Small caps outperformed the broader index in June by a wide margin. The S&P/TSX SmallCap Index rallied an impressive 5.9 per cent compared to a 2.6-per-cent gain for the S&P/TSX Composite Index.
There were 10 sectors in the S&P/TSX SmallCap Index that delivered positive price returns. The leading sectors were industrials, energy, financials, materials and health care with gains of 9.8 per cent, 8.3 per cent, 8.2 per cent, 6.4 per cent and 6.1 per cent, respectively. The sole sector reporting a loss in June was consumer staples, which fell 4.6 per cent. Market breadth was broad with 73 per cent of the securities in the TSX SmallCap Index reporting positive price returns.
The top 10 performers in the TSX SmallCap Index during the month were:
- Neo Performance Materials Inc. (NEO-T), up 54 per cent
- Bausch Health Companies Inc. (BHC-T), up 46 per cent
- Taseko Mines Ltd. (TKO-T), up 39 per cent
- Endeavour Silver Corp. (EDR-T), up 36 per cent
- Prime Mining Corp. (PRYM-T), up 35 per cent
- First Majestic Silver Corp. (AG-T), up 33 per cent
- Algoma Steel Group Inc. (ASTL-T), up 30 per cent
- Ur-Energy Inc. (URE-T), up 28 per cent
- Stingray Group Inc. (RAY-A-T), up 27 per cent
- Mattr Corp. (MATR-T), up 27 per cent
Stocks with the largest positive revisions to their target prices over the past month include:
- Ballard Power Systems Inc. (BLDP-T), up 20 per cent
- Andrew Peller Ltd. (ADW-A-T), up 18 per cent
- OceanaGold Corp. (OGC-T), up 13 per cent
- NovaGold Resources Inc. (NG-T), up 13 per cent
- New Gold Inc. (NGD-T), up 13 per cent
- Perpetua Resources Corp. (PPTA-T), up 11 per cent
- Stingray Group Inc. (RAY-A-T), up 10 per cent
- K92 Mining Inc. (KNT-T), up 10 per cent
- GoldMining Inc. (GOLD-T), up 10 per cent
Stocks with the largest negative revisions to their target prices over the past month include:
- Enghouse Systems Ltd. (ENGH-T), down by 10 per cent
- Algoma Steel Group Inc. (ASTL-T), down by 10 per cent
- VersaBank (VBNK-T), down by 13 per cent
- Arizona Metals Corp. (AMC-T), down by 13 per cent
- Canopy Growth Corp. (WEED-T), down by 39 per cent
As of June 30, the S&P/TSX SmallCap Index was up 11.4 per cent year-to-date. In comparison, the S&P/TSX Composite Index was up 8.6 per cent year-to-date.
Earnings season is just weeks away. According to Bloomberg, earnings for the TSX SmallCap Index are expected to grow 23 per cent over the next 12 months, down nearly 1 per cent from last month’s forecast.
Now, here’s a look at analysts’ current target prices, recommendations, forecast returns and yields for all 241 securities in the S&P/TSX SmallCap Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
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