Attractive valuation acts as a support mechanism to your equity levels: Portfolio manager
Canada’s benchmark stock index pared its gains throughout the trading day but still managed to end in positive territory on Monday as mining stocks rose.
The S&P/TSX Composite Index closed 49.04 points higher, or 0.25 per cent, at 19,669.17.
One market strategist, however, warned the recent optimism among investors that have lifted stocks might be short lived.
“Profit margins are getting pressured and will continue to be pressured in the quarters ahead. We don’t think that the market is pricing that in at all. That concerns us,” Sandi Bragar, a partner and market strategist at Aspiriant, said in an interview Monday.
She also said companies might not be able to fully pass on higher input costs to consumers, leading to potential pressure on future earnings.
“Earnings per share over the next couple of years could come down by 40 per cent, which could translate into a further market decline in the 20 to 30 per cent range,” she said.
Barrick Gold Corp. was among the big mining names gaining ground Monday. Shares of the company rose 3.32 per cent to $20.84 after posting a slight earnings beat in its latest quarter. The company’s all-in sustaining costs rose 11.4 per cent in its second quarter compared to the year before.
“Costs are a reality. And, you know, we've been saying that inflation is coming for some time now. And I think everyone tries to deny it, but it is what it is and it's how we manage it,” said Mark Bristow, chief executive officer of Barrick, in an interview.
He pointed out that there were a number of other factors aside from inflation that impacted the company’s all-in sustaining cost.
“We have guided higher costs for the year and we could exceed guidance, even, but that's the short term. And we're comfortable that our business plans are fully intact going forward,” Bristow said.
Meanwhile, John Goldsmith, a portfolio manager at Montrusco Bolton, said he thought Barrick has been managing its costs better than its peers: “Barrick is probably faring pretty well relative to some of the other gold miners. I think this is a tough environment for gold equities in this type of macroeconomic backdrop.”
Shares of Cenovus Energy Inc. ended 3.43 per cent higher at $21.99 after announcing it’s buying the remaining 50 per cent stake in a Toledo-based refinery from BP Plc, giving it full ownership.
The US$300 million all-cash deal will help Cenovus execute on its longer-term strategy of boosting its refining capabilities.
Markets in New York lost steam throughout the day as tech stocks dragged on the major indices. The S&P 500 closed 0.12 per cent lower, the Dow Jones Industrial Average inched out a 0.09-per-cent gain and the Nasdaq fell 0.10 per cent.
It was a choppy trading session for West Texas Intermediate as well after oscillating between gains and losses. It ultimately ended two per cent higher at US$90.76 per barrel.
The Canadian dollar gained four-tenths of a cent at 77.75 cents U.S.