It’s been an interesting end to an interesting week of trading on the TSX. Oil prices were up by over a percentage point on Friday, continuing Thursday’s positive movement, and while the energy outlook is still on the grim side thanks in part to U.S. oil supplies and a global economic slowdown, the increase has served to stave off a five-month low.
As well, Canada managed to reel in its lowest trade deficit in half a year, with the loonie sitting a little higher against the U.S. dollar. While it may be a little premature to break out the party streamers, shareholders in the following companies may have reason to celebrate.
Tech and energy started to recover this week
After falling off a cliff at the end of May, ending a remarkable five-month run, Descartes Systems (TSX: DSG)(NASDAQ: DSGX) led the charge this week, jumping several percentage points to become the top gainer on Thursday. Up 3.4% at the time of writing, this return to form goes some way to putting the logistics tech stock front and centre for growth investors at a time when uncertainty lurks in every corner of the TSX.
Rising 2.5% on Thursday to help energy stocks boost the TSX index, a three-year estimated earnings growth rate of 98.6% and fair value would be the two main reasons to buy oil-weighted Baytex Energy (TSX: BTE)(NYSE: BTE) meanwhile. However, a five-year beta of 3.62 relative to the TSX index might count out any low-risk investor with a milder taste in energy stocks looking to get defensive right now.
Despite a number of recoveries – some of them considerably greater than this week’s – the general trend here is downward, with the share price slumping since the beginning of last month. Whether it hits a 52-week low any time soon is anyone’s guess, though it’s hovering around the $2 mark at the moment, and as such, it’s not far off the low of 1.88% it touched over the winter holidays.
Weed stocks could be an indicator for market sentiment
Down 2.7% at the time of writing but finishing the week higher, Cronos Group (TSX: CRON)(NASDAQ: CRON) is a moderate sell at the moment. It’s a strange time right now for this burgeoning sector in general, characterized by a formula of high-intensity production that may ultimately undergo a sea change: from CBD products to “craft weed” producers, the expected billion-dollar cannabis industry could look very different in a few years’ time.
However, it doesn’t take a few years to cash in on Canadian cannabis stocks, and with a 36-month beta of 5.06, gutsy investors could still cream some upside with Cronos Group thanks to its volatile share price. A trailing 12 month P/E of 56.8 times earnings and P/B of 7.43 times book don’t denote good value for money, though, thereby impacting the margin for capital gains.
The bottom line
With its recovering share price, Descartes Systems joined the tech stock rally that helped buoy the market this week, nudging the TSX index a little higher in the middle of the week. It’s still overpriced, but as it offers growth to a tech investor, it looks like a moderate buy at the moment. Baytex Energy, meanwhile, though it offers some growth, is a downward trending stock and may not a solid buy right now.
