It was a relatively flat week on the TSX as oil stocks struggled, primarily due to fears of further shutdowns as COVID-19 cases are surging yet again worldwide.
While this is certainly something to keep an eye on, we’ve had a few members ask us if now is the time to be selling their stocks in case the markets were to crash because of further shutdowns.
The simple answer to this is no. The vast majority of investors who attempt to time things like this will fail in doing so, and simply underperform.
Since 2001, the S&P 500 has gained around 6% annually, while active retail investors have earned 4.25%. It’s been proven time and time again that an active “timing the market” style of investing doesn’t work.
Yet it’s human nature to want to be one of the outliers who is successful at doing so. This is often because we frequently overestimate our skill level, not just with investing but most things in life.
We also hear of the pundits on the news calling the market crash right before it happened. But what we don’t see is the 9 other times they’ve called it before and have been wrong.
If you’re looking to build a portfolio that can stand the test of time and generate long standing returns, buying strong companies and holding them for the long term is the only way to achieve that goal.
Staying invested over the long term from a timing perspective poses almost no risk. Attempting to time tops and bottoms poses significant risks of being wrong, and sacrificing returns.
The bulk of the returns over the course of a year in the stock market are made on very few days. You do not want to be sitting in cash on those days.
So to sum it up in a single sentence? No, we don’t believe now is the time to sell strong investments and sit in cash.
GoodFood earnings
It was yet another record quarter for GoodFood, and the market has rewarded a stock that has been beaten up quite a bit due to fears of its business model suffering post pandemic.
As we’ve stated with GoodFood for the last 3-4 months, the impacts are overstated, and the sell off is overdone.
Yes, slowing growth was expected but the company is trading at valuations that in our opinion have more than enough of this priced in.
The company is growing its revenue, customer base and margins, and is having success with its same day grocery delivery in major cities. We believe that it is a matter of when, not if this gets deployed country wide.
The age of convenience is here, and it’s likely here to stay. Especially amongst the younger generation, who have been surveyed saying they have absolutely no problem paying more money for convenience.
This is a driving factor in our overall thesis for GoofFood, one that remains well in tact after earnings. Click the link below to read our full report on GoodFood.
3 Bull List stocks approaching key a key technical indicator – the Death Cross
A couple of weeks ago we talked about the Golden Cross technical indicator. While not always an indicator of a big upswing, research has shown that every significant bull run begins with a Golden Cross.
Today, we take a look at the opposite – the dreaded Death Cross. What is a Death Cross?
Simply put, it is the opposite of the Golden Cross and when a short-term moving average (50 day MA) drops below a long-term moving average (200 day MA). I’ve added a chart below to highlight one, so make sure your e-mail client is accepting images from us.
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The Death Cross has shown to be a strong predictor of corrections, recessions and bear markets. However, like the Golden Cross it isn’t always perfect and a downtrend does not always follow a Death Cross.
There is also another caveat to the Death Cross – research has shown that the Death Cross is more relevant when a stock has lost 20% or more of its value.
Less than that and there were times it has proven to be a bullish signal. Why? It could be a signal that the profit taking has already been happening and a trend reversal is near.
Why bring this to your attention today?
Because there are currently three stocks on our Bull List that are on the verge of a Death Cross – TMX Group (TSX:X), Parkland Fuels (TSX:PKI) and Quebecor (TSX:QBR.B).
If we use the 20% loss as a parameter, then none of these stocks would qualify. In fact, it could be a bullish signal for all three. Since their downtrends began, Parkland and Quebecor are only sitting on single-digit losses.
Quebecor’s has been much longer and coincides the departure of the Videotron CEO. In this case, a Death Cross could be a bullish signal in that profit taking has already been taking place over the past couple of months. Given this, it is unlikely that QBR will suffer a significant short-term downtrend.
Parkland’s fortunes are tied to an economic rebound. Last week’s economic jitters no doubt had an impact on the stock and will continue to do so until the markets know with certainty there will be no more lockdown or restrictions.
We expect volatility to continue with this one as any bullish/bearish news on the economy can send the stock moving in either direction.
The TMX Group is an interesting one. It only just recently posted a Golden Cross (in late May) which has thus far proven to be a false bullish long-term trend. While it did rebound nicely off lows over the short term, it then traded sideways before its most recent drop.
Worth noting, TMX also suffered a Death Cross this past December. In that instance, TMX dropped from $129.45 to $121.88 (-7.47%) in the months that followed. That event superseded a sharp rise and it’s Golden Cross in May.
While TMX is one to watch, a 7.5% drop following a Death Cross is actually not all crazy. In fact, the company recouped all of its losses and then some as it hit a 2021 high of ~$138 per share before its latest downtrend. Assuming the Death Cross event happens, TMX would have lost 6.39% of its value and dropped below $130.31 per share (current 200 DMA).
Once again, not even remotely close to meeting that 20% threshold which is proven to be a more accurate indicator of a prolonged downtrend.
What it may prove to be, is buying opportunity for investors on these 3 options.
