impressed, sinking its shares 7.3 per cent this year, but that only made it a middling performer. None of the six large Canadian bank stocks were in positive territory, with National Bank of Canada the biggest loser, down 18.6 per cent. Toronto- Dominion Bank’s 1.6-per-cent loss was the least.
THE BIGGEST WINNERS
BEST OF THE BEST
It wasn’t all bad in Canadian equities. You just had to know where to look. Ottawa software firm Kin
axis Inc., which went public in June 2014 and was recently added to the S&P 500 composite, was the best performer. Its shares have exploded 148.3 per cent. The stock that’s flying the highest on the Venture exchange is also from the Ottawa area. Edgewater Wireless Systems Inc., which produces a line of Wi-Fi access points that can penetrate higher densities, saw its penny shares catapult 1,350 per cent.
I. T. RULES EVERYTHING AROUND ME
Code runs the world and the companies with strong code ruled Canadian equity markets. The S& P/ TSX information technology index finished on the top step of the podium out of 10 sectors, gaining 14.8 per cent to beat the consumer staples category (up 12.3 per cent). It was a bit of a mixed bag in the I.T. index, with seven of the 13 stocks in positive territory. Shares of BlackBerry Ltd. were down two per cent, which can be considered a win for the hobbling cellphone and software maker. Si
erra Wireless Inc., an Internet of Things company, was the worst of the best. Shares of the Richmond, B.C.- based company tanked 60.5 per cent.
LONG LIVE FANG
Goldman Sachs Group Inc. closed its famous nine- year- old emerging- markets fund for the BRICs ( Brazil, Russia, India and China). Now, there’s a new acronym in town: FANG for Facebook Inc., Amazon. com Inc., Netflix Inc. and Google Inc., a quartet of technology powerhouses. Their stocks have soared in 2015, with shares of online video streamer Netflix leading the charge by posting a 138- per- cent gain. But investors shouldn’t put all their eggs in the FANG basket, as a repeat of these results would be a feat.
ROGER THAT
After years of being a laggard, class B shares of Rogers Communications Inc. are the best among Canadian telecom’s big three. They gained eight per cent, while shares of its rivals BCE Inc. and Telus Corp. rose 1.6 per cent and fell seven per cent, respectively. Rogers finished the year strong, gaining more high- paying mobile- phone subscribers than analysts expected it would. But with Shaw Communications Inc. buying Wind Mobile Corp. this month, the landscape is about to get more competitive across the major markets.