The Globe and Mail
Well, that was a rough one. For investors, 2018 was the year it all went down – stocks, bonds, commodities – very little was spared the carnage. The year was essentially book-ended by broad market corrections, between which there was a meltdown in the Canadian energy market and a sell-off in big-name U.S. tech stocks, leaving the bull market looking more vulnerable than it has in recent memory. As a tumultuous year draws to a close, here is a final look at the stars and dogs of 2018.
Facebook (DOG)
It all started so honourably, as a competition between former high-school acquaintances over who has the fullest, most rewarding life as evidenced by travel photos, promotion announcements and posts about the joys of parenthood. But after engaging more than one-quarter of humanity in this daily, demoralizing culture war, Facebook took a dark turn. How dark? By giving outside developers access to user data, the company allowed a quiz app to harvest tens of millions of profiles, which were then used by a consulting firm working on Donald Trump’s presidential campaign. While Facebook has committed to fixing its security problems, a continued string of data breaches is resulting in intensifying political scrutiny and calls for boycotts. It’s unclear, however, how disillusioned users who choose to leave the platform will inform the world they are feeling blessed. -Tim Shufelt
Bitcoin Futures (DOG)
A description of bitcoin making the rounds on Twitter captures the cryptocurrency nicely: “Imagine if keeping your car idling 24/7 produced solved Sudokus you could trade for heroin.” Despite mass misunderstanding of how bitcoin works, it took on an unprecedented public profile last year when its price exploded to more than US$18,000. Criticisms over the high energy requirements for mining bitcoins, as well as its potential use in financing terrorism and the illegal drug trade, were mere background noise to what was seen by bitcoin faithful as the rise of a currency of the future. Its most enthusiastic supporters often share a distrust of governments and central banks, and, by extension, traditional fiat currency. That vision of bitcoin, however, is undermined by its wild volatility, which was on full display this year. Down by more than 70 per cent, it’s difficult to argue that bitcoin is a good store of value, even if it’s heroin you’re buying. -Tim Shufelt
TSX Energy Stocks (DOG)
There was one hell of an early Black Friday sale in the oil patch last month – a barrel of Alberta crude could be yours for the low, low price of just US$13.46. Some things that cost more than that: the average paperback, a litre of maple syrup or a decent lunch in downtown Toronto. An extraordinary confluence of bad fortune pushed Canadian oil prices to their lowest levels on record this year. A clogged pipeline network, refinery outages, a global relapse into oversupply, concerns over demand weakness, and record Canadian production all conspired to rack the energy sector with the worst downturn since the oil-induced recession. As a result, all but one oil and gas producer in the S&P/TSX Composite Index declined on the year, with MEG Energy Corp. posting a gain mainly by virtue of a takeover bid from Husky Energy Inc. Little for energy investors to celebrate, let alone all those kids with barrels of bitumen sitting under the tree. -Tim Shufelt
Corus Entertainment (DOG)
Chances are there are not a whole lot of tweens glued to Global TV on Friday nights to watch Chicago Fire or its spinoff Chicago PD on Wednesday nights, or its other spinoff Chicago Med on Saturdays. All three are offerings from Corus, which is facing fierce competition for viewers, particularly younger viewers, from the likes of Netflix and Amazon Prime. Weighed down by a heavy debt load from its acquisition of Shaw Media, and facing declining television advertising revenues, the company was forced to cut its dividend by nearly 80 per cent while taking a $1-billion impairment charge in part to reflect the declining value of broadcast licences. CEO Doug Murphy acknowledged the need to “adapt,” much like the heroes of Chicago Fire, as per the synopsis for Season 7: “When it’s go time, they put their differences aside and everything on the line for each other.” -Tim Shufelt
Maxar Technologies (DOG)
“That’s no moon.” Those were the famous words spoken by Jedi master Obi-Wan Kenobi upon beholding the Death Star, the Empire’s planet-killing super-laser in the original Star Wars. Spruce Point Capital Management expressed something similar after taking a closer look at Maxar and seeing something more sinister behind the space-technology company’s shiny public profile. Questionable accounting was being used to cover up financial strains, Spruce Point alleged in an August report titled Falling Out of Orbit to Zero, which, incidentally, turned out to be the Death Star’s ultimate fate at the hands of the plucky Rebel Alliance. And who knows, maybe old Obi-Wan had already called his broker to put a short position on the Empire. Spruce Point was certainly short Maxar’s stock, which proved a prophetic bet when, in October, the company reported a US$384-million impairment charge, raising questions about the sustainability of one of the company’s satellite businesses and cratering the stock by 45 per cent in one day. -Tim Shufelt
Roots (DOG)
It’s fitting that Roots features a beaver in its logo: The iconic retailer sure knows how to chew through investors’ money. It started the moment Roots went public in October, 2017, when the shares – which the company had initially sought to price at $14 to $16 – were issued at $12 and promptly fell to $10 on their first day of trading. The disastrous debut should have served as a warning. Hit by disappointing results – including a 13.4-per-cent drop in same-store sales in the third quarter – the shares extended their losses in 2018. The company attributed the lousy results to warm fall weather, the lack of a major marketing campaign and a hangover from 2017 when Canada’s 150th birthday gave sales a boost. But investors seemed to be fearing something worse: Maybe the Roots brand just isn’t cool any more. -John Heinzl
