5 of Canada’s biggest market winners and losers in 2013

5 of Canada’s biggest market winners and losers in 2013

John Shmuel and David Pett | January 1, 2014 7:00 AM ET

We take a look at five of the best- and worst-performing stocks in the Toronto Stock Exchange’s S&P/TSX 60 index during 2013.


By John Shmuel

Valeant Pharmaceuticals International Inc. (VRX/TSX)

Annual return: 110.01%

Canada’s largest publicly-traded drug company was also the biggest winner on the S&P/TSX 60 Index in 2013. Valeant Pharmaceuticals International’s stock price more than doubled for the year as investors rewarded the company for its active and profitable acquisition streak. Valeant’s most recent deal, on Dec. 16, was an offer to buy U.S.-based medical-device company Solta for a 40% premium. RBC analyst Douglas Miehm gave the deal a big thumbs up, saying it showed Valeant’s ongoing efforts to expand its business. He also hiked his price target for Valeant to $120 from $117 following the announcement. Adding further allure for investors heading into 2014, Valeant’s management in October said they continue to hunt for profitable acquisitions and that Valeant would even be open to a “merger of equals.”Magna International Inc. (MGA/TSX)

Annual return: 75.32%

Magna International’s stock had a breakout year in 2013. After spending two years essentially moving sideways, two key events allowed the share price to soar. First, Magna founder Frank Stronach, who long held an iron grip over Magna and had significant voting power through his large stake, stepped out of the picture by ceding the chairmanship in November 2012. Around the same time, Magna’s European division, which had long suffered due to Europe’s economic challenges, finally began to show signs of recovery. But the meteoric rise of Magna’s stock has some analysts cautioning investors about the risks of getting in now. David Tyerman, analyst at Canaccord Genuity, said the share price appreciation this year has “pushed up Magna’s valuation to a high level” and currently maintains a hold rating.

Canadian Pacific Railway Ltd. (CP/TSX)

Annual return: 59.22%

Chief executive Hunter Harrison continues to give Canadian Pacific Railway investors plenty of reasons to love him. In July, Mr. Harrison told investors during a conference call that his four-year plan to turn CP around is 10 to 12 months ahead of schedule — and it’s no coincidence CP’s stock hasn’t stopped rallying since. Most recently, the company announced a record third-quarter profit and operating performance, largely due to Mr. Harrison’s drive for increased efficiency. Financial data firm FactSet recently revealed that CP is one of the most widely held Canadian stocks among U.S. hedge funds, with some US$3.4-billion worth of shares being held south of the border.

CGI Group Inc. (GIB.A/TSX)

Annual return: 54.93%

The heated debate over the myriad problems with the Affordable Care Act website in the United States has caught the website’s creator, CGI Group, in the crossfire. But the negativity wasn’t enough to put a damper on CGI’s stock, which has nicely spiked during the past couple of years. The biggest growth catalyst came from CGI’s $2.7-billion acquisition of European IT firm Logica in 2012. CGI went on to restructure many of Logica’s European operations, squeezing more efficiency out of them and improving profits. That paid off big in 2013 as stronger earnings and analyst upgrades lured investors to buy in. Some uncertainty continues to hover over CGI because of the U.S. health-care website fiasco, but the majority of analysts still rate the stock as a buy, with Desjardins recently upgrading its target from hold to buy in the wake of an 8% price pull back in the past month.

Gildan Activewear Inc. (GIL/TSX)

Annual return: 55.82%

Gildan Activewear, maker of underwear, socks and t-shirts, was the S&P/TSX 60’s top performer in 2012 and had another blockbuster year in 2013. That’s an impressive back-to-back performance considering the company was near collapse just a few years ago, when Gildan’s largest wholesale buyer nearly filed for chapter 11 bankruptcy during the height of the financial crisis. But with the economy bouncing back, Gildan’s sales have recovered and the company continues to grow. Gildan’s management has announced that they have earmarked $350 million for facility upgrades and a new plant over the next year. They’re also more upbeat about costs since Gildan continues to benefit from normalizing cotton prices, which have dropped to about US90¢ a pound from a high of US$2.20 a pound in 2011. Analysts are certainly optimistic about the company’s future, with Bloomberg showing most analysts rate it a buy.


By David Pett

Potash Corp of Saskatchewan Inc. (POT/TSX)

Annual loss: -13.49%

Potash Corp.’s fate as one of the year’s worst performers was sealed in late July when shares in the fertilizer giant plummeted 23% in just two days, following the breakup of Belarusian Potash Co. (BPC), one of two global marketing ventures that controlled 40% of potash exports worldwide. The stock has since somewhat rebounded, rising 13% over the past five months, but the large majority of analysts covering the company believe 2014 will be another tough year. That could all change, however, if rumours prove true that Urakali and Belaruskali, the estranged partners in BPC, are set to resume their cartel-like relationship in the new year.

BlackBerry Inc. (BB/TSX)

Annual loss: -33.05%

After falling 20% in 2012, BlackBerry shares were again in the red this past year due to ongoing troubles at the Canadian smartphone maker and persistent doubts about its much-talked-about turnaround. With any luck, John Chen, the company’s new chief executive, will get things moving in the right direction over the next 12 months as the company tightens its focus on enterprise customers. But if his tenure to date is any indication, get ready for another rocky year. Since taking the helm in mid-November, the stock is up more than 16%, but fell almost 5% earlier this week on news that former co-chief exec Michael Lazaridis was selling his shares following his failed takeover bid.

Eldorado Gold Corp. (ELD/TSX)

Annual loss: -52.89%

Eldorado Gold was the worst-performing big-cap gold miner in 2013 as the falling price of bullion continued taking its toll on the industry’s heaviest hitters. If there is a silver lining to the story, it’s that analysts believe the worst may finally be over for the sorry group that also includes Barrick Gold Corp., Goldcorp Inc. and Agnico-Eagle Mines Ltd., to name but a few. There are 16 analyst buy recommendations on Eldorado, versus seven holds and two sells heading into the new year and the stock is expected to climb 55% over the next 12 months, according to average price target estimates.

Teck Resources Inc. (TCK.A/TSX)

Annual loss: -23.51%

Teck Resources also fell prey to weaker gold prices in 2013, but the bigger headache for the diversified miner is the precipitous drop in coking coal prices to below US$150 per tonne from more than US$3oo/tonne a little over two years ago. The fossil fuel was responsible for roughly half of Teck’s operating profits in 2013 and prices are not expected to improve anytime soon due to supply increases following a rebound in Australian production and stronger domestic production in China. “While the lower Q1/14 benchmark price has likely already been discounted in Teck’s share price, the weak start to 2014 coal pricing is likely to weigh on share price performance until there is more clarity on pricing for the balance of the year,” said Greg Barnes, an analyst at TD Securities, in a recent note to clients.

Penn West Petroleum Ltd. (PWT/TSX)

Annual loss: -17.87%

Penn West Petroleum disappointed shareholders in 2013 by falling more than any other large-cap energy play in the country. The lowlight — a two-day 23% plunge — came in early November, when the company announced sweeping changes that would result in asset sales and reduced short-term production levels. Fortunately, most market observers don’t foresee another big selloff next year, but caution is still strongly advised. Of the analysts who cover the stock, 14 have hold ratings, five have sells and three have buys.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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