Here we go again. A relative newcomer to the TSX Composite Index party is dominating Canada’s premier index. Shares in online retailer Shopify Inc. have nearly tripled since April, surpassing the stodgy Royal Bank of Canada as the country’s largest publicly-traded company.
New blood is a good thing, but investors who get exposure to Canadian equities through market-weighted exchange-traded funds (ETFs) that track the TSX may not have their money where they think. Holdings in market-weighted ETFs are based on their current market capitalization and are automatically adjusted as share prices change. Shopify now accounts for nearly seven per cent of the TSX Composite compared with RBC’s 5.8 per cent weighting and TD Bank’s 4.7 per cent stake.
That gives Shopify a great deal of sway on the TSX and exposes ETF investors to risks they might not be aware of.
As an example, shares in RBC are trading at 12 times trailing earnings and TD trades at 10 times earnings. In comparison, the price-to-earnings ratio – a critical gauge that ties prices to past earnings – doesn’t even register in a meaningful way for Shopify because earnings have been inconsistent. Shopify’s forward P/E ratio based on its outlook for future earnings is a whopping 557 times earnings – a best guess in a pandemic-plagued global economy.
We’ve been here before over the past three decades with Nortel, Research in Motion (now Blackberry Ltd.), and more recently Valeant Pharmaceuticals (now Bausch Health Companies Inc.): all taking an outsized weighting in the TSX for a short period of time.
Add that to the fact that the TSX is already under-diversified. It accounts for less than three per cent of publicly-traded equities, two-thirds of which are either finance or resource related – and a market-weighted TSX ETF might not be such a good investment.
Here are some alternatives if you are looking for broad Canadian equity exposure.
Sector ETFs
ETFs that track specific sectors are available on the Canadian market. If Canadian financials or resources are what you want there are ETFs that exclusively track Canadian financials (banks and insurance companies), resource sectors such as energy, or small caps.
Canadian equity mutual funds
Actively-managed Canadian equity mutual funds can steer clear or limit the amount of index aberrations like Shopify if the manager wishes.
Active management, however, has a price. Annual fees average about 2.5 per cent of the amount invested if purchased through an advisor compared with a TSX market-weighted ETF, which charges less than one-tenth of a per cent. That extra fee adds up over time; resulting in less money invested and compounding over time.
Curiously, the average Canadian equity mutual fund underperforms the TSX Composite over several time periods by about the same amount as the average fee, which suggest many managers merely track the index as is and pocket the extra fee.
On the bright side, that means many actively-managed Canadian equity funds outperform the index even with the fee. To increase your odds of finding a winner you can try bypassing an advisor by purchasing the ‘D’ series of the same fund, which often has a fee that is a full per cent lower. Scandalously, many discount brokers only offer the ‘A’ series (advisor) and pocket the extra per cent for advice they never provide.
Just buy the darn stocks
The good thing about a thin index is it’s easy to replicate one stock at a time. Every Canadian should have a healthy portion of Canadian equities in the portfolios, so why not just cherry-pick the good ones?
It’s a decision you might want to make with an advisor but a few no-brainers include the financial and telecom oligopolies protected by foreign ownership restrictions that generate consistent and generous dividends. Stand at the main intersection of most Canadian cities or towns and turn 360 degrees. You will see one or more of the big banks: TD, BMO, CIBC, Scotiabank or Royal Bank.
Similarly, check your latest television, phone or internet bill and the company is likely owned by BCE Inc., BNN Bloomberg’s parent, Rogers Communications Inc. or Telus Corp.
If you want to own Shopify, buy Shopify.
Payback Time is a weekly column by personal finance columnist Dale Jackson about how to prepare your finances for retirement. Have a question you want answered? Email dalejackson.paybacktime@gmail.com.
Most job search advice is cookie-cutter. The advice you’re following is almost certainly the same advice other job seekers follow, making you just another candidate following the same script.
In today’s hyper-competitive job market, standing out is critical, a challenge most job seekers struggle with. Instead of relying on generic questions recommended by self-proclaimed career coaches, which often lead to a forgettable interview, ask unique, thought-provoking questions that’ll spark engaging conversations and leave a lasting impression.
Your level of interest in the company and the role.
Contributing to your employer’s success is essential.
You desire a cultural fit.
Here are the top four questions experts recommend candidates ask; hence, they’ve become cliché questions you should avoid asking:
“What are the key responsibilities of this position?”
Most likely, the job description answers this question. Therefore, asking this question indicates you didn’t read the job description. If you require clarification, ask, “How many outbound calls will I be required to make daily?” “What will be my monthly revenue target?”
“What does a typical day look like?”
