3 Big Stock Market Disappointments of 2015
It was a rough year for stocks in general but these three fared worse than expected.
Every year brings new hope for investors. Markets will rise, the value of the portfolio will swell, and all will be right with the world.
Sometimes it happens that way. But occasionally the year ends up leaving us poorer than when it began. Although it wasn’t a total disaster (think back to 2008 for that), 2015 turned out to be a year most people would prefer to forget. The performance of the TSX was dismal enough but some securities fared even worse.
Click through for my candidates for three of the biggest disappointments of the year outside the oil and gas sector, which was pretty much a total bust.
Enbridge Inc. (TSX, NYSE: ENB). I’ve always regarded this pipeline and gas distribution utility as a bedrock holding for every portfolio. Over the years, it has been a sound performer, providing both a respectable yield and steady capital gains. There was no reason to believe that 2015 would be any different, especially after the company kicked it off with a whopping 33 per cent dividend increase. The share price surged after the Dec. 3, 2014 announcement, closing the year at $59.74.
Investor enthusiasm continued to build until by mid-April the stock was up to an all-time high of $66.14. Then, suddenly, people started to think that maybe the pipeline companies would be sideswiped by the oil sell-off. Enbridge shares turned around and started drifting lower. Even the early December announcement of another 14 per cent dividend increase effective March 1, 2016 didn’t stem the sell-off. By Dec. 14, the shares had fallen all the way to $40.17, where they were yielding a handsome 4.6 per cent.
At that point, saner heads prevailed and the stock rallied to close on Dec. 24 at $46.42. Still, that was down 22.3 per cent for the year and almost 30 per cent from the April high.
Valeant Pharmaceuticals International (TSX, NYSE: VRX). Canada doesn’t have much of a healthcare sector and one company, Valeant Pharmaceuticals, dominates what little we do have. Although Valeant has its headquarters in Laval, Quebec, most of its manufacturing facilities are in the U.S. with commercial offices around the world. Still, its executive office is here and we were proud to claim it as our own as the stock kept rising to the moon. The shares ended 2014 at $166.33 and continued to climb, reaching an all-time high of $346.52 in early August.
Then Hillary Clinton and some folks in Congress began wondering out loud why the price of drugs jumped by astronomical amounts after their makers were taken over by Valeant. U.S. federal prosecutors started nosing around, a Senate committee said it would look into the high cost of medications, and investors fled the scene.
The stock closed on Christmas Eve at $157.68. That was down only half of one per cent for the year but off 54 per cent since August.
Boardwalk Real Estate Investment Trust (TSX: BEI.UN). REITs have become a favourite of income-oriented investors because of their steady cash flow and attractive yields. Boardwalk REIT was one of the top performers, thanks to its extensive holdings in booming Alberta. The stock soared as high as $71.40 in late October 2014 and was still in the $60 range as the year ended.
Then Boardwalk became collateral damage in the great oil price war that continues to this day. Massive layoffs in the energy sector combined with a severe economic slowdown in the province left investors with the perception that Boardwalk’s cash flow would suffer and they sold out. In fact, the trust’s finances have held up quite well so far with third-quarter funds from operations up 2.2 per cent from the year before on a per unit basis. But that news plus a $1 special distribution did nothing to stem the rush to the exits.
Boardwalk fell as low as $44.77 on Dec. 14 before rallying to close at $48.61 on Dec. 24, down about one-third from its high of October 2014.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to www.buildingwealth.ca.