Cineplex (DOG)
One of the year’s biggest box-office hits was Crazy Rich Asians. Unfortunately, there are still a lot of crazy poor Cineplex shareholders. Even as the movie theatre chain posted higher box-office and concession revenue per patron in the third quarter – contributing to a 4.4-per-cent increase in overall revenue – earnings were dragged down by restructuring charges, an increase in share-based compensation expenses and sharply lower revenue from in-theatre advertising. Cineplex’s CEO called the disappointing quarter “an anomaly," but judging by the hefty decline in the stock price, investors are worried that making money on this stock could be Mission: Impossible. -John Heinzl
Aphria (DOG)
A common side effect of marijuana use is paranoia. For instance, while under the influence you might imagine that Aphria came under attack from short sellers who alleged that the cannabis producer purchased assets in Jamaica, Colombia and Argentina at valuations that were “vastly inflated or outright fabrications.” Further, you might imagine that those assets had been owned previously by firms with ties to an adviser and prominent investor in Aphria. Your paranoia might even lead you to believe that, even as the company dismissed the allegations as “false and defamatory,” Aphria’s shares collapsed and analysts slashed their price targets. Good thing it was just your paranoia and none of this, er, actually happened. -John Heinzl
Dollarama (DOG)
For years, Dollarama was an unstoppable growth stock. But as the retailer saturated the market with stores and steadily hiked prices, you knew something had to give eventually. When same-store sales rose just 2.6 per cent in the second quarter – about half of what analysts expected – the stock got crushed. It tumbled again when U.S. short-seller Spruce Point Capital took aim at the company in late October, and suffered yet another drop in December when third-quarter results also disappointed. The collapse wiped out more than two years worth of gains in Dollarama’s stock price and left investors wondering if the company will ever regain its former growth-stock glory. -John Heinzl
General Electric (DOG)
General Electric used to be a stock that let investors sleep soundly. In 2018, it was a stock that woke everyone up at night. Hammered by losses in its power business and the ill-timed 2017 acquisition of oilfield-services giant Baker Hughes, the once-mighty industrial conglomerate missed earnings expectations repeatedly, fired CEO John Flannery after a little more than a year on the job, slashed its quarterly dividend to a penny and got punted from the Dow Jones Industrial Average, of which it had been a member since the Dow’s founding in 1896. Nothing GE did – including bringing in the respected Lawrence Culp as CEO and splitting the power business in two – could stop the relentless slide in the stock. -John Heinzl
Cameco (STAR)
You can’t hide from the taxman. Unless, of course, you’re a large corporation, then it’s hiding season, all year round. In September, a Tax Court of Canada decision in favour of Cameco gave fodder to the common complaint that the Canada Revenue Agency is failing to thwart corporate-tax avoidance. Cameco, one of the world’s largest uranium producers, had been battling the CRA over the claim that the company underpaid taxes by $2.5-billion by shifting profits to a Swiss subsidiary with only two employees. For years, Cameco had been weighed down by low uranium prices amid a global oversupply that emerged after the 2011 tsunami caused Japan to shutter its nuclear reactors. The tax fight was an additional overhang. As a result, Cameco’s court victory produced the stock’s single best day in nearly 10 years. In other words, the same old song (with apologies to The Beatles): “Let me tell you how it will be / There’s one for you, nineteen for me / Unless you move it all offshore / Then you get to keep it all / 'Cause I’m the taxman …” -Tim Shufelt
Great Canadian Gaming (STAR)
Great Canadian Gaming essentially had two very good days this year. In early May, the company reported earnings that trounced analyst expectations, largely as a result of its new stake in three Toronto-area casinos, including the Woodbine and Great Blue Heron casinos. The share price soared by 27 per cent in one day, with the next three days taking the total gain to 41 per cent. In November, the company’s Greater Toronto Area properties helped it post another huge beat, as third-quarter revenues and earnings roughly doubled. That time, the stock leaped by another 22 per cent. And that’s pretty much it. The rest of the year was unimpressive. But as any poker player knows, if you can take a couple of monster pots, you just might be able to coast through the rest of the game. -Tim Shufelt
Twitter (STAR)
As a top-performing stock, Twitter is as deeply flawed as it is a social-media platform. On Tuesday, Amnesty International published the results of a study suggesting Twitter content is teeming with racist and sexist abuse, making it a “toxic place for women.” That came as a bombshell revelation to, well, almost no one who has been on Twitter. But then short-seller Andrew Left predicted the study will be impossible for Wall Street to ignore, calling Twitter the “Harvey Weinstein of social media.” And yet, in a twist of dark irony, or perhaps as a knock against capitalism, Twitter’s stock has still posted one of its best years since going public in 2013, having outperformed Facebook by nearly 50 percentage points. Amid an attempt to purge the site of fake accounts and bots, advertiser revenue has been growing alongside active daily users. In June, Twitter was added to the venerable S&P 500 Index, forcing index funds managing trillions of dollars to invest in the stock Mr. Left now calls “uninvestible.” -Tim Shufelt
