Betting against skeptics turned out to be a good investment strategy in 2013, but it was dismal for anyone counting on a comeback in commodities.
Looking back over the past 12 months, there wasn’t a broad view of the market that investors could cling to. Instead, it was a rally or slump in certain sectors and stocks that picked up momentum.
“The boat kept getting tipped on one side and the other … It was a very volatile market in terms of punishing the losers and rewarding the winners,” says Robert Sneddon, president and portfolio manager at CastleMoore Inc.
Activist investor Bill Ackman’s billion-dollar bet against nutritional supplement maker Herbalife Inc. was one of the riskiest bets looking over the past year. The stock has risen by about 140 per cent since Mr. Ackman’s Pershing Square Capital Management made a case for selling short the stock, calling it a “pyramid scheme.”
The shares saw another lift last week after an audit by PricewaterhouseCoopers gave Herbalife’s books a clean bill of health.
“We’d like to thank Mom, Jesus, and the short sellers,” D.A. Davidson analyst Tim Ramey, who is bullish on Herbalife, wrote to clients, according to The Wall Street Journal.
Investors who thought Facebook was quickly losing friends were also kicking themselves in 2013. Critics had been taking shots at the social media company after the flop of its May, 2012, initial public offering, where its shares sank below the $38 (U.S.) offering price to around $20 within months. Facebook stock has doubled in 2013, surpassing its IPO price by mid-year after reporting better-than-expected earnings and an increase in mobile advertising revenue.
One of the most surprising comebacks in Canada was the more than 300-per-cent rise in shares of Air Canada, the best-performing stock on the S&P/TSX composite index in 2013. After years of being grounded by high operating costs and crushing debt, and a pension shortfall, the newly restructured Air Canada has become a market darling.
Other TSX stocks that outperformed include Canadian Energy Services & Technology Corp., Valeant Pharmaceuticals International Inc., Element Financial Corp. and Methanex Corp. – all of which have doubled or nearly doubled since the start of the year.
Betting on Canada’s bank sector was also a bold move that paid off in 2013, despite calls from at least one U.S. fund manager that Canada’s financial sector was headed for trouble. An unexpected lift in the Canadian housing market, gradual growth in the global economy and record earnings performances led most of the Big Six bank stocks to hit record territory toward the end of 2013.
There was plenty of doom and gloom for investors in 2013, especially among Canadian stocks. While the S&P 500 rose 28 per cent and hit fresh records in 2013, the TSX rose a mere 8 per cent, weighed down by the depressed mining sector, particularly precious-metal stocks.
Gold has fallen nearly 30 per cent this year to about $1,200 an ounce and is poised for its biggest annual drop since 1981. Silver has fallen by about 33 per cent to around $20 an ounce.
Detour Gold Corp., whose biggest investor is hedge fund firm Paulson & Co., was the worst-performing stock on the TSX this year, down about 85 per cent. Other mining stocks that were hammered include gold company Rio Alto Mining Ltd. and Iamgold Corp., both down about 70 per cent.
Newmont Mining Corp., as well as coal companies Cliff Natural Resources Inc. and Peabody Energy were among the top losers on the S&P 500.
“It was such a long bull market in resources that this was the year you really … got creamed,” said Bill Harris, partner and portfolio manager at Avenue Investment Management.
But it wasn’t just mining stocks that set back investors in 2013.
The dramatic fall of the once-iconic BlackBerry Ltd. was a disappointment for its devotees. Blackberry shares have fallen more than 30 per cent this year after the lacklustre launch of its latest BlackBerry 10 and a failed auction of the company that led to a $1-billion recapitalization and CEO shuffle.
There was “misguided optimism” with BlackBerry, said Bruce Campbell, president of Campbell, Lee & Ross Investment Management. “It would have been easier to look [at the stock] from the sidelines than to look as an owner, hoping for something.”
With files from Reuters and Bloomberg News
S&P/TSX 10 Best Performers
Air Canada +333.7%
Cdn. Energy Serv. 115.2
Valeant Pharma. 100.5
Element Financial 99.4
CCL Industries 82.4
Constellation Soft. 80.9
Secure Energy 77.4
Intertape Polymer 75
S&P/TSX 10 Worst Performers
Detour Gold -85.8%
Atlantic Power -71.8
Rio Alto Mining -70.7
Rubicon Minerals -69.4
Dundee Precious -67.7
Pretium Res. -59.7
Alacer Gold -57.1
Centerra Gold -56.7
Endeavour Silver -56.6