Followed the herd, didja?
Well, you just may want to add a spot o’ rum to that egg-nog before we survey the stock market carnage for those who followed the herd and took a pounding in 2001.
You might have gotten away with a herd mentality in a raging bull market, but in a bear market, it’s a recipe for disaster.
And, this year, with the Toronto Stock Exchange 300 Index down about 19 per cent, the sheep have been sheared clean by the blue chips with all those analyst buy recommendations.
For example, if you owned a portfolio of the eight most liquid stocks on the TSE and thought you were playing it safe, you didn’t even beat a badly beaten market. You’re 20 per cent poorer and you don’t own a single winner.
In trading volume, Nortel Networks (NT) is head and shoulders above any other TSE company with almost three billion shares trading hands this year and, despite almost doubling in a late-year rebound, the tech giant is also the TSE’s biggest loser by a country mile, down about 77 per cent for the year.
The second biggest loser is another former darling of blue-chip investors, Bombardier (BBD.B), down 35 per cent largely on its exposure to the floundering airline and travel industries. It is also the TSE’s second biggest volume stock.
The next two biggest volume stocks, BCE (BCE) and Abitibi-Consolidated (A), are also the third and fourth biggest losers, down 20 per cent and 15 per cent respectively.
The list of eight biggest volume stocks also includes Bank of Montreal (BMO), down 10 per cent; TD Bank (TD), down seven per cent; Royal Bank (RY), down four per cent; and Barrick Gold (ABX), down three per cent.
Now, if you’d done something really stupid and bet the ranch on a speculative oil company nobody has heard of, you wouldn’t be weeping in your eggnog. You’d have 13 ranches.
No kidding! The longest home run in the Canadian stock market this year was slugged by aptly named High Point Energy (HPE.A-CDNX). A measly three- center at the start of the year, High Point has rocketed to 40 cents on the Canadian Venture Exchange for a 1,233-per-cent gain!
The news that seemed to drive the stock late in the year was the company’s naming of Glen Yeryk and Glenn Carley as its top executives. The same duo had worked some magic with another junior, Magin Energy, before it was sold earlier in the year.
High Point may be the most obscure company among the big winners of 2001, but it wasn’t alone. Most of the big movers were unheralded companies that didn’t make the radar screens of the big brokerages.
The TSE’s biggest hitter was Nova Gold, which has soared from 18 cents at the start of the year to $1.75, almost a 10-bagger.
Many of the companies that bucked the bear are those that are off the beaten track and the Bay Street cocktail circuit.
Bay Street doesn’t pay much attention to companies based in Alberta, which explains why so many Alberta-based small-cap and micro-cap companies were on sale at the start of the year.
Calgary-based World Point Terminals (WPO-TSE), whose claim to fame is oil storage, has shown a whopping 567-per-cent gain, running from 75 cents to $5. Calgary-based Northside Group (NTG-TSE), a company that builds truck bodies, has gained 215 per cent to $8.05.
Calgary-based BW Technologies (BWT-TSE), which is taking the gas-detection gadget industry by storm, is up 141 per cent.
Even some of the better-known Alberta companies have flourished through an ugly bear market, including Edmonton-based Stantec (STN-TSE) and Calgary-based retailers Forzani Group (FGL-TSE) and Liquidation World (LQW-TSE).
Stantec and Liquidation have doubled and Forzani has nearly tripled.
Many of these companies will be trumpeted by the pied pipers on Bay Street in the new year as screaming buys.
That’ll be the red flag signalling that the easy money’s been made and it’s time to unearth some new babes in the woods.
* GOING DOWN SWINGING: Something to ponder while Christmas shopping.
The Motley Fool (fool.com) has an intriguing column about credit-card stupidity. Rex Moore estimated the cost of a tour of 30 baseball stadiums by two fans, a scenario featured in a MasterCard commercial, at $16,000 U.S.
“When the bill arrives, that warm and fuzzy MasterCard feeling abandons our heroes,” writes Moore. “As they begin the search for employment, they realize they’ll have to pay the minimum amount due each month and it could take four decades for each of these guys to pay off their shares of the debt. Each could pay $40,000 in interest during this time. That sushi actually cost them $80 and the two lattes cost them $20 each.”
Of course, they could have done far worse.
They could have used Canadian dollars!
* SAGE ADVICE: “When everyone thinks alike, everyone is likely to be wrong. When masses of people succumb to an idea, they often run off at a tangent because of their emotions.” – Humphrey Neill, stock market contrarian.
HOT ALBERTA STOCK: HIGH POINT ENERGY
HPE.A-CDNX 40 cents, up 37 cents (+1,233%) (To Dec. 14) High Point's banner year conjures up memories of the wild days of dot-com fever when 10-baggers were popping up all over the place, like gophers in a horse pasture. But this Calgary company is an old-fashioned oil-and-gas play. The stock charged late this year with the announcement of an executive team including Glenn Carley and Glen Yeryk, a one-two punch with an impressive track record.
COLD ALBERTA STOCK: HOME MEDIA CORP.
HM-CDNX 4 cents, down $2.36 (-98.33%) (To Dec. 14) Alert the media! With the tech meltdown on the CDNX, this Calgary-based e-commerce solutions company was in a race to finish last. The faded penny stocks were falling all over each other at the finish line, with 14 CDNX-listed companies down 98 per cent or more from Jan. 1. Although Home Media displayed the biggest crash amongst Alberta companies, it finished a disappointing seventh overall.