The January Indicator Effect: Most often the overall performance of January will provide a strong correlation to the rest of the year. As of this weekend, the S&P 500 is below 2009 year end closing. Many experts recently predicted a 10% retracement. The market was also unnerved by comments from US President Obama on future banking sector regulation. Canadian financial stocks took a hit. Market corrections however, provide for opportunities to alter portfolios and accumulate premiere stocks for (near) bargain prices. Some of the opportunities worth watching include:
Precious Metal Sector: Agnico Eagle (AEM) @ $56.97 & Barrick (ABX) @ $38.66 are now closer to 52 week lows than highs. Considering the price of gold, it would appear that these stocks are undervalued. Goldcorp’s (G) price-to-earnings ratio is at 8.99, remarkably low for the sector. Franco Nevada (FNV) @ $27.46 and Iamgold (IMG) @ $15.39 both lost over 9% in market value this week. Keep an eye on Teck Comminco (TCK.B) @ $38.77.
Banking Sector: National (NA), Royal (RY) and TD all took substantial hits and are worth a look at accumulating. I had previously sold CIBC (CM) @ $66.72 (closed at $63.73) & National @ $60.00 (closed at $56.64) earlier in the month. Banks could suffer further short-term damage as news in the US unfolds.
Energy & Agriculture: With a $5 pullback in the price of oil, many energy giants retreated offering nice accumulation points. These include CNQ ($69.80), ECA ($34.15), NXY ($22.48), & TLM ($17.99). I had previously sold CNQ @ $75.82 & TLM @ $20.21, although subsequently repurchased them at $72.40 & $19.16. I’m willing to wait it out and accumulate more if prices continue to drop. Agrium (AGU) & Potash (POT) have held up well of late.
Recommendations: Lighten up unnecessary positions. Some preferred shares are still paying handsomely including BPO.PR.L (6.58%) & CWB.PR.A (6.75%).
Market could tumble further but that will provide for strong long term potential gains in great companies. Good luck this week, Warren.
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