2011 was a tough year on public companies in Canada. Two out of the first three weeks of January were down, setting a theme that would carry through most of the next 49 weeks. The S&P TSX Composite Index reached its yearly high in the first week of March as the main Canadian index surged above 14,000 for the first time since May 2008, but the wind was sucked out of it by then.
International turmoil was in full force as protests in the Middle East heightened concerns about oil supply routes being shut down, and massive earthquakes and tsunami rocked Japan on March 11, crippling the Fukushima Dai-ichi nuclear plant and threatening radiation exposure to millions of people and to products. Global supplies took a significant hit, especially the automotive industry, as a result of damaged and radiation-exposed products kept from being exported by Japan.
Gold was still surging to new record highs -- on its way to $1,900 U.S. per troy ounce, but the resource-heavy Canadian exchanges simply did not follow. Ironically, when gold peaked in September above $1,920 U.S. an ounce and then began its subsequent fall to year end levels around $1,550 U.S., the TSX and Venture exchanges followed its downward path.
Canadian economic data holding steady, including continuously low interest rates; unemployment levels far less than its U.S. counterpart; and a housing sector that did not collapse was not enough to prop up the exchanges as Eurozone financial woes, slowing demand from China and a sometimes struggling U.S. economic recovery tempered consistent data from Canada.
Heading into the final day of trading, the S&P TSX Composite had shed more than 12% on the year. The smaller TSX Venture had lost a whopping 37% of its value in the last 52 weeks. The negative movement is a bit of a surprise as oil is up more than 10% on the year and gold has appreciated by more than 8% throughout 2011.
Canada’s tech darling, Blackberry maker Research in Motion, dominated headlines throughout 2011. Shares that were once trading around $160 each before the financial collapse in 2008 have been pummeled annually since and this year was no different. From downgrades by institutions such as Jefferies & Co. to Canadian Investor Jaguar Financial Corp. calling for the company to consider selling itself or to sell its wireless patents to raise shareholder value, RIM has not received much positive attention.
Toss in some global blackout issues, reduced demand and stiff competition throughout the industry and shares of RIM dumped another 75% of their value to now be trading in the neighbourhood of $15 each. The company still is the source of takeover possibilities heading into 2012 with several large suitors emerging recently, but it is important to remember that RIM is a point of pride for Canada, a country that is growing resilient towards takeovers by foreigners of its domestic companies.
It should not be forgotten that the Canadian government squashed the $40-billion hostile takeover attempt of Potash of Saskatchewan by Australian miner BHP Billiton in 2010 because it did not feel the deal was in the best interest of Canadians.
Exchange operator TMX Group, Inc. spent its fair share of time in the spotlight throughout the year regarding merger attempts. Early in the year, TMX was looking to establish its global footprint to parallel that of the NYSE Euronext by merging with the London Stock Exchange, a deal that eventually fell apart.
That didn’t slow the buyout news swirling around the TMX Group, though. The Maple Group, the all-Canadian consortium of financial institutions and pension funds made an unsolicited bid of roughly $3.8 billion to acquire TMX Group shortly after the failed LSE merger. Significant concerns about the deal surfaced immediately that were centered around competition in equities trading, and clearing and settlement services in Canada. The deal is still on the table and trying to clear any hurdles. Still building its international presence, TMX Group purchased a 16% stake in the Bermuda Stock Exchange, as reported on December 21.
It’s always difficult to discern which stories were the most impactful of the year, but the Keystone Pipeline project spent plenty of time on the front pages. Backed by Calgary’s TransCanada Corp., the proposed project would ship up to 700,000 barrels a day from Alberta's oilsands to the U.S. Gulf Coast, but has met stiff resistance from environmental activists along the proposed route. Temporarily on hold, the U.S. State Department has stated that it won’t make a decision on the project until after the 2012 presidential election in November.
Although not directly market related, the Canadian elections of 2011 are certainly worthy of a mention. The death of long-time New Democrat Party leader Jack Layton, which came only months after he led the NDP to its best showing in history, was one of the top Canadian news stories in 2011. The federal election demoted the Liberal party to a third-place status and escorted in a Conservative majority, drastically changing Canada’s political landscape.
Canadian personal finances also proved a major point of discussion throughout the year with many analysts, industry watchdogs and even the Bank of Canada governor all signaling alarm bells over Canadian household debt issues, primarily stemming from the booming Canadian housing market.
While housing prices on a national level continued to defy negative market forces, most of the upward pressure came on the backing of increased consumer debt. While all seems fine for now, debt is a ticking time bomb and it has gone off in many other parts of the world over the last few years with some serious consequences, so Canadians should at the very least take notice and strive to commit to easing their debt burdens in 2012 as any shock such as rising interest rates, a new recession or major job losses could result in the debt bubble bursting.
Throughout 2011 we once again proved our prowess to make stock picks throughout our "Penny Stocks to Watch" that are posted each and every Friday after the closing bell for our members to check out technical charts poised to move the following week. Even while Canadian markets languished throughout the year, our Penny Stocks to Watch produced countless quick hitters for 10% to 30% gains while also delivering many plays with far larger gains that outstripped the markets.
Among some of the notable rapid movers, Channel Resources Ltd. (TSX-Venture: CHU) ran from 24.5 cents to 36 cents in five days (+46.94%) during July; Trelawney Mining and Exploration, Inc. (TSX-Venture: TRR) moved from $3.92 to $5.85 (+49.23%) after being picked in June; and CGX Energy Inc. (TSX-Venture: OYL) cruised from $0.77 to $1.24 (+61.04%) in a matter of weeks during October and November.
Others took a bit of time and rose steadily. Examples included Metanor Resources Inc. (TSX-Venture: MTO) which dipped briefly to support from a profile price of 26 cents in August before climbing to 43 cents (+65.38%) in September; Titan Medical Inc. (TSX-Venture: TMD) rising from $1.15 in July to $1.99 in November (+73.04%); and Mart Resources Inc. (TSX-Venture: MMT) increasing from 50 cents in October to 94 cents (+88.0%) just a couple days ago.
Our best performers for 2011 were PMI Gold Corporation (TSX-Venture: PMV) which we featured at $0.51 in January right before it rose in a little over a month to $1.07 (+109.80%) and d'Arianne Resources Inc. (TSX-Venture: DAN) which shot to $1.70 within two weeks of our February price of $0.48 before continuing its ascent to $2.50 in September for a stunning gain of 420.83%.
Of course, we can’t guarantee that 2012 will continue to bring winners, but we have proven our ability to find quality undervalued companies and technical plays since 1999 and don’t expect the next year to tarnish our impeccable track record. We can guarantee that we will work hard to perform our due diligence to bring you the best value propositions that we can find again during our 13th year of operation. Happy holidays to everyone, and may 2012 treat the Canadian market a bit more generously.
