Large cap Canadian companies affected by a high loonie
moneyrelations :: Oct.09.2007
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As many media outlets reported, this Canadian Thanksgiving long weekend saw a lot of Canadians take advantage of the high-flying loonie to make the journey across the border to shop. I’m open to some shopping myself in the US stock markets but this article in the London Free Press about the loonie’s meteoric ascent being a double-edged sword sobered me up:
As of Oct. 3, the year-to-date returns on the S&P 500 in the United States are 8.6 per cent.
However, when we factor for the 17-per-cent increase in the loonie, the positive 8.6-per-cent gain turns into a 7.2-per-cent loss.
The same is true for the Dow and Nasdaq, up 12.3 per cent and 13.2 per cent respectively, but off four per cent and 3.2 per cent in Canadian dollar terms.
The numbers won’t impede with my plan to buy lower costing US denominated ETFs as I have a long investment horizon in front of me. However, this serves as a lesson to keep in mind of where I’m going to be in my retirement years and have that reflected in my asset allocation. If the greenback continues its longterm downtrend, I will need to make a decision if I want to hedge the currency or not. I don’t want to run into these conversion problems later on.
What I also found interesting in this article was a list of large cap Canadian companies that derive 20% of their sales abroad.
Some companies whose earnings may be impacted by the loonie are CN Rail, Sun Life Financial, Royal Bank, Manulife Financial, Research in Motion, Potash Corp., Goldcorp, Teck Cominco, TransCanada Corp., Nexen, Cameco, CP Rail, Magna International, Bombardier, Kinross, Thompson Corp, Nortel, Agrium, TransAlta, Cognos, Nova Chemicals, MDS Inc., Biovail and Celestica.
This is a great idea for a shopping list. I’ll need to do more research on these companies but if they are well-managed, sound, and fit into my investment style, I’ll be there with cash on hand to hopefully scoop some shares from shaky hands.
In the news, Investing ::
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