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Strategies & Market Trends : Underexposed Canadian Stocks

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From: Underexposed	12/13/2017 6:12:25 PM
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This is my first post in this thread and I thought I would begin by comparing the US and Canadian markets. When I started investing for real back in 2004 I naively thought stocks were stocks and what worked in Canada worked in the USA. But I found out that the differences are great and I almost blew my USA dollar account as a result.... I refuse to add money to that account because of exchange rate issues... so recovery in that account has been snail-like. So ... what are the differences? 1. The Canadian marketplace is resource based market, whereas the American market has a more industrial/business/technology focus. The TSX and TSXV have a total of about 2420 listings... of those almost 300 are either oil/gas, producers, pipelines or service companies or about 12% of the listings are related to the O&G. The TSX and TSXV have 1100 listings for mining and precious metals or about 45% of the listings are related to Mining/Precious metals. By comparison the Nasdq, NYSE and Amex have about 7100 listings total.... not all are USA companies though... about 800 of these listings are not American companies Oil and gas related stock listings on the NASDQ, NYSE and Amex are about 307 companies (many of which are Canadian companies with duel listings) or about 4% of the total listings related to O&G Mining/Precious Metals related stock listings on the NASDQ, NYSE and Amex are about 108 companies (many of which are Canadian companies with duel listings) or about 1.5% of the total listings related to O&G So... you can see the effect of a downturn in Oil & Gas or Mining on the Canadian market place...over 50% of the Canadian stocks are in these sectors... the USA has only about 6% of their listings in these areas 2. Canadian investors have easy access to American stocks whereas the average American investor has NO access to Canadian stocks UNLESS the Canadian stock has a dual listing. Take gold stocks as an example: The USA lists 10 gold companies (8 of those companies are Canadian companies with dual listings) Dual listings are necessary if a Canadian company decides he wants to reach the American investor. You will not find an American company with a Canadian listing as well as an American listing. There is no MicroSoft taking a Canadian listing... if Canadians want to invest in Microsoft they can easily buy the American stock with no global penalties. Why doesn't all Canadian stocks take dual listings... because it is an added expense. Often though Canadian companies take the cheap way to get a second listing by using the American OTCB. The listing requirements there are quite relaxed. Serious American investors do not invest in OTCB stocks as they have a better selection on the major exchanges and hence the shares traded on the OTCB are low compared to those traded on the Canadian exchanges. Even when traded on Major US exchanges a Canadian resource stock has less volume traded in the USA compared to that in Canada. For example: Crescent Point Energy [TSX:CPG] traded 6.9m shares today... the American listing [NYSE:CPG] traded only 1.5m shares It is even more dramatic if the stock is listed on the OTCB WAJAX CORP (a major distributor of heavey equipment to mining, O&G and forestry industries in Canada) [TSX:WJX] had 55.5K shares traded and closed at $23.97/share [Grey market:WJXFF] had 255 shares traded at $18.86 at the close @ $1 cdn = $0.78 USD the two prices are the same within a dime or so. So Americans can invest in Canadian stocks through the OTCB and grey markets but at a very reduced liquidity... few serious investors go there. Conclusion The downturn in the resource sectors affect the Canadian markets far more than the American markets. So why don't Canadians just forget the Canadian companies and buy American as there is no penalties from Brokers. Well many do.... but there is an additional problem and that is the exchange rate between the countries. You can make nice gains in the USA market only to have them wiped out by the difference in our monies.... of course you could buy/sell your American stocks when the exchange rate is favourable but that is a gamble for many. Are there buys in the non-resource sectors in Canadian stocks??? Yep.. but after years of great buys in the Mining and O&G sectors you (at least I) never paid much attention to other sectors....{stupid} In this we will see if I can change that perception. There is another difference between American and Canadian stocks and that is "What is a penny stock?" I have written enough so far that will be a topic for the next post. UE

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