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Monthly Reviews - Mars 2022

Discretionary consumption

By Ariane Beauregard

The Capped Consumer Discretionary Index jumped by 8.36% in the last month, outperforming the S&P/TSX Index which only jumped by 3.67%. Consumer discretionary also outperformed the consumer staples index, which rose by only 5.75%.

Figure 1 : Comparison between the Consumer Discretionary Index, Consumer Staples and the S&P/TSX

One of the companies that contributed to this increase was BRP Inc. (DOOO), which alone jumped by 20.85% in the month of March. This increase can be explained by the release of the fourth quarter results for the 2022 fiscal year. DOOO shares rose by 9.9% after the announcement of adjusted earnings per share of $2.36, beating the Zacks consensus estimate of 1.97%. Another important announcement, made on March 25th, was the return of Can-Am motorcycles, but this time with a fully electric lineup to mark their 50th anniversary.

Two other stocks that performed well in the month of March were Canada Goose Holdings Inc (GOOS) with an increase of 20.85% and Aritzia Inc (ATZ) with an increase of 15.85%. Canada Goose announced on March 22nd its expansion into the Japanese market, entering into an agreement with Sazaby League to develop a joint venture under the name Canada Goose Japan. For its part, Aritzia has not announced anything significant. However, on March 8th, ATZ had reached its lowest price of $42.00 since last October. Investors jumped on the occasion to buy the stock, rising by 11% from that low.

Other than these three stocks, the luxury goods sector is fairly stable. This may indicate that the February recession of the index, possibly due to the outbreak of the Russian-Ukrainian conflict, is now not as big a risk.

 

FinTech

By Hugo Lirette

The following figure compares the performance of the S&P Cryptocurrency Broad Digital Market Index, an indicator that tracks the performance of digital assets listed on recognized open digital exchanges that meet minimum liquidity and market capitalization criteria, to the performance of the S&P500 year-to-date.

Figure 2: Comparison between the performance of the S&P Cryptocurrency Broad Digital Market Index and the performance of the S&P500

It can be seen that cryptocurrencies have underperformed the S&P500 throughout March. In fact, since the beginning of January, the cryptocurrency market has been in a strange state of indecision. In fact, BTC is trading between 35000 and 45000 USD$. This can be seen by the following figure.

Figure 3: Year-to-date trading range of Bitcoin

The month of March started off rough with a sharp decline of about 14%. Then, BTC quietly rose by about 24% throughout the month to pass the resistance formed at the beginning of the year. BTC managed to break through the 47500 USD mark. This can be seen in the following figure.

Figure 4: Bitcoin passed resistance at the end of March

Breaking through this resistance is a good sign for BTC. It remains to be seen what direction it will take in the coming months. Sentiment seems to be quite mixed. According to the Fear & Greed Index, the market has a neutral sentiment about the evolution of the commodity. This can be seen in the following figure.

Figure 5: Cryptocurrency market fear and greed index

A lot of news this month.

Cryptocurrencies played a role in the conflict between Ukraine and Russia, the Ukrainian government asked the world for funds using two virtual wallet addresses.

Figure 6: Ukrainian government Twitter post

On March 9, 2022, President Joe Biden issued an executive order calling on the government to examine the risks and benefits of crypto assets. Several sanctions have been issued against Russia. Out of concern that cryptocurrency is a way to escape these, the president ordered the executive order.

Earlier in March, it was announced that members of the Bored Ape Yacht Club’s NFT collection would receive their own crypto-currency, ApeCoin. This coin has completely turned the market upside down.

In short, in the world of cryptocurrencies, there are always interesting things happening. To be continued in the next monthly review…

 

Industries

By Lynn Doughane

Boyd Group (TSX:BYD) shares rose more than 10% in the past week. The company operates collision repair centers in the United States and Canada. These centers operate under the names Boyd Autobody & Glass and Assured Automotive in Canada and under the Gerber Collision & Glass brand in the United States. It also operates as a retail auto glass operator.

Boyd Group has been one of the best performing stocks on the TSX over the past decade. It has returned a spectacular 1,300% to investors since March 2022, including dividends. However, it is also down 40% from historical highs.

The company explained that its financials have steadily improved through the first six months of 2021 as demand for services has picked up due to the relaxation of COVID-19 standards. But while demand has surged over the past two quarters, Boyd’s ability to meet demand has been impacted by supply chain disruptions and a tight labor market.

BYD stock is valued at a 2022 price-to-sales ratio of 1.2 and a price-to-earnings ratio of 46. Analysts following BYD stock remain bullish and have a 12-month average price target of $226, or 39% above its current price.

 

Basic consumption

By Catherine Kallas

What will the next season look like for the consumer staples sector?

A new season is on the horizon, and it is not a comforting one for holders of consumer staples stocks, especially in the food sector. Many analysts, including Wendy Nicholson, predict that the sector’s earnings will come under increasing pressure due to rising input costs. This inflation is due to companies’ exposure to much higher packaging and transportation costs. On the other hand, foreign currency pressures are increasingly being felt. This is due to the current geopolitical context in terms of the Russian invasion of Ukraine. This has allowed the U.S. dollar to increase in value and make products from American companies more expensive. Companies such as Mondelez International (MDLZ) and Kellogg (K) are exposed to this risk as more than half of their sales are outside the United States. In the market, this is illustrated by shares trading at a lower price with a discount. This could be a good buying opportunity if we consider that the pressures currently experienced are only transitory.

 

Real estate

By Marie-Pier Dufour

Comparing the real estate stock market index with the Toronto Stock Exchange index for the month of March, two events stand out. Indeed, the following image shows that the REIT overtakes the TSX on March 9, then on March 21, the TSX catches up with the REIT. It should be noted that the two indexes underwent a nice increase and that only 0.32% separated them.

Figure 7: Comparison between the REIT and the S&P/TSX Composite Index

Regarding the outperformance in early March, it could be explained by the fact that despite the increase in the key interest rate, the sale price of houses continues to rise. This news encourages people to invest in real estate, which contributes to the increase in the value of the REIT index.

As for the March 21 drop, it is consistent with the Ontario government’s announcements. Indeed, the government decided to increase the tax on non-resident homes by 5%. The tax will increase from 15% to 20%. This move is designed to encourage property purchases by Ontario families, not foreign speculators looking to make a quick profit. The government is also closing the tax loophole where people who enroll in four semesters of full-time study two years after a property purchase could receive a tax break. This may have been a disincentive to foreign investors, especially considering that Toronto is one of the most expensive cities for real estate. This manoeuvre could also be adopted by other provinces. Uncertainty on this issue may also cause the market to fall.

 

Energy

By Daphné Binard

Following Russia’s invasion of Ukraine, Brent crude oil futures and WTI (West Texas Intermediate) oil prices nearly doubled during the month of March. The price of WTI reached a day high of $129.44 a barrel on March 8, a maximum not seen in the past 14 years.