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Stock picks for economic recovery, ETFs for uncertainty now and Canadian companies at risk of short squeeze: What you need to know in investing this week

Stock picks for economic recovery, ETFs for uncertainty now and Canadian companies at risk of short squeeze: What you need to know in investing this week

Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.

Four TSX stock picks for an expected economic recovery from an index-beating fund manager

It was a long-term bet on Big Tech and a mix of consumer and health care stocks that helped Murray Wealth Group deliver double-digit, benchmark-beating returns last year, Brenda Bouw writes. “We buy companies we believe in for the long term and that we’re comfortable buying in stressed times,” says Jamie Murray, portfolio manager and head of research at Murray Wealth Group, which manages about $180-million in assets.

Despite the market run-up in recent months, his team is forecasting the recovery to continue into this year and next – with some expected volatility – as the global economy recovers from the pandemic amid the widespread vaccine rollout. He expects Air Canada, Aritzia, Linamar and Stelco to do well amid an anticipated recovery. Here’s why.

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Gordon Pape: Uncertain about what to invest in? Consider these four ETFs

Many Canadians have money to invest, Gordon Pape writes, they just don’t know what to do with it. A recent survey by Bank of Nova Scotia finds that 55 per cent of Canadian investors feel optimistic about their financial future, but many remain cautious. Most people (70 per cent) admit it’s hard to know what to do when it comes to their investments in the current environment.

Investors who are confused about where to put money right now and are sitting on the sidelines should go back to first principles, he advises. Make a plan based on your age, goals, tax status, and risk tolerance and stick with it. Here are four exchange-traded funds he suggests you can invest in now, despite the market uncertainty.

These Canadian stocks could be the most vulnerable to a short squeeze

Most investors are proud to say they hold only high-quality companies in their portfolio, Scott Barlow writes. But it has been low-quality stocks exploding higher in recent weeks. Returns on stocks with the biggest short positions – generally, weaker companies where sophisticated investors are betting on a share price decline – are racing ahead of benchmark performance, potentially indicative of a new market cycle.

The trend of short investors losing heaps of money as their stocks rally goes far beyond GameStop, AMC and other stocks recently dominating the headlines. The pattern has reached deeply into Canadian markets. The table below shows the recent performance of Canadian companies with the highest short positions as measured by short interest as a percentage of total stock float. Read more here.

Canadian companies with the highest short positions

Name Ticker Short Int. as % of Float 1M Ttl. Rtn. (%) 3M Ttl. Rtn. (%) 12M Ttl. Rtn. (%)
S&P/TSX Composite 2.8 14.7 6.7
First Majestic Silver FR-T 25.4 25.7 53.0 60.9
Westshore Term. Inv. WTE-T 22.0 9.0 22.5 10.3
Aurora Cannabis ACB-T 21.5 53.8 160.8 -45.7
Cronos Group CRON-T 19.1 64.1 83.0 52.3
Canada Goose Hldgs. GOOS-T 18.9 18.2 7.9 12.9
Canopy Growth WEED-T 18.8 71.3 93.5 80.0
West Fraser Timber WFG-T 12.4 3.0 29.0 61.5
BlackBerry BB-T 11.4 75.1 149.7 83.4
Trillium Thera. TRIL-T 10.9 -13.7 -1.9 218.3
Great-West Lifeco GWO-T 10.9 -2.1 9.5 -7.6
Aphria APHA-T 10.1 118.2 188.7 210.2
Fortuna Silver Mines FVI-T 9.8 -6.0 7.5 89.4
Boardwalk REIT BEI-UN-T 9.5 4.7 31.9 -22.8
Dream Office REIT D-UN-T 8.7 -1.9 10.5 -37.6
Loblaw Cos. L-T 8.7 -0.1 -4.8 -7.6
Canadian Tire CTC-A-T 8.5 4.0 17.7 26.1
Laurentian Bank LB-T 8.1 0.2 18.1 -22.5
Imperial Oil IMO-T 7.5 0.2 32.1 -19.9
Arc Resources ARX-T 7.1 9.3 -0.7 -2.1
Vermilion Energy VET-T 7.1 3.9 72.5 -67.7
Seabridge Gold SEA-T 6.9 -8.1 -6.0 33.2
Ballard Power Sys. BLDP-T 6.9 56.7 130.4 258.3
Great Cdn. Gaming GC-T 6.5 -2.0 81.4 7.0
Bausch Health Cos. BHC-T 6.4 30.6 50.5 -5.0
Innergex INE-T 6.4 4.5 17.7 57.2

Source: Bloomberg,  Scotiabank GBM Portfolio Strategy 

Read more: As GameStop craze fades, droves of novice investors face a reckoning

Beaten-down REITs could see quick reversal as lockdowns end, CIBC analysts say

After a year in which offices went virtual, and bricks-and-mortar stores were given up for dead, few people are excited about the potential of real estate investment trusts, Ian McGugan writes. For value-hunting investors, the lack of attention could be an opportunity. “We see a path to 20 per cent returns [in 2021] within the sector, albeit with a relatively larger-than-historical range of possible outcomes,” write CIBC analysts led by Dean Wilkinson in a report this week.

The extent of the gains will hinge on how fast effective vaccines can be rolled out, the CIBC team cautions. But current valuations in the sector “are perhaps overly punitive.” Even modest signs of easing lockdowns and falling infection numbers could go a long way to reversing the negative sentiment around REITs. Read more here.

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More from Ian McGugan: Is this a bubble or not? Three things wise investors should keep an eye on

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Rob Carrick: Why Canadian investors should stop buying U.S.-listed ETFs

More than 1,000 ETFs are listed on the Toronto Stock Exchange today, a mix of new products shovelled into the market to address one trend or another and tried-and-true funds with a solid track record, Rob Carrick writes. There’s sufficient supply of this latter type of fund to offer a thought to Canadian ETF investors: Instead of putting money into U.S.-listed ETFs, buy domestic.

The cost of owning the US$323-billion SPDR S&P 500 ETF Trust and its Canadian counterparts are pretty much the same, but the cost of buying is a different story. When you buy a TSX-listed ETF holding U.S. stocks, your money is converted into U.S. dollars by the ETF company. When buying a U.S.-listed ETF, your broker converts your Canadian dollars into U.S. currency. Currency conversions within a fund are done at institutional rates, “and it’s very cost-effective,” says Michael Cooke, head of ETFs at Mackenzie Investments. Read more here.

More from Rob Carrick: Young people are turning their backs on an investment that pays 50 cents on the dollar, guaranteed

What investors need to know for the week ahead

Major companies releasing their latest results in the week ahead include Air Canada, Enbridge, Fortis, TMX Group, Twitter, General Motors, PepsiCo, Kraft Heinz, Manulife Financial, Sun Life Financial, Great-West Lifeco, Intact Financial, Brookfield Asset Management, Telus, Walt Disney, Cenovus Energy, Cameco, Canopy Growth and Aurora Cannabis.

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Economic data on tap include: U.S. inflation figures for January and U.S. wholesale inventories for December (Wednesday); Canadian wholesale trade and new motor vehicle sales for December plus industrial product price index for January (Friday).

Looking for more money ideas and opinions?

Published at Sun, 07 Feb 2021 19:31:37 +0000

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Written by Riel Roussopoulos

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