The Stock: Canaccord Financial Inc.
The Trend
Whether propelled by bullish or bearish sentiment, investors are on the move again. Although year-to-date trading activity on the Toronto Stock Exchange in 2010 is below last year's tally of the same period, November's trading volume and transactions are up significantly from the activity of November, 2009. The total number of transactions on the major North American exchanges in November was up 28 per cent from the same November period of last year. Average daily volume on the platforms of CME Group - where futures contracts on many important derivative asset classes trade - in November was up 24 per cent from the previous month.
Heightened market volatility spurred the revived trading, but a hopeful investor class has responded by driving the stock market back to new highs - both the S&P/TSX composite index and the Wilshire 5000 Total Market index, the broadest measure of U.S. equities, eclipsed their previous 2010 high-water marks last week. Also reflecting the growing trading activity and bullish sentiment is the performance of U.S. brokerage house stocks. The iShares Dow Jones U.S. Broker-Dealers Index Fund an exchange-traded fund that represents the group, is a current Stock Trends pick, as are the stocks of TD Ameritrade E*Trade Financial and optionsXpress Both optionsXpress and Interactive Brokers Group rallied to new highs on high trading volume last week, as each company revealed the strength of their balance sheets with special cash dividends for shareholders.
Investors see these improved conditions in the stocks of some independent Canadian wealth management firms. Shares of Guardian Capital Group rallied above trend and hit a new high last week, while the stock DundeeWealth Inc. traded heavily and begins December 58 per cent above its summertime level. High volume of trading characterized last week for the stocks of IGM Financial and CI Financial while shares of AGF Management and GMP Capital have outperformed the S&P/TSX composite by 10 per cent in the final quarter of 2010. Bullish investors looking to capture the rising fortunes of these financial intermediaries can trade the emerging trends of the group.
The Trade
Canada's largest independent investment dealer is Canaccord Financial. Its stock rallied on high volume last week, hitting a new 52-week high before closing the week below $13. The company's announced ventures into expanding service in Asia - buying China-based advisory firm Balloch Group and partnering with the Export-Import Bank of China - lifted the stock, but these deals build upon the growth strategy Canaccord staked its future on with its acquisition of Genuity Capital Markets earlier this year. Although its stock was a Stock Trends Bullish Crossover in September, an indicator that would alert investors to an improving price trend, its late-November rally off the 13-week moving average trend line to above the $11.75 level was a good sign for investors looking for a more positive signal before trading this bullish trend.
The Upside
Positive equity market conditions mark a technical objective above $16 for this trade - an advance of 25 per cent from the current share price. An extended bull market will help fuel trading - and continued relative price performance - for this and other wealth management and broker-dealer stocks in the months ahead.
The Downside
A drop below $11.75 would be an early signal to exit this trade for anxious short-term traders.
Skot Kortje