The strange rally in TSX stocks took a breather last week. Since March, Canadian broader markets have soared more than 35%, marking it an epic recovery. However, many TSX giants traded notably lower last week, pushing them in the oversold zone.
Investors should note that stocks with a relative strength index (RSI), a momentum oscillator, below 30 are oversold, and stocks with an RSI above 70 are overbought. Extreme RSI readings indicate the impending reversal in the stock’s direction.
Let’s take a look at such oversold TSX stocks with strong fundamentals that offer handsome upside potential over the long term.
Top TSX stock: Suncor Energy
Suncor Energy is relatively well placed in the current crisis, mainly due to its large downstream operations. Lower crude oil prices dent its margins on the production side, but they minimize the input costs for the downstream operations, offsetting the impact to some extent.
However, energy markets might continue to trade volatile driven by the supply glut. Lower demand driven by the virus outbreak and record production in an already oversupplied market will likely push oil prices lower.
Suncor Energy stock looks reasonably valued at the moment. I see it as a lucrative bet if you are looking for something in the Canadian energy patch. Its strong fundamentals and stable dividends make it an attractive investment proposition for the long term.
Top TSX stock: Bank of Nova Scotia
The recent weakness also pushed Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) stock in the oversold zone. The third-biggest bank by market capitalization reported relatively better earnings for the last quarter. Its premium yield and a discounted valuation at the moment make it nothing short of a steal.
Bank of Nova Scotia has seen multiple economic downturns in the past, and it has emerged stronger every time. I don’t expect an immediate unscathed recovery from BNS from the current crisis. But I think its diversified revenue base and high-quality loan portfolio will support a relatively faster recovery.
Bank of Nova Scotia stock offers a dividend yield of 6.5%, which is higher than top Canadian peer banks. It has been paying dividends for the last 187 years.
For long-term investors looking to bet on the Canadian banking sector, Scotiabank looks an attractive option that offers stability and solid total return prospects.
Top TSX stock: Restaurant Brands International
Shares of the quick-service restaurant operator Restaurant Brands International (TSX:QSR)(NYSE:QSR) notably outperformed broader markets recently. The stock rose more than 100% in the last three months, while the TSX Index was up only 35%.
The restaurant stock surged as economies re-opened, expecting a faster recovery than peers. However, importantly, even if Restaurant Brands manages to open all of its restaurants, it will likely operate at a significantly reduced capacity. That might hinder its near-term financial performance, which could weigh on the stock.
However, I am bullish on Restaurant Brands stock because of its attractive long-term growth prospects. I don’t see any meaningful changes in people’s eating-out habits after the pandemic. Restaurant Brands stock looks trading at a premium at the moment, but I think its superior expected earnings growth and a premium dividend yield justify that.
Source:- The Motley Fool Canada
We're #25! Industrials power modest Q3 gain for the TSX – BNN
The S&P/TSX Composite Index rose 3.91 per cent in the third quarter, with gains moderating after a blowout Q2 as equity markets digested the shocks from the COVID-19 pandemic, prospects for continued economic shutdowns and the impact of lower-for-longer interest rates.
Those gains have the Toronto benchmark ranked 25th out of 92 global peers, sandwiched between Romania’s Bucharest BET Index and Germany’s DAX Index, and comfortably lagging the performance of the U.S. broad-market S&P 500 and the blue-chip Dow Jones Industrial Average.
In all, nine of the 11 TSX subgroups were in positive territory for the quarter, indicating a degree of breadth to the gains.
Below, BNN Bloomberg takes a look at the TSX leaders and laggards for the quarter that was.
Industrials: +13.22 per cent
Utilities: +9.88 per cent
Materials: +8.76 per cent
Industrials led the way for the TSX, as investors looked to parse the impact on Canada’s economic reopening on the nation’s transport, construction and equipment makers. Utilities, which typically perform well in a low-rate environment due to their need to borrow capital to fund expansions and have a habit of paying steady dividends, took second spot with a nearly 10 per cent gain. The materials subgroup took third sport with a nearly nine per cent gain, with gold prices holding near a multi-year high due to global economic uncertainty. But it wasn’t just the precious metal that helped the subgroup, with some strength in copper lifting base metals producers amid speculation Chinese industrial activity was beginning to recover from the pandemic-induced demand destruction.
Trillium Therapeutics Inc.: +72.45 per cent
Pretium Resources: +50.00 per cent
Ritchie Bros. Auctioneers: +42.88 per cent
Trillium hasn’t just been a standout performer in the third quarter, it’s been the top performer on the TSX Composite Index so far this year, rising more than 1,000 per cent. The company, which develops cancer treatments for conditions including lymphoma, has seen encouraging results for some of it’s treatments, buoying investor enthusiasm. Trillium’s efforts haven’t gone unnoticed by some of the heavy hitters in the pharma industry, with Pfizer Inc. taking a US$25 million equity stake in the firm during the quarter. Trillium also raised $150 million in Q3 through a share offering.
The rising price of gold lifted all boats, but none more than single-mine operator Pretium. The company, which operates its Brucejack mine in north-west British Columbia, surged past analyst expectations in its most recent quarter. The rising price of bullion prompted Pretium to raise its full-year free cash flow expectations, based on an average gold price of US$1,800 per ounce. However, Pretium also warned that COVID-19 measures would raise costs as it looks to protect its workers and operations from the ravages of the virus. Pretium’s Brucejack mine is a sprawling claim with difficult geological hurdles and is seen as a potential acquisition target, with Barrick Gold Chief Executive Officer Mark Bristow having been reluctant to say the mining giant wouldn’t take a look at a potential tie-up.