Although it’s important to understand day-to-day expectations, this question tends to elicit vague responses and rarely leads to a deeper conversation. Don’t focus on what your day will look like; instead, focus on being clear on the results you need to deliver. Nobody I know has ever been fired for not following a “typical day.” However, I know several people who were fired for failing to meet expectations. Before accepting a job offer, ensure you’re capable of meeting the employer’s expectations.
“How would you describe the company culture?”
Asking this question screams, “I read somewhere to ask this question.” There are much better ways to research a company’s culture, such as speaking to current and former employees, reading online reviews and news articles. Furthermore, since your interviewer works for the company, they’re presumably comfortable with the culture. Do you expect your interviewer to give you the brutal truth? “Be careful of Craig; get on his bad side, and he’ll make your life miserable.” “Bob is close to retirement. I give him lots of slack, which the rest of the team needs to pick up.”
Truism: No matter how much due diligence you do, only when you start working for the employer will you experience and, therefore, know their culture firsthand.
“What opportunities are there for professional development?”
When asked this question, I immediately think the candidate cares more about gaining than contributing, a showstopper. Managing your career is your responsibility, not your employer’s.
Cliché questions don’t impress hiring managers, nor will they differentiate you from your competition. To transform your interaction with your interviewer from a Q&A session into a dynamic discussion, ask unique, insightful questions.
Here are my four go-to questions—I have many more—to accomplish this:
“Describe your management style. How will you manage me?”
This question gives your interviewer the opportunity to talk about themselves, which we all love doing. As well, being in sync with my boss is extremely important to me. The management style of who’ll be my boss is a determining factor in whether or not I’ll accept the job.
“What is the one thing I should never do that’ll piss you off and possibly damage our working relationship beyond repair?”
This question also allows me to determine whether I and my to-be boss would be in sync. Sometimes I ask, “What are your pet peeves?”
“When I join the team, what would be the most important contribution you’d want to see from me in the first six months?”
Setting myself up for failure is the last thing I want. As I mentioned, focus on the results you need to produce and timelines. How realistic are the expectations? It’s never about the question; it’s about what you want to know. It’s important to know whether you’ll be able to meet or even exceed your new boss’s expectations.
“If I wanted to sell you on an idea or suggestion, what do you need to know?”
Years ago, a candidate asked me this question. I was impressed he wasn’t looking just to put in time; he was looking for how he could be a contributing employee. Every time I ask this question, it leads to an in-depth discussion.
Other questions I’ve asked:
“What keeps you up at night?”
“If you were to leave this company, who would follow?”
“How do you handle an employee making a mistake?”
“If you were to give a Ted Talk, what topic would you talk about?”
“What are three highly valued skills at [company] that I should master to advance?”
“What are the informal expectations of the role?”
“What is one misconception people have about you [or the company]?”
Your questions reveal a great deal about your motivations, drive to make a meaningful impact on the business, and a chance to morph the questioning into a conversation. Cliché questions don’t lead to meaningful discussions, whereas unique, thought-provoking questions do and, in turn, make you memorable.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.
CALGARY – Canadian Natural Resources Ltd. reported a third-quarter profit of $2.27 billion, down from $2.34 billion in the same quarter last year.
The company says the profit amounted to $1.06 per diluted share for the quarter that ended Sept. 30 compared with $1.06 per diluted share a year earlier.
Product sales totalled $10.40 billion, down from $11.76 billion in the same quarter last year.
Daily production for the quarter averaged 1,363,086 barrels of oil equivalent per day, down from 1,393,614 a year ago.
On an adjusted basis, Canadian Natural says it earned 97 cents per diluted share for the quarter, down from an adjusted profit of $1.30 per diluted share in the same quarter last year.
The average analyst estimate had been for a profit of 90 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Oct. 31, 2024.
CALGARY – Cenovus Energy Inc. reported its third-quarter profit fell compared with a year as its revenue edged lower.
The company says it earned $820 million or 42 cents per diluted share for the quarter ended Sept. 30, down from $1.86 billion or 97 cents per diluted share a year earlier.
Revenue for the quarter totalled $14.25 billion, down from $14.58 billion in the same quarter last year.
Total upstream production in the quarter amounted to 771,300 barrels of oil equivalent per day, down from 797,000 a year earlier.
Total downstream throughput was 642,900 barrels per day compared with 664,300 in the same quarter last year.
On an adjusted basis, Cenovus says its funds flow amounted to $1.05 per diluted share in its latest quarter, down from adjusted funds flow of $1.81 per diluted share a year earlier.
This report by The Canadian Press was first published Oct. 31, 2024.
