5i Research - Forums

We encourage members to view and participate in our Forums page where investors can share and discuss ideas on the broader investment markets, individual stocks, tax, and FX trading. There is an increased participation level from the 5i Research team in the forums, and members can expect to discuss ideas directly with 5i!

Check out the Forums page today to see what other investors are seeing in the markets today!

Report Updates

We have posted report updates on Premium Brands Holdings (PBH), Topicus.com (TOI), and A&W Revenue Royalties Income Fund (AW.UN). PBH targets and acquires food businesses within its specialty food and premium food distribution platforms. Topicus is a serial acquirer focusing on acquiring and managing vertical market software that provides mission-critical solutions for its customers. AW.UN owns the A&W trademarks used in the A&W quick service restaurant business in Canada. One company has experienced some difficulty in its margins and as consumers shift their spending habits, the other company has proven its resilience and innovative profile, while another company has demonstrated that it has a large addressable market and its strong capital allocation skills. 

Read the latest updates by logging in here!

Investor Sentiment Survey

Thank you to all of those that have participated in our investor sentiment surveys thus far. We feel that these surveys have added value to our thought process on the current investment landscape, and we hope that you all have felt the same. 

The survey shouldn't take more than 5 minutes and no personal details are required.

Let us know how you are feeling about markets and the economy by following the link below! We will let you know the results in our next market update.

Investor Sentiment Survey

Market Update

The markets have largely been moving up over the past couple of weeks, as fears around a worsening banking situation in the US are subsiding. There has been a minor sector rotation underneath the surface as investors have had to be tactical with their positioning, where large caps unabated by the banking crisis have been treated as a safe haven, and impacts on small and mid-cap names are being assessed. Gold has been moving higher, nearing $2,000/oz and oil has caught a bid bouncing from the mid-60s to the low 70s. There is a lot of uncertainty in the markets, but we are seeing the markets climb a 'wall of worry' and we see green pastures of downward pressure on yields and inflation up ahead. It might be hard to believe, but we are nearly ¼ of the way into the year already. Q1 2023 is nearing a close and in this market update, we want to assess the year-to-date (YTD) return on the TSX and its composition.

TSX Year-to-Date (YTD) Return
Relative to other major indices, such as the S&P 500 or the Nasdaq 100, the TSX Composite has held up relatively well over the past 12 months. A lot of this success can be attributed to its second-largest constituent, the energy sector. Energy was the best-performing sector of 2022, as the price of oil soared higher and oil companies became money printing machines.
 
So far, the TSX has returned roughly 1% to 2% on a YTD basis. The index was up as much as 7% for the year in February, although this return began to falter as the price of oil fell below $70 and the energy sector lost its momentum. The YTD return was worsened by the effects of the US banking crisis on the Canadian financial sector, and this continues to weigh on the index’s performance. Overall, we see a bit of support being found at its current levels, and the RSI on a daily basis has been reset to normal levels.

TSX Sector Constituents
Its largest constituent is the financials sector, at ~32%, and while most Canadian banks were negatively impacted last year, they held up well relative to higher volatility sectors such as real estate, consumer discretionary, and technology. Below, we can see the composition of the TSX index, with energy and financials combined accounting for roughly 50% of the index. The lower volatility, defensive, sectors such as industrials, utilities, and consumer staples make up ~22% of the index, and the more cyclical, high-beta areas such as tech, materials, and consumer discretionary also comprise ~22% of the index.

Source: spglobal.com
 
YTD Return on the Individual Sectors
Let’s turn now to the year-to-date (YTD) performance of the individual TSX sectors. While the higher volatility sectors, technology, and materials, represent a lower weighting in the overall TSX composite, they have been the best-performing sectors YTD, at a 10.8% and 6.6% YTD return, respectively. Technology has been rebounding amidst the prospects of falling interest rates and bond yields, and materials has been performing well as copper and gold producers have benefitted from rising mineral prices. Energy has been the worst-performing sector YTD as the price and outlook of oil weakens and energy investors take profits from a substantial outperformance in 2022.

We see the potential for technology and materials to continue as market leaders throughout the year, and for higher cyclical areas such as consumer discretionary and real estate to begin their ascent. We feel that the financials sector has some near-term headwinds as investors weigh the potential for further systemic risks, although, on a long-term basis, the Canadian financial sector remains one of the more robust in the world. There is much time left in the year, and sentiment shifts can occur faster than most are expecting, but largely, we would not rule out a strong year for the TSX composite.

Best wishes for your investing!

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