Falling crude oil prices have decimated Canadian oil stocks and now Canadian bank stocks are following a global selloff. The Globe and Mail writes about the most recent travails of Canadian stocks.
Canada’s big banks have long been sheltered from many of the global economy’s biggest troubles, but a dramatic sell-off on Tuesday suggested that this might not be the case any longer.
Canadian bank stocks were down more than 3.5 per cent during the day, marking the biggest decline for the group since August, 2009, when stock markets were emerging fitfully from the global financial crisis.
Stocks recovered some lost ground later in the day, but over all, Canadian bank stocks have tumbled more than 7 per cent this year.
While that is relatively mild next to the double-digit declines among U.S. and European bank stocks, Tuesday’s downturn suggests investors are starting to lump the big banks together with their global peers.
Canadian banks are hurting because of their exposure to a weak domestic economy, indebted consumers, a precarious housing market and the depressed energy sector. Is there an upside to this situation? When is it time to buy Canadian stocks?
Value Investing in Canadian Stocks
For most long term investors the best time to go hunting for bargain prices in solid stocks is when the market is depressed. In this regard a good place to look to see if it is a good time to buy Canadian stocks is the Money Sense Canada’s Best stocks 2016 report.
Our All-Star Stocks, which combine the best growth and value prospects, gained 15.8% per year on average since we started in 2004. That assumes an equal dollar amount was put into each All-Star Stock in the first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC exchange-traded fund) climbed 4.4% per year over the same period.
These folks look at price to book value ratio (P/B), price to tangible book value ratios and P/E ratio over the preceding 12 months. And they like companies that pay dividends, have low or no debt and have demonstrated growth over the last few years. You can see their list of stocks for free but will have to pay to see the raw data they use to make their choices.
When to Buy in the Canadian Oil Patch
The Financial Post notes that the amount of wealth that has been destroyed in Calgary is staggering. Their advice is that while looking for bargains to beware of zombie stocks.
“The amount of wealth that has been destroyed in Calgary is staggering,” said George, whose father Rick ran Suncor Energy Inc. for two decades till 2012.
“In some cases, you see zombie equities that are basically trading at option value with bonds trading in the fifties. Buyers aren’t stupid – they see the capital structure and the implied enterprise value. Why should they attribute value to the equity when the market is telling them there is none?”
Yet more assets are coming to the market. Last week, Ernst & Young Inc., the court-appointed receiver of bankrupt company Spyglass Resources Corp., put the company’s assets on the block.
When looking for bargains including bargain stocks make sure that the price is appropriate and that you are not the last person in line to buy a zombie stock with no real value.