For a long time, billionaire investors like George Soros and Warren Buffett have been saying that a second stock market crash is in the making. The TSX Composite Index surged 30% between April 1 and September 1 after falling 34% in March. The market crashed when the COVID-19 pandemic struck, and the market rallied on the back of the government stimulus package.
There were fears that the second wave of pandemic after the reopening of the economy would repeat the March sell-off. These fears are materializing. The increasing COVID-19 cases in the U.S., Canada, and Europe are recreating conditions of a lockdown. But this time, there won’t be a complete nationwide lockdown but tighter travel restrictions. Governments are better prepared to handle a coronavirus outbreak than they were in March.
Is the stock market crash 2.0 here?
George Soros stated that the free money coming from the fiscal stimulus package created a liquidity bubble, which drove stock valuations to new highs. When the valuations are high, there is more downside than upside.
The stock market was already bearish when the Canada Revenue Agency (CRA) delayed Canada Recovery Benefit (CRB) payments because of a technical glitch. The liquidity coming from the stimulus package was drying up. The COVID-19 resurgence accelerated the bearish tone. The TSX Composite Index has fallen 4.7% in the last three trading days and 6.2% in 13 trading days. In the March-sell off, the Index fell 11.8% in three trading days and 18.7% in 13 trading days.
The potential of another wave of pandemic hurt Air Canada (TSX:AC) and Suncor Energy (TSX:SU)(NYSE:SU) the most. Their stock prices fell 11.6% and 10.2%, respectively, to their March lows. Even virus stocks like Shopify, Lightspeed POS, and Kinaxis dipped single digits this week.
Companies are releasing their third-quarter earnings. The TSX Composite Index decline was partially offset by earnings surprises. For instance, better-than-expected third-quarter earnings sent RioCan REIT stock up 2.46%.
Stocks in the red
AC and Suncor are already struggling with sluggish air travel and oil demand. Another wave of tighter restrictions dampened any hopes of a recovery this year. The stock price momentum of AC and Suncor was range-bound since the pandemic. The recent dip pushed their stock prices to the lower end of their price range. AC stock has found support at $15. But Suncor stock lost its support and fell below $15. Warren Buffett exited airline stocks but retained his investment in Suncor in April.
A prolonged sector weakness leads to consolidation. The oil and gas industry has been in crisis for six years, and the pandemic has made things worse. Moreover, interest rates are near zero, creating an opportunity to acquire companies with strong assets at an attractive price.
The Canadian oil and gas industry saw its first mega-merger; Cenovus Energy agreed to acquire Husky Energy for $3.8 billion. Analysts believe that this could be the beginning of a mergers and acquisition supercycle. Suncor is in a far better position than most oil and gas companies because of its integrated business model. Its third-quarter earnings gave a snapshot of its liquidity, which will help it withstand crisis and operating efficiency that will help it return to profit when the oil price recovers to US$45/barrel.
The airline industry is already consolidated. It might undergo further consolidation, or some airlines might declare bankruptcy. For instance, AC slashed the Transat A.T. bid price by more than 70% to $190 million. But this deal could fall in jeopardy if AC faces the risk of bankruptcy.
What should you do in this stock market pullback?
The recent dip in the stock market has created an opportunity to buy post-pandemic stocks at discount. Suncor has growth potential, but its growth comes with risks. There are better stocks like Enbridge and RioCan, which have dividend yields of over 8.86% and 9.97%, respectively. These stocks are also reporting profits and positive cash flows. The stock market pullback has created an opportunity to lock such high-dividend yields for a lifetime.
Here are some more quality stocks to buy in the recent stock market pullback.
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Fool contributor Puja Tayal has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Enbridge, Shopify, and Shopify. The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends KINAXIS INC.
China’s factories crank up output, but jobs, debt remain concerns – Aljazeera.com
China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.
Upbeat data released on Monday suggest the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.
But companies are still not expanding their payrolls, the figures show, and some analysts point to rising debt levels among state-owned firms as another possible headwind for the economy.
China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.
“The latest official PMI surveys show that the pace of economic growth picked up in November on the back of a broad-based improvement in both services and manufacturing,” Julian Evans-Pritchard, senior China economist at research firm Capital Economics, said in a note sent to Al Jazeera.
China’s blue-chip share index hit a 5-and-a-half-year high following the data release.
The robust headline PMI points to solid fourth-quarter growth, which analysts at Nomura expect to quicken to 5.7 percent compared with the same period last year, from 4.9 percent in the third quarter, an impressive turnaround from the deep contraction earlier this year.
The economy is expected to expand by about 2 percent for the full year, the weakest in more than 30 years but still much stronger than other major economies that are struggling to bring their coronavirus outbreaks under control.
The official PMI, which largely focuses on big and state-owned firms, showed the sub-index for new export orders stood at 51.5 in November, improving from 51.0 a month earlier. That bodes well for the export sector, which has benefitted from strong foreign demand for medical supplies and electronics products.
Also helping activity in November were aggressive e-commerce shopping promotions, which unleashed solid consumer demand and bolstered confidence for small and medium firms.
But a surging yuan and further lockdowns in many of its key trading partners could pressure Chinese exports, which have been surprisingly resilient so far.
More companies have reported the impact from currency fluctuations, compared with a month ago, said Zhao Qinghe, senior statistician at the NBS.
“Some firms have flagged that as the yuan continues to rise, corporate profits are under pressure and export orders are declining,” said Zhao.
He added that the recovery across the manufacturing industry remained uneven. For example, the PMI for the textile industry has stayed below the 50-point threshold, pointing to weak business activity.
