Sep 30, 2021
We're #73!: TSX flatlines despite volatile third quarter
TSX down 0.5% during third quarter
Canada's main financial market ended the third quarter pretty much the same way it began.
Any volatility brought forth by creeping energy prices, inflationary concerns on both sides of the border, and a general election were ultimately canceled out after Toronto’s benchmark S&P/TSX Composite Index posted a small 0.47 per cent decline over the third quarter of the year. The TSX’s performance has earned it the 73rd spot out of 92 major global indices, with the index sandwiched between the Euro Stoxx 50 and Shanghai in terms of third-quarter returns. Mongolia’s stock exchange led the pack with a 28 per cent return during the past three months.
Here’s a look at how things played out on the TSX over the third quarter of the year. Returns are as of Sept. 30 closing levels.
Consumer Staples: +4.19 per cent
Industrials: +3.63 per cent
Real Estate: +3.09 per cent
Energy: +1.62 per cent
Financial Services: +0.31 per cent
Industrial stocks led the charge in the third quarter with planemaker Bombardier Inc. and coal terminal operator Westshore Terminals Ltd. among the sector's top gainers. Consumer staples also broadly moved higher with George Weston Ltd. and Loblaw Companies Ltd. atop gains as higher food prices benefitted those companies. The TSX's real estate subgroup also surged in the quarter, with several REITs and property developers benefitting from strong demand for Canadian housing amid record-low interest rates.
Bombardier Inc.: +84.62 per cent
Lithium Americas Corp.: +53.64 per cent
Westshore Terminals Ltd.: +43.15 per cent
Nuvei Corp.: +43.01 per cent
Methanex Corp.: +42.05 per cent
Bombardier was the third quarter's biggest winner with its share price nearly doubling as investors cheered several deals and production announcements the company made over the summer. Bombardier also benefitted from being added back to the TSX Composite Index following strong Q2 results that showed better-than-expected profitability and improved working capital management. With Bombardier's cash flow now improved by an additional $200 million this year, the company was in a better position to tap debt markets with the issuance of $750 million in new bonds due in 2028.
Lithium Americas Corp.
Surging sales of electric vehicles in China bolstered mining companies, especially those like Lithium Americas that supply key metals used in the production of lithium-ion batteries for electric vehicles. Investors also warmed up to an announcement the company made in July regarding an investment in Arena Minerals for developing lithium mining projects in Argentina. Lithium Americas was also listed on the TSX's 2021 TSX30 list which showcased the 30 best-performing stocks on the exchange in the past three years.
Westshore Terminals Ltd.
Vancouver-based Westshore Terminals rallied over the past quarter following a July announcement that it secured a services deal with BHP Group to handle potash shipments from the company's proposed Jansen potash mine in Saskatchewan for a term until 2051. Westshore Terminals was up as much as 45 per cent on the day of the announcement, its biggest one-day move on record, which one analyst now sees as a material re-rating of the company's stock. The company also moved to improve its quarterly dividend by an additional 25 per cent earlier this month.
Worst Performing Sectors:
Health Care: -19.53 per cent
Consumer Discretionary: -6.96 per cent
Materials: -6.02 per cent
Information Technology: -1.32 per cent
Communication: -0.38 per cent
It was not a great quarter to invest in TSX-listed health care stocks as the sector was the clear loser during the third quarter of the year. Cannabis stocks were under heavy pressure in the subgroup with four of Canada's biggest pot producers leading the indices' declines. Pot producers fell out of favour during the quarter amid another period marked by steep losses and missed revenue expectations. Consumer discretionary companies were broadly lower as auto part makers like Magna International Inc., Linamar Corp., and Martinrea International Inc. saw double-digit declines due to a global supply chain crunch that limited the availability of semiconductor chips and other key components. Meanwhile, materials also were a notable decliner in Q3 as miners in the resource-heavy group suffered from lower gold prices brought on by fears the U.S. Federal Reserve will begin tapering its bond-buying program later this year.
Worst Performing Stocks:
Real Matters Inc.: -43.85 per cent
Canopy Growth Corp.: -41.46 per cent
New Gold Inc.: -39.91 per cent
Westport Fuel Systems Inc: -36.78 per cent
Tilray Inc.: -35.95 per cent
Real Matters Inc.
Real Matters fell out of favour with investors over the third quarter and earned the title as the TSX’s worst-performing stock during those three months. The Toronto-based real estate software company reported Q3 results that missed expectations that were driven in large part by disappointing results from its U.S. title business amid a slowdown in mortgage activity. Those results led to several deep price target cuts by analysts while the company said it remains confident that it will continue to meet its fiscal 2025 goals.
Canopy Growth Corp.
Smiths Falls, Ont.-based Canopy Growth led declines for all TSX-listed pot companies during the third quarter as the company's recent quarterly results missed top-line expectations while sentiment in the legal cannabis space softened as the likelihood of legalization bills being passed in the U.S. grew dimmer. Canopy said its fiscal first-quarter revenue failed to meet analyst expectations as COVID-related restrictions in Germany hurt the company's medical cannabis sales while sluggish results in the Canadian cannabis market also weighed on the pot giant.
New Gold Inc.
New Gold shares plunged in Q3, mirroring similar moves from other big gold producers, despite posting better-than-expected fiscal second-quarter results. Gold miners have not curried much favour from investors over the past month as prices for the yellow metal have eased in reaction to uncertainty on when the U.S. Fed will taper its stimulus program, now expected to take place in the coming months. New Gold, however, suffered more than its peers after the company cut its production guidance, which led to several analysts reducing their price target on its stock.