(July 19 – 10:00 ET) – Frank Russell Co. says the Canadian stock market was more than just a high tech market in the second quarter.
“The Canadian market was much broader in the second quarter than it has been in the recent past,” said Paul Carter, research analyst at Russell in Toronto. “With nine out of the 14 sub-sectors outperforming the TSE 300, diversified investors and managers were again able to compete with the broad market indices. As a result, investors should expect to see more managers exceeding the TSE 300 this quarter than in the previous two quarters.”
Carter says that rebounds in some out of favour sectors, such as oil and gas, and real estate, boosted results. Oil & Gas was the best performing sector during the quarter with a return of 20.6%. Real estate was driven to a 19.4% return by TrizecHahn Corp.
As a result, value stocks slightly outperformed growth in the quarter. Growth stocks, as measured by the Russell 300 Growth Index, finished the quarter with a 8.03% return, while the Russell 300 Value Index, managed 8.50%.
“Growth and value stocks experienced a wild ride in the quarter,” said Carter. “Though growth and value turned in similar performances at the quarter’s end, they took a rather roundabout way to get there,” Carter said.
Value was leading much of the time until Nortel took off in June, singlehandedly boosting the growth index. Nortel now has a 59% weight in that index.
In the small cap area, though, value did outperform growth. The small cap value index returned 8.0% during the quarter, compared to 4.4% for the growth index.
Much of the credit for this performance goes to GSI Lumonics, the TSE’s best performer with a 114% return, Methanex was up 69%. The fund companies drove the gains on the growth side, as they ran up in anticipation of Amvescap plc’s takeover of Trimark Financial.
Carter concludes that diversification was the way to go in the second quarter. “It was difficult to determine what direction the market would take in the second quarter. Money managers with exposure to different areas of the market were better off compared to last quarter when a focus on Nortel and technology and communications stocks was the key to success,” said Carter.
-IE Staff