Stock markets contain some performers

When the TSE 300 plunged 574 points in mid February, some investors were on the verge of panic. The sudden plunge of Nortel Networks had shocked Bay St. and pushed the TSE 300 into the red for 2001.

But guess what? Things are not really as grim as they may seem.

A look at the numbers behind the headlines reveals some interesting facts. For starters, as of the close on February 16 the TSE 300 Index was down 6.1 per cent year-to-date – but it really isn’t. Most of that loss reflects the precipitate slide of Nortel.

The TSE 300 Capped Index, which limits the weighting of any one stock to under 10 per cent, was actually at break-even year for the year. That meant that if Nortel were completely removed from the calculation, the rest of the index would be up. That explains why some Canadian equity funds are showing good profits so far in 2001. It also demonstrates the danger of index investing when it comes to the TSE.

Some sectors gaining
A look at the sub-indices of the TSE tells an even more fascinating story. As you might expect, the Industrial Products index – the one that contains Nortel and the other major tech companies – is a ms, down more than 20 per cent in the first six weeks of the year.

But several other sectors are showing strong gains:

  • Conglomerates are up 20.5 per cent year-to-date to February 16.
  • Transportation and Environment sub-index is up 15.6 per cent.
  • Metals and Minerals is ahead 12.2 per cent.
  • Consumer Products has advanced 8.8 per cent.

Surprisingly, the Oil and Gas sub-index is a laggard, up only 2.3 per cent so far this year.

Stock performers
Some of the stocks that are performing well in the current market are:

  • Alcan
  • Petro-Canada
  • Noranda
  • Talisman
  • Canadian Utilities
  • Anderson Exploration
  • Norske Skog.

So there are profits being made in the market, amid all the carnage. It’s a matter of careful stock selection and avoiding those sectors that are most vulnerable at the present time – particularly technology.

This article was originally published in the Internet Wealth Builder newsletter, February 19. The IWB is a weekly e-mail financial advisory, edited and published by Gordon Pape.