In the services sector, activity expanded for the ninth straight month. The official non-manufacturing Purchasing Managers’ Index rose to 56.4, the fastest since June 2012 and up from 56.2 in October, as consumer confidence gathered pace amid few COVID-19 infections.
Railway and air transportation, telecommunication and satellite transmission services and the financial industry were among the best-performing sectors in November.
A sub-index for construction activity stood at 60.5 in November, improving from 59.8 in October, as China steps up infrastructure spending to revive its economy.
Monday’s data also showed that the labour market is still facing strains. Services firms reduced payrolls at a faster clip in November, while factories slashed staff for the seventh straight month, although at a slower pace.
“The continued recovery reduces the need for further monetary easing, but any shift to tightening is also unlikely given continued labour market pressure,” said Erin Xin, Greater China economist at HSBC.
Another factor that could prove problematic for China is rising levels of debt among regional governments and state-owned enterprises (SOEs).
“The recent wave of SOE debt defaults has contradicted the overall data improvement, including the latest PMI,” wrote Daiwa Capital Markets economists Kevin Lai and Eileen Lin in a research note sent to Al Jazeera.
“Many of these companies should have benefited from a nascent recovery since the economy reopened. However, most of these companies are owned and controlled by local governments,” they said.
“They have been allowed to raise more funds from the bond market and run bigger fiscal deficits when the pandemic began to hit the local economy. Hence, when domestic demand indicators turn better, it is usually a result of more debt-driven stimulus being injected into various industrial sectors.”
Scotiabank CEO 'cautiously optimistic' about COVID rebound, reports $1.9B Q4 profit – Yahoo Canada Finance
Apple Rush Company seeing continued success with Element C through its distributor Botanaway, Inc. in Virginia
TITUSVILLE, Fla., Dec. 01, 2020 (GLOBE NEWSWIRE) — The Apple Rush Company, Inc. (US OTC PINK: APRU), announces that it has shipped additional pallets of Element C to Botanaway, Inc. in Virginia. Element C continues to prove itself in the territories it is represented in. Sales have been solid and we believe it is the best in class of CBD beverages. It is one of a kind in taste, efficacy, and value. Depending on the market, pricing at retail is falling between $5.99 and $7.99 per can with 25mg of CBD. We have a new production run scheduled for next week and are excited about the reorder rate from retailers in the Midwest as well. Tony Torgerud, CEO of Apple Rush, said, “each of our distributors is proving that Element C is a top notch product that consumers love. We are receiving testimonials from consumers that can’t believe the difference Element C has made in their lives and expect that will continue as we expand to additional territories.”David Reynolds Derian, CEO of Botanaway, Inc., commented, “Element C is an amazing CBD beverage. We are seeing success with it throughout our thousands of retail stores and have our sights on several other functional beverages in the near future. The technology in formulation that APRU utilizes has proven to be a great differentiator from the other CBD infused beverages on the market.”Tony Continued, “we are excited to have David and his team on board for Element C. His support has been invaluable in what we do in research and development for new products. Our production runs will continue to increase in size as we expand across the country. I would expect to be making some announcements in the near future on new product development expanding the Element Brands line. We have been receiving calls from other parts of the country for distribution and will be adding those as production increases.” About The Apple Rush Company, Inc. The Apple Rush Company, Inc., through its subsidiary APRU, LLC, is a distributor of CPG products under the trademarked Apple Rush brand, Element brand and other labels. The Apple Rush brand has more than 47 years of existence in the natural beverage industry. As a historical leader in the organic and natural beverage sector our goal is to now become a leader in the distribution of anhydrous hemp oil products nationwide. For more information, please go to www.applerush.com, www.aprubrands.com, and www.mistyk.com with our expanded product portfolio.Safe Harbor Act: Forward-Looking Statements are included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations including words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will,” and similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. We are under no obligation to (and expressly disclaim any such obligation to) update or alter forward-looking statements, whether as a result of new information, future events or otherwise. Investor Relations Contact: Tony Torgerud 888-741-3777 x 2
Scotiabank beats as international unit rebounds, provisions fall – BNN
Bank of Nova Scotia kicked off earnings season for Canada’s Big Six lenders by handily beating profit expectations amid a sharp drop in funds set aside for loans that could go bad.
Scotia said Tuesday its fiscal fourth quarter net income was $1.9 billion, compared to $2.3 billion a year earlier. On an adjusted basis, it earned $1.45 per share. Analysts, on average, expected $1.22.
In a potentially encouraging signal about credit quality trends amid the second wave of COVID-19, the bank booked $1.13 billion in provisions for credit losses during the three months ending Oct. 31. While that was a 50-per-cent increase from a year earlier, it was a significant decline from the $2.18 billion that had been set aside in the previous quarter.
Scotia’s core Canadian banking operations struggled in the quarter compared to the same time in 2019, with revenue falling four per cent year-over-year and adjusted profit sliding 13 per cent. The bank pointed out its net interest income came under pressure because of the Bank of Canada’s rate cuts. On a sequential basis, the unit’s profit surged 81 per cent.
The bank’s sprawling international operations rebounded in the quarter as adjusted profit hit $353 million from just $4 million in the fiscal third quarter.
Scotia’s other primary operating units – wealth management and global banking and markets – each delivered year-over-year growth in adjusted profit.
“As we look forward to 2021, we will continue to put customers first and we remain cautiously optimistic that better times lie ahead as we continue to grow our presence as a leading bank in the Americas,” said CEO Brian Porter in a release.
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