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moneysense.ca, 15/02/06
Is the TSX Overvalued?
I recently received the Scotiabank (TSX: BNS) annual report in the mail and some numbers jumped out: Revenue has grown at a glacial pace from $10.36B in 2001 to $10.72B in 2005, but net income has increased significantly from $2.07B to $3.20B over the same time period. The main reason is the provision of credit losses has decreased from $1.42B to a mere $230 million in 2005. Scotiabank is now trading at 2.7 times book value.
I mention Scotiabank because of a link on The Stingy Investor website to a newsletter from Patient Capital Management, a money manager I hadn’t heard about before. Table 1 in the newsletter points out that Canadian banks are trading at an average of 2.9 times book value compared to US Banks which trade at 1.57 times. The average Canadian Energy company is trading at a rich 10.9 times cash flow, whereas its US peers are trading at 7 times cash flow. The banks and energy sector, which form a significant percentage of the TSX index, appear to be overvalued.
moneysense.ca, 15/02/06
Hadn’t put much thought into until you mentioned it. It wouldn’t suprise me if there was some overshoot of “appropriate valuations” in the recent bull market.
Where would you put your money short-term (6-24 Months)? Altamira has a cash-performer money-market fund that seems OK – but I’m not sure if RBC Action Direct charges fees associated with this?
I’m not interested in opening up a savings account (e.g. ING) b/c of the hassle of moving out of my investment account..
dhphelp: I think you should be able to park money in the Altamira High-Interest Cash Performer account without paying any fees. There is a note that says that there may be a processing fee, so I think you should check with a representative first.