Fundamentals Matter More than Ever: Avoid "Growth Fever" in 2018

This past year saw a number of high-flying growth companies take hold of investors’ imaginations, climbing to astronomical highs and defying the laws of financial physics in the process. Companies like Shopify Inc. (TSX:SHOP)(NYSE:SHOP) and Canopy Growth Corp. (TSX:WEED) finished the year as two of the top three best performing companies traded on the TSX.

Marijuana and technology (specifically e-commerce related tech companies) have become all the rage for investors on both sides of the border, as evidenced by a high profile $245 million investment in Canopy during 2017 by U.S. liquor distributor Constellation Brands, Inc. (NYSE:STZ) for only 10% of Canopy.

The distributor of Corona also has an option to exercise an additional 10% investment at previous market rates, an investment which would be very lucrative given the current rise in Canopy’s share price.

In addition to the Canadian cannabis sector, Shopify and other e-commerce related tech securities traded on the TSX have performed very well in 2017, showing the strength of investor sentiment for long-term growth trends in these spaces.

That said, the emphasis which has been placed on growth in recent years combined with a slough of cheap money continuing to flow into equities and away from fixed income securities in this rising interest rate environment has led to a scenario which many analysts believe could be a significant bubble, born out of the quantitative easing efforts following the most recent recession nearly 10 years ago.

Cautious long-term investors should consider ramping up exposure to fixed income securities, despite near-term potential downside, as a prudent long-term investing strategy.

Invest wisely, my friends.