As 2010 winds down, those of you who remained invested in the markets have likely had a good year.
Year to date, the S&P TSX Composite Index is up 14.5% while the S&P TSX Venture Composite Index is up a mere 4.3%.
“… as the latest round of (earnings) reports continues to flow, we believe the investment horizon is generally positive,” says portfolio manager Lee Appleton of Matco Financial.
So far in the third quarter, 64% (109 of the 169) of companies in the S&P TSX Composite Index have met or beat their earnings expectations. Despite a year over year flattening in the pace of earnings acceleration, analysts have increased the forward estimates for those companies that met or beat their earnings expectations in the shortened third quarter of 2010.
“Rounding out 2010, we expect corporate Canada will produce 678 in earnings, a healthy step up from 599 in 2009,” Appleton remarks.
Those of you who pay attention to volatility may have noticed that as volatility in the third quarter continues to decline, valuations for the S&P/TSX Composite Index now reflect 19 times trailing earnings, up from 17 times in the second quarter of 2010.
Elaborating further, he comments:
“As companies continue to tell their earnings stories, we’re focused on equities with strong profitability, reasonable multiples and healthy dividend yields. Moving through this typically strong season for markets, we’re targeting low cash balances and positive returns for Q4. Looking at the balance of 2010 and the first quarter of 2011, we’re optimistic about the overall market and high-quality companies in particular. In our view, any short-term market setbacks will provide buying opportunities.”
Two stocks favored by Appleton, who seeks out companies that don’t present well at first glance, are Magna International (MG:TSX) and Research In Motion (RIM:TSX).
Check out the PDF below to find out what Lee has found after reading between the lines of these companies’ earnings reports.
Disclaimer:
Matco Financial Inc. is a privately owned and independent Wealth Management Office. The material presented in the Matco Report is intended to provide information to Matco Financial clients, contacts, and affiliates. Readers should not act on this information without first consulting their investment advisor, tax advisor, financial planner, or lawyer. This communication does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.
Management fees, commissions, and expenses may be associated with investment management services and mutual fund investments. Please read the applicable information such as the prospectus, which contains detailed investment information and is available from your advisor before investing. Most marketable securities such as mutual funds are not guaranteed or insured, their values change frequently, and past performance may not be repeated.
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