Ritchie Bros Auctioneers:
Canada’s preeminent dealer of used industrial, farming and construction equipment has thus far weathered the pandemic-induced slowdown. Net income decreased a paltry two per cent in the company’s most recent quarter, even in the face of lockdowns and a drop in overall economic activity. There is, however, a degree of counter-cyclicality to Ritchie Bros results. As a middleman for the sale of second-hand equipment, the firm often benefits from customers seeking out deals on the second-hand market rather than shelling out for brand new equipment.
Health care: -14.44 per cent
Energy: -9.39 per cent
Communications services: +0.79 per cent
Trillium’s outsized gains weren’t enough to spare the health care sector from posting the weakest performance of the composite’s 11 subgroups in the quarter. Health care was hammered by some noticeable weakness in the cannabis sector as pot stocks continue to be punished for rocky performances. Energy’s rough ride continued, albeit with a disconnect from underlying energy prices. While individual stocks have been under pressure, crude oil prices have largely been in a holding pattern, with North American benchmark West Texas Intermediate hovering around US$40 per barrel as investors assess how the pandemic and subsequent economic reopenings impact the demand picture. Communications services has seen a bit of a mixed bag through the quarter, as Canada’s Big Three telcos spar with new entrants over wholesale network access rates and Cogeco battles a takeover offer from Altice USA and Roger Communications, which muddies the picture when it comes to overall performance.
Aurora Cannabis Inc: -63.07 per cent
Vermilion Energy Inc: -48.51 per cent
Enerplus Corp: -36.13 per cent
Aurora’s stock has been demolished amid persistent cannabis oversupply concerns. Shares in the company plunged more than 25 per cent in one trading session alone after the company disappointed investors with its fourth-quarter results as growing pains persist in the cannabis market. The firm was also chastised by MKM Partners, with their analyst calling on Aurora to stop growing so much cannabis as the market remains out of balance with consumer demand. The company says it expects to reach positive EBITDA (earnings before interest, taxes, depreciation, and amortization) by the second quarter of 2021, about 18 months later than earlier projected.
The geographically-diversified energy company, which operates not only in North American but also off the coast of Ireland and France, has seen its share price swing with the vagaries of international energy markets. Fund flows from operations, a key metric in the energy sector, plunged 52 per cent in the company’s most recent quarter as concerns over global energy demand mounted. Vermilion has also been hampered by price impacts from internal squabbling over production quotas for OPEC members and suspended its dividend in April.
The energy price pressures also took a toll on Enerplus in the third quarter. The company, which operates in Western Canada, North Dakota, Montana and Pennsylvania, posted a 13 per cent decline year-over-year in its most recent quarter, reflecting a troubled picture for overall consumer demand. Enerplus also booked significant impairment charges in the quarter, further hampering results.
Which top TSX gainer are you most likely to invest in?
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New COVID-19 outbreak at Vancouver care home where 13 died – Global News
Ten people have contracted COVID-19 at a long-term care home in downtown Vancouver that was the site of one of B.C.’s worst outbreaks of the disease last spring.
Vancouver Coastal Health declared a new outbreak in the special care unit of Haro Park Centre on Tuesday.
On Wednesday, the care home said one person who tested positive was in hospital, while nine others were being isolated on site.
Haro Park Centre CEO Robert Gillis said early indications are that an asymptomatic family member of a resident brought the virus into the facility.
Gillis said the home was notified about the case on Sept. 27 and isolated the resident, but that it had already been several days since the visit.
Nine of the 10 new cases were asymptomatic, he said.
During the facility’s first outbreak, 89 people contracted COVID-19 and 13 patients died.
That outbreak was declared over on May 30.
© 2020 Global News, a division of Corus Entertainment Inc.
American Airlines to start furloughing 19,000 workers – Jamaica Observer
NEW YORK, United States (AFP) – American Airlines will begin furloughing 19,000 workers from Thursday, the company announced, as US officials have failed to reach a deal on fresh aid to the pandemic-hit air travel sector.
US carriers that received billions in aid from Congress had promised to refrain from laying off workers until the end of September, setting the stage for potentially thousands of job cuts in October.
“Our elected officials have not been able to reach agreement on a Covid-19 relief package… As a result, tomorrow, we will begin the difficult process of furloughing 19,000 of our hardworking and dedicated colleagues,” CEO Doug Parker said in a letter Wednesday.
However, he sounded a note of hope saying that if lawmakers are able to hammer out a deal for new assistance, the furloughs would be cancelled and the affected teams recalled.
Since the coronavirus intensified in March, US airlines have been grounding planes and delaying jet deliveries to limit their cash-burn as air travel remains at about only one-third of its level a year ago.
Carriers have struck agreements with unions to spread out work among employees. Tens of thousands of employees have also accepted unpaid leave or early retirement packages to avert the need for involuntary terminations.
Still, the decisions will not be enough to avert all job cuts. Airlines have said they do not expect a full recovery until a vaccine is widely available, which company executives have said may not be until late 2021.
Unions have said 100,000 people or more could be laid off without additional federal aid, but analysts expect a smaller number than that as airlines and unions seek ways to avoid layoffs.
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