Rail Stocks Helped Pull the S&P/TSX Composite Higher in the First Quarter

Solid returns from several marquee names resulted in a positive first quarter for the S&P/TSX Composite.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The numbers are in and thanks to a big contribution from Canada’s rail companies, CN Rail (TSX:CNR,NYSE:CNI) and CP Rail (TSX:CP,NYSE:CP), the S&P/TSX Composite was able register a gain of 3.2% in the first quarter of 2013.  This move forward for the Index is impressive given the 2.5% drag that the heavyweight Materials sector caused during the quarter.

CN Rail moved ahead by 13% and contributed 42 basis points (1 bps = .01%) to the overall index.  CP Rail gained 31.4% but because it carries a smaller weight in the Index due to its lower market cap, only contributed 39bps.  Rail stocks are benefitting from a jammed North American pipeline system.  Both CN and CP expect significant future growth from oil transport in the coming years and the shares are moving higher because of it.

Aside from CP and CN, the rest of the top five contributors during the first quarter were Valeant Pharmaceuticals (TSX:VRX,NYSE:VRX) which climbed 28.5%, Canadian Natural Resources (TSX:CNQ,NYSE:CNQ) up 13.7%, and BCE Inc. (TSX:BCE,NYSE:BCE) +11.3%.  These three names pitched in 40bps, 36bps, and 31bps to the Index’s total return respectively.

Valeant has been a market darling for some time as the company has made a string of growth oriented acquisitions that has the analyst community a flutter.  The company’s balance sheet however could mean the recent success is relatively short-lived.

CNQ has considerable natural gas assets that have held the shares back in recent years as the commodity slumped.  Natural gas performed reasonably well however in the first quarter, creeping from the low $3 range to $4/mmBtu and this provided a tailwind for CNQ’s stock.  A more normal winter in much of North America was a likely contributor to the commodity’s move higher.

BCE’s stock rose as shareholders applauded the company’s most recent dividend bump.  The shares yield 4.9% but an analysis of future cash flows indicates BCE’s dividend raising game may be on hold for some time.

Aside from CNQ, the top 5 first quarter contributors was void of the resource (energy/materials) and financial stocks that the S&P/TSX Composite Index is loaded with.  Because of this sizeable allocation to just 3 sectors, investors that rely on Canadian Index funds and ETFs severely lack diversification in their portfolio, opening them to undue risks.  “Buy These 5 Companies Instead of Following a Flawed Piece of Advice” is our special FREE report that outlines an easy to implement strategy and 5 Canadian stocks that reduce the risks involved with passively investing in the Canadian market.  Click here now to receive the report – FREE!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned at this time.  David Gardner owns shares in Canadian National Railway. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Profit dial turned up to maximum
Tech Stocks

$1,000 Invested in Constellation Software Stock Would Be Worth This Much Today

Constellation Software (TSX:CSU) is trading above $2,000 today. Why this stock is so expensive, and is it worth buying?

Read more »

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Stocks for Beginners

TFSA Investors: Top TSX Stocks to Buy With $6,000

Here are two safe, dividend-paying TSX stocks for your long-term portfolio.

Read more »

Gold medal

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Are you looking for growth stocks that could be huge winners in the next decade? Here are three top picks!

Read more »

Retirees sip their morning coffee outside.

Retirees: How to Make Over $95/Week in Passive Income TAX FREE!

Canadian retirees who are hungry for passive income should look to snag stocks like Sienna Senior Living Inc. (TSX:SIA) in…

Read more »

Man holding magnifying glass over a document

Where to Invest $500 in the TSX Right Now

Given the massive correction, long-term investors can start buying stocks like Shopify and goeasy to outpace the broader markets by…

Read more »

Aircraft wing plane

Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »