In a country rich with resources, and where financial services comprise roughly one-third of the major stock exchange, it can be hard to care about a wide swath of industries.
But if you want to make money these days, you simply have to.
There are no two ways about it: there is a changing of the guard on the S&P/TSX Composite Index. Where resources and banks used to dominate, auto parts manufacturers, label makers and methanol suppliers have stolen the spotlight.
In the past year, eight of the top ten TSX stocks were in sectors other than energy, mining and banking. The three hottest companies, all of which saw their share prices double since last August, are: equipment leasing specialist Element Financial Corp.; drug maker Valeant Pharmaceuticals International Inc.; and wood panel manufacturer Norbord Inc.
And the next three best performers, whose one-year returns range from 86 to 99 per cent, are just as diverse, ranging from label maker CCL Industries Inc. to auto parts behemoth Magna International Inc. and tech play Constellation Software Inc.
Other top stocks from the past year include Canfor Corp., Stantec Inc. and Gildan Activewear.
In some respects, this diversity shouldn't be shocking. Metals prices have fallen, until recently Alberta crude traded at a deep discount to U.S. oil and the banks haven't proven long-term growth potential.
However, you used to be able to avoid these sectors yet still make money by playing the yield game, investing in things like real estate investment trusts and the telcos. Now you've got to be much more selective.
The sector shifts have affected deal making, too. Mining and energy deals are hard to come by, whereas retail M&A has been extremely hot and companies like Davis + Henderson Corp. are striking billion-dollar acquisitions.
The one 'traditional' sector that Canadian investors have been able to rely on has been insurance. Industrial Alliance, Manulife Financial and Sun Life Financial all rank in the top 20 best performers over the past year.
(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)
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