Finance Blog

Is the Canadian Market way to hot right now? Let’s take a look…

I did a little number crunching, for the growth rates of the S&P/TSX Composite Index for the last few years. Here are the numbers:

Notice the double-digit percentage growth for 2003, 2004, 2005. That’s three straight years! And from the very bottom in Oct 2002, the gain is over a whopping 100%, that’s double! So, are we done? Year-to-date shows that it’s cooled off a bit. However, it’s still a 12% growth since same time last year. Now for the chart…

Wow, quite a bull-run. A small drop since beginning of the year, but looks like it’s headed up again?

Now, how about those gems of the Canadian market, the income trusts. Let’s look at the S&P/TSX Income Trust Index…
Similar story, and chart…

Here’s a great article on the income trust outlook — Rethinking Income Trusts. I think he’s got a very good point…

So at this point, my advice is to income trust investors is to lower their sights. If you are sitting on large capital gains, consider taking some of the money off the table. Make future purchase decisions on the basis of yield and cash flow sustainability. Avoid speculation.

In short, choose trusts on the basis of what they are supposed to be: income securities, nothing more, nothing less.

A look at Cisco Systems, CSCO $21.06, +0.82 (4.05%). Apparently investors bought Cisco shares on expectations that a Cisco executive speaking at a conference in New York would highlight positive growth prospects for 2006.

Why I like Cisco:

• Dominant market position in the large network routing and switching markets
• In November 2005, CSCO agreed to acquire cable set top maker Scientific-Atlanta for about $6.9 billion. The planned
  transaction would help to pull through additional network transport demand, especially in the attractive IP television (IPTV) and video-on-demand market.
• Financials: one of the best in the industry, over $16 billion in cash, no long-term debt, and cash flow generation that averages more than $600 million per month.

S&P’s Recommedation is a BUY, 12-Month Target Price: $23.00

Google was up 0.6%, or $2.18, at $364.80 on Wednesday following Tuesday’s sell-off.

“Google’s shock yesterday has kind of worn off,” said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco. .