Friday January 7, 6:45 pm Eastern Time
worldlyinvestor.com Region of the Day
Canada: Northern Bargains
By Bob Beaty, Columnist
If you're looking for bargains after this week's tech-led selling frenzy, don't forget
Canada.
I'm always amused watching market pundits, especially the profusion of US-based gurus who are well paid to tell us what the
markets have done.
The only thing faster than a snap correction in the market is the fancy footwork these folks do as the market changes direction.
Rarely daunted when surprised by volatile markets, they invariably trot out comforting words like rotation and profit taking and
assure us that they saw this coming, stay the course, it'll be OK.
Until it isn't, I guess.
A Chance for Some Northern Exposure?
The Canadian market was not immune to the recent rout. The TSE 300 has mirrored the progress of the S&P 500, giving up
4%-plus so far this week. The selling has spilled over from the frothy Nasdaq - down more than double the other indices. The
Dow has fared better - seems quality stocks with real earnings are less vulnerable than those traded on a wish and a prayer of
future potential.
But the latest correction, or whatever the euphemism of the day is, has offered up some values in Canada that may tempt
investors.
Bell Canada (NYSE:BCE - news) and Nortel (NT: NYSE) are both off more than 20% from their respective peaks.
Semiconductor stock PMC Sierra (PMCS: Nasdaq) also has carved off a like amount, despite its recent inclusion in the
Nasdaq 100 index and the bright outlook for the chip sector in 2000.
Corel (Nasdaq:CORL - news) has dropped a massive 63% from its December run-up due to earnings vagaries and the stock's
inability to rise in step with its peers. But while Corel may appear relatively cheap, one may still be paying for hype rather than
fundamentals. Don't lose sight of the fact that Corel had a 52-week low of $2.00.
Wireless Offerings
Investors may want to bookmark some other Canadian names to begin picking away at should stability begin to reappear.
Wireless stocks seem to be the rage of the new millennium.
Research In Motion (Nasdaq:RIMM - news), a leader in wireless pagers, has backed up, although many US analysts' still rate
the shares a strong buy. The company just renewed an arrangement as pager of choice for US telecom Bell South (BLS:
NYSE).
JDS Uniphase (Nasdaq:JDSU - news), a high-profile builder of fiber-optic networks, has bucked the downtrend, off only 10%
from its high of $189. The shares will split 2 for 1 in February, but there's a lingering, worrying factor in that the board wants
the right to increase the outstanding shares from 600 million to 3 billion in order to facilitate acquisitions and finance the
ever-popular ''general corporate purposes.''
Given that earnings for JDS Uniphase are virtually non-existent at this point, the shares will have to continue to either trade on
future potential or the price will have to adjust to reflect a more realistic valuation. Good company, but given the long run-up,
not for the faint of heart.
The Fed Factor
The most worrying aspect of where we currently find ourselves is the US Fed's rate dance. The number of high-flying US and
Canadian stocks is remarkably small. Those same stocks are also extremely rate sensitive.
Given that precarious combination, any rate rise surprises could accelerate the speed of a market decline. Many investors have
already figured this out; the flight to quality names are driving the Dow - long the trusted standard bearer - higher. So will it be
in Canada. Play the frothy tech stocks, but invest for the long-term in the big names.
Believe it or not, fundamentals are still important. And if you don't believe that, take a good look at which stocks are holding
and which are folding.
Bob Beaty is worldlyinvestor.com's Canada Editor. He worked for 20 years in the brokerage industry, in both Canada
and the UK. Now primarily Internet-based, he has written extensively on stocks, bonds and market-related issues for a
variety of Web sites. His column suggests investment and trading opportunities in the Canadian market. |
