The S&P/TSX Composite Index suffered its largest drop in three years on October 24, the same day the Bank of Canada elected to hike the benchmark rate by another 0.25%. The central bank said that strong fundamentals justify an accelerated rate-tightening path into next year. Indexes across the developed world continued to struggle last week. The NASDAQ fell into correction territory on the same day.
Investors should look to take advantage of discounts before the inevitable uptick. The TSX has dropped to 2016 levels but a batch of late fall and early winter earnings should give it a boost before 2018 comes to an end.
Lundin Mining (TSX:LUN)
Lundin Mining is a Toronto-based metals company with operations in North America, Latin America, and Europe. Shares had dropped 34% over a three-month span as of mid-afternoon trading on October 25. The stock reached a five-year peak in late 2017 on the back of soaring base metals prices.
Copper and zinc prices have experienced weakness in 2018 and are not expected to regain momentum until early next decade. Analysts now expect a prolonged trade war between the United States and China, which will curb global growth and hurt commodity prices going forward. For this reason, Lundin Mining is the riskiest bet of the stocks we will cover today.
Canada Goose stock had dropped 18% month over month as of mid-afternoon trading on October 25. Shares were still up over 50% in 2018 so far. Canada Goose still boasts a high valuation when we look at its price/earnings and price/sales ratios, but its world class leadership has so far proven that it can successfully navigate the harsh modern retail environment.
Canada Goose has seen its e-commerce business post fantastic growth over the past year, and it is now entering the busy season. The company is also expanding into Asia where its brand has encountered early success. The stock is worth considering ahead of its second-quarter earnings release, which is expected in early November.
Kinaxis stock was down 10% month over month as of mid-afternoon trading on October 25. Shares were still up 11% in 2018 thus far. Kinaxis is expected to release its third-quarter results on November 9. The company has won several significant clients in 2018, including Volvo and Toyota Motor Corp., which has made up for the loss of a major Asia-based client in 2017. Trade tensions will complicate global supply chains and could ultimately boost demand for Kinaxis’s flagship RapidResponse product. This stock remains an attractive long-term hold.
TMX Group (TSX:X)
TMX Group stock was down 7.8% month over month as of this writing. Shares were still up double digits in 2018 so far. The company is expected to release its third-quarter results in early November. The TSX has suffered from lower volumes in 2018 as Canada has experienced an investment flight since U.S. tax reform.
However, lower prices and stability on the trade front after the USMCA was announced should draw interest for the Canadian market going forward. Legal cannabis has also drawn in overseas investors. TMX posted a record quarter in Q2 2018 in the face of these headwinds.