Search

Top financial analysts Murray Leith, Greg Bay, Tony Massie and Wayne Deans discuss their forecasts for the Canadian stock market for 1995. All of the analysts, except Bay, were generally optimistic about growth in the stock market, especially in the Toronto Stock Exchange. The analysts also discussed some their picks for 1995 which cover a wide range of sectors, from cable television to petroleum and natural gas.

The downturn in the Canadian stock market at the end of 1994 is favorable to cash-rich companies. Falling share prices, retreating investors and rising interest rates are not at all having ill effects on cash-rich firms with little debt and strong earnings. Instead, analysts believe that these companies are in the best position to capitalize on weak stock prices, particularly their own. Present conditions are expected to result in increases in stock buybacks, regular dividends and special payouts.

Speculative markets performed poorly in 1994 with penny stocks in the diamond, oil and gas, gold and junior technology sectors taking major plunges. While the Dow Jones industrial average and the Toronto Stock Exchange remained reasonably stable, the indices of the Vancouver Stock Exchange and the Alberta Stock Exchange have declined by 25% since the beginning of 1994. Nevertheless, many stock analysts are not ruling out a recovery in 1995 and have cautiously begun bargain-hunting.

Investment adviser Peter Lynch advises market players to spend more time determining the volatility of the market, especially the macroeconomic sectors, rather than predicting its outcome. He believes that the market for cyclicals such as aluminum, paper and chemicals, presents the greatest opportunity because of the high turnover. Among the automobile companies which seem to be following the path to recovery, he believes that Chrysler Corp., Ford Motors Corp and General Motors Corp. are the best picks.

Investors should realize that solid fundamentals alone will not be able to boost the price of a corporation's stock. There are stocks whose share prices fail to improve despite solid earnings and revenue growth and despite their popularity among market analysts and institutional investors. Although there are no set rules for identifying these so-called 'lame-duck stocks,' there are certain signs which investors should look out for. They should avoid thinly-traded stocks being discarded by existing shareholders, stocks in firms experiencing bad press or stiff competition and highly cyclical stocks which appear inexpensive on a current earnings and cash flow basis.

The small-cap funds market is expected to make a strong comeback in the stock market after suffering in the first half of 1994. Key US and Canadian small-cap indexes rose slightly in Jul. 1994, indicating that the small-cap market is getting set for a recovery. Buying small-cap stocks while they are cheap will mean superior earnings later. A list of ten small-cap funds with the best potentials is presented.

Five top equity fund managers give their views on the prospects for Canadian stocks. Given that all five managers suffered asset declines in the first half of 1994, their emphasis on caution in the short-term comes as no surprise. However, all five managers believe that, in the long-term, Canadian equities are poised for healthy growth for the remainder of the economic cycle. Hence, they recommend stocks in resource-based industries, export-oriented companies and industrial firms in cyclical sectors. Stocks recommended include Bombardier, Premdor Inc. and Rogers Communications Inc.

Investors can avoid losing money in stock market bombs by making the distinction between a short-term downslope and a major one. Danger signals based on stock trading basics and a feel of the market can easily be identified by investors so they can bail out their money just before a stock market bomb. Warning signals, according to analysts, include an equity issue after a sharp share-price run-up, insider selling, sudden management changes and a slowdown in earnings momentum.

Mutual fund investors would do well to put their money in the Japanese and most European markets such as Scandinavia, France, Italy, Britain and Spain, according to international money managers when polled on the best bets in 1994 in global markets. Mexico, India and Australia also show positive signs. Meanwhile, the money market experts surveyed were divided over Brazil, Chile, Hong Kong, Malaysia, Thailand and other markets in the Far East. However, they agree that Germany as well as the US are poor investment choices in 1994.

Some of the companies listed on the Toronto Stock Exchange (TSE) have been consistently bad in the past 15 months. Although the TSE 300 index climbed 31% during the same period, these companies averaged an 8% loss and only one of them managed to attain a two-digit gain. However, analysts predict that the share prices of the Oshawa Group Ltd., DMR Group Inc. , Circo Craft Company Inc., Agra Industries Ltd. and Laidlaw Inc. are ready to recover.

Six amateur stock market investors share some tips on making successful investments and have proven some common beliefs and practices as myths. Some of the strategies taken by these amateur investors include buying stocks of big blue-chip companies which were down and out, investing aggressively in risky small-caps but with tangible assets, investing in companies which pay dividends and investing large amounts in stocks one strongly believes in. It is not advisable to invest in businesses one is unfamiliar with. Global and long term perspectives and keeping track of the markets regularly are wise measures to observe in investing.

The erratic motions of Canada's bull market following a 40-month run serves as a sign for portfolio managers to consider acquiring growth stocks. Current trends offer quality growth stocks at low prices. Parties on the buy side are advised not to disregard the correction option. Some of the growth stocks in the market include Newbridge Network Corp, Loewen Group Inc, Intertape Polymer Group Inc, SoftKey International Inc, Future Shop Ltd, Mackenzie Financial Corp, Euro-Nevada Mining Corporation Ltd, Geac Computer Corp and Meridian Technologies Inc.