Merck (STAR)
It seems as though there is nothing that cannot be divided among partisan lines these days, but can we at least agree that cancer is bad? While the libertarians think it over, let’s assume a consensus and acknowledge the progress being made in the fight against cancer. Merck is one of the leaders in developing an emerging class of drugs called immunotherapies, which enlist the body’s own defences in attacking cancerous cells. Merck’s wonder drug Keytruda, which has shown great promise in treating lung cancer, has also proven a key growth driver for the company, with 12-month rolling sales up by about 40 per cent over last year, as at the end of Merck’s fiscal third quarter. That’s more than double the growth rate of the overall immuno-oncology market in the United States, which is a big reason Merck’s stock was the best performer of the Dow Jones Industrial Average this year by a wide margin. And with that, we can go back to arguing about immigration and pipelines. -Tim Shufelt
Canadian Apartment Properties REIT (STAR)
This isn’t going to help ease tensions along the generational divide, but the rising pressures on tenants in Canadian cities is working to the benefit of dividend investors holding CAP REIT shares. Already, millennials blame baby boomers for failing to extend benefits they enjoyed to future generations. Pensions, for example. And home ownership. As resale housing in some cities has become prohibitively expensive for many younger buyers, so too have rental rates skyrocketed amid heated competition for fewer vacancies. With interests in about 50,000 rental units, nearly one-third of which in the Toronto area, CAP REIT had an overall occupancy of 99.2 per cent at the end of its fiscal third quarter, while rents are rising steadily. This has all amounted to a 23-per-cent return this year for CAP REIT unitholders, who, safe to say, are much more likely to be regularly watching The National than playing Fortnite, if you know what I mean. -Tim Shufelt
Microsoft (STAR)
Remember those TV ads where the hipster Apple dude would make fun of the nerdy PC guy? Well, Microsoft finally got its revenge: Propelled by growth in cloud computing, the success of XBox and the enduring popularity of Windows and Office365, Microsoft’s stock surged to record highs as Apple’s shares got hammered by slowing iPhone sales. Putting an exclamation point on Microsoft’s comeback under CEO Satya Nadella, the software giant in November overtook Apple as the world’s most valuable company, regaining the top position it had relinquished eight years earlier. Momentum is on Microsoft’s side: Since Mr. Nadella took the reins in 2014, Microsoft’s shares have nearly tripled and the company has hiked its dividend five times. -John Heinzl
Canada Goose Holdings (STAR)
With its green poop, obnoxious honking and refusal to yield to bicycles or cars, the Canada goose may not be universally adored as a species. But Canada Goose, the parka company, got no shortage of love from investors this year. The stock took flight as the company posted double-digit revenue growth, expanded its product line and hiked its fiscal 2019 outlook. The year wasn’t without setbacks: The shares sank in December after the company postponed the opening of its first store in Beijing – a decision it attributed to construction delays but which came amid calls for a boycott of Canada Goose in China in retaliation for Canada’s controversial arrest of Huawei’s CFO. The next few months will show whether it’s possible to keep this goose grounded. -John Heinzl
Amazon.com (STAR)
Thanks to Amazon’s virtual assistant, Alexa, you can order a movie from Prime Video, get a pizza delivered and dim the lights – all without leaving the couch. This is, um, progress, and it’s just a sample of the things made possible by the tech giant Amazon. The company that started as an online bookstore is now the global leader in e-commerce, operates the largest cloud computing platform, sells a growing assortment of private-label products and owns a movie and TV studio, among other things. Amazon was also one of the S&P 500’s top-performing companies in 2018, even as other tech stocks stumbled. “Alexa, get me 100 shares of AMZN for my RRSP – and find out where that pizza driver is.” -John Heinzl
McCormick & Co. (STAR)
Whether you’re squeezing French’s mustard onto your hot dog, sprinkling Club House seasoning onto your chicken or – horrors! – mixing a packet of McCormick instant gravy for the Christmas turkey, there is a McCormick shareholder somewhere saying “thank you.” The company that makes these and hundreds of other spices, seasonings and condiments for consumers, food manufacturers and restaurant chains has built a global flavour empire that spans 150 countries and generates annual sales of more than US$5-billion. In addition to spicing up investors’ portfolios with some delicious capital gains this year, the company hiked its dividend by nearly 10 per cent – the 33rd consecutive annual increase. Bon appétit. -John Heinzl
TripAdvisor (STAR)
“The room was full of bed bugs, the toilet leaked and the newlyweds next door kept us up all night.” Writing reviews on TripAdvisor is a good way to warn other travellers about what to expect. And investing in TripAdvisor is a good way to get rich so you’ll never have to stay in a seedy dive again. Shares of the travel website rallied as the company made it easier for users to read reviews and then seamlessly book hotels directly from the site, taking aim at competitors such as Booking.com and Expedia. TripAdvisor also generated revenue with novel initiatives such as a deal with DoorDash to enable food deliveries to hotels. Investors gave the stock nothing but five-star reviews. -John Heinzl
John Heinzl
Tim Shufelt