While global markets are in a downtrend year to date, return drivers for active investors still abound.
The most important among them is value, the ability to identify out-of-favour companies, pummeled by the downturn, that retain favourable characteristics like free cash flow, pricing power and low-cost production at a more attractive share price.
While tech and growth names have been the hardest hit from inflation’s dampening of post-pandemic investor enthusiasm, most sectors in the TSX are brimming with opportunity, with only the utility and consumer discretionary indices with over 50 per cent of constituents above their 150-day moving average.
Another data point to pay attention to is the price of oil, which has recently been putting a cap on Canadian economic output due to its resistance around the US$100 per barrel level. At these prices, the highest in approximately eight years, a wide assortment of industries has been forced to charge consumers more – or curtail production – to offset the extra costs, which is exacerbating inflationary pressures and motivating The Bank of Canada to keep raising its benchmark interest rate to slow demand down to a pace companies can keep up with. A similar dynamic is occurring with metals, lumber and wheat, with demand overtaking supply, and prices rising to the detriment of new business initiatives.
The key question to ask as an active investor isn’t, When will energy prices return to historical averages? Since macro forecasting is akin to gambling in this context; rather, a more pointed question reads, Which companies have built enough brand equity and fortified their balance sheets to ensure demand and satisfaction regardless of volatile input costs? While health care and consumer staples are the obvious sectors to analyze, given the importance of these products across households, enduring brands exist across the Canadian market with widely varying degrees of analyst coverage, especially in the small-cap and microcap spaces Market Herald Canada readers tend to work in.
A third return driver to consider is monetary policy, namely The Bank of Canada’s ongoing battle with inflation – 8.1 per cent as of June 2022 – as it seeks to balance consumer spending and new business initiatives with still overwhelming post-pandemic demand. In certain cases, such as energy, commodities and real estate, inflation is good for business because real asset prices are high, while for others, like industrial and consumer discretionary companies, raw material costs may be hindering earnings and tarnishing future outlooks unless supply chains are backed by exclusive and flexible arrangements.
The takeaway is that while the makeup of the investment landscape is constantly changing, opportunities are always visible to the proper perspective. No matter your level of financial expertise, it is impossible to know how the market will react as the world works through its current economic and sociopolitical troubles. The one thing we can say for sure is that market history teaches us that share prices will reflect intrinsic value after all is said and done. In other words, if negative sentiment leads to a discounted asset, that discount will eventually disappear once market participants catch wind of it, whether you capitalized on it or not.
Let’s now turn to the news stories piquing the interest of our investor community over the past week, which span across mining, health care and technology:
First Mining Gold (TSX:FF) to acquire Duparquet Gold Project
First Mining Gold has offered to acquire all the issued and outstanding shares of Beattie Gold Mines.
Beattie Gold Mines is a private company that owns the rights to mining claims that comprise a large part of the Duparquet Gold Project in Quebec.
The transaction consolidates one of the largest advanced-stage, undeveloped gold projects in Canada.
CEO Dan Wilton sat down with Sabrina Cuthbert to discuss the acquisition.
First Mining Gold (FF) closed up by 13.95 per cent over the past week trading at $0.24 per share.
Algernon Pharmaceuticals (CSE:AGN) achieves co-primary endpoint in its Phase 2 study of Ifenprodil
Algernon has met the co-primary endpoint in its Phase 2 proof of concept study evaluating NP-120 for the treatment of idiopathic pulmonary fibrosis (IPF) and chronic cough.
Based on the positive data, the company plans to file a pre-IND application with the U.S. FDA for a Phase 2b IPF study.
CEO Christopher J. Moreau spoke with Sabrina Cuthbert about the ongoing research.
Algernon Pharmaceuticals (AGN) closed up by 2.33 per cent over the past week trading at $3.07 per share.
G Mining Ventures (TSXV:GMIN) secures US$481M financing for the Tocantinzinho Gold Project
G Mining has secured US$481M for the construction of its 100-per-cent owned Tocantinzinho Gold Project in Brazil.
The project is on schedule to achieve production in the second half of 2024.
President and CEO Louis-Pierre Gignac joined Sabrina Cuthbert to discuss the capital influx.
G Mining Ventures (GMIN) closed up by 6.67 per cent over the past week trading at $0.80 per share.
Nextech AR Solutions (CSE:NTAR) (OTCQB:NEXCF) announces updates to ARway
Nextech AR Solutions (NTAR) has announced upgrades to ARway, its augmented reality spatial mapping platform.
The company will spin ARway out as a standalone public company later this year, marking the first publicly traded pure-play spatial computing platform.
Nextech AR shareholders will receive a stock dividend of at least 3,200,000 shares on a pro-rata basis.
CEO Evan Gappelberg sat down with Sabrina Cuthbert to discuss the updates.
Nextech AR (NTAR) closed down by 22.22 per cent over the past week trading at $0.84 per share.
Datametrex (TSXV:DM) to install EV charging platforms at seven commercial properties in B.C.
Datametrex (DM) subsidiary Datametrex Electric Vehicle Solutions has secured seven commercial properties in B.C. to install its EV charging platforms.
The initial deployment is underway at a commercial plaza in North Vancouver with further expansion across Canada in the works.
The company will generate significant SaaS revenue from these real estate partnerships.
CEO Marshall Gunter spoke with Daniella Atkinson about the installations.
Datametrex AI (DM) closed up by 9.09 per cent over the past week trading at $0.12 per share.
Tune in next Friday afternoon for a look into the week’s top trending stories on The Market Herald Canada.