The TSX created a new index, the TSX 30, which is formed under the basis of total return over the past three years for the top 30 companies in the TSX.
The first batch of index constituents are the following and this is an interesting list:
TSX 30: June 30, 2016 to 2019
Note the "3Yr" column is TOTAL return, dividend/distributions adjusted.| Rank | Issuer Name | Ticker | 3Yr |
|---|---|---|---|
| 1 | Canopy Growth Corporation | TSX:WEED | 1823% |
| 2 | Shopify Inc. | TSX:SHOP | 883% |
| 3 | Village Farms International Inc. | TSX:VFF | 868% |
| 4 | Kirkland Lake Gold Ltd. | TSX:KL | 605% |
| 5 | Trilogy Metals Inc. | TSX:TMQ | 503% |
| 6 | Aphria Inc. | TSX:APHA | 479% |
| 7 | Air Canada | TSX:AC | 346% |
| 8 | Neptune Wellness Solutions Inc. | TSX:NEPT | 322% |
| 9 | Ivanhoe Mines Ltd. | TSX:IVN | 312% |
| 10 | North American Construction Group Ltd. | TSX:NOA | 304% |
| 11 | Labrador Iron Ore Royalty Corporation | TSX:LIF | 282% |
| 12 | Ballard Power Systems Inc. | TSX:BLDP | 232% |
| 13 | Pollard Banknote Limited | TSX:PBL | 210% |
| 14 | goeasy Ltd. | TSX:GSY | 209% |
| 15 | Anglo Pacific Group PLC | TSX:APY | 185% |
| 16 | North American Palladium Ltd. | TSX:PDL | 183% |
| 17 | Gran Colombia Gold Corp. | TSX:GCM | 178% |
| 18 | Resverlogix Corp. | TSX:RVX | 174% |
| 19 | Wesdome Gold Mines Ltd. | TSX:WDO | 172% |
| 20 | Cargojet Inc. | TSX:CJT | 166% |
| 21 | Theratechnologies Inc. | TSX:TH | 161% |
| 22 | Summit Industrial Income REIT | TSX:SMU | 160% |
| 23 | Constellation Software Inc. | TSX:CSU | 158% |
| 24 | Tucows Inc. | TSX:TC | 152% |
| 25 | Great Canadian Gaming Corporation | TSX:GC | 147% |
| 26 | CAE Inc. | TSX:CAE | 136% |
| 27 | Park Lawn Corporation | TSX:PLC | 131% |
| 28 | TerraVest Industries Inc. | TSX:TVK | 131% |
| 29 | BRP Inc. | TSX:DOO | 131% |
| 30 | Boyd Group Income Fund | TSX:BYD | 126% |
I have a few observations.
My initial gut reaction is that anybody investing in this index is nuts simply because it is a momentum index – people would be buying in and more or less facilitating the cash-out of the top players. Buying something solely on the basis of previous price appreciation is a questionable investing strategy.
Indeed, items 1, 3, 6, 7, and 8 on the table above were built on the basis of the cannabis industry (of which readers here should know I am highly skeptical of). I think most of these companies have had their hey-day and are now realizing that getting remotely close to justifying their valuation is not going to be an easy endeavour.
On second glance, the TSX 30 index is actually reasonably diversified among industries, except finance. Considering that the main TSX 60 index is dominated by finance (37% of the index at present), the lack of financials is not a terrible characteristic.
There are a few companies on this list that made me go “really?” and when looking at their stock charts they indeed were able to deliver said returns. Ivanhoe Mines? Seriously!!?? (answer: they got really lucky with the June 30, 2016 to June 30, 2019 date ranges – go take a look at their stock chart).
My other observation is: so few companies appreciated +125% in the past three years. There are a few staple companies where it is really worth buy-and-holding (Constellation Software comes to mind here, although future returns are very likely not to be nearly as good as previous ones), but is one really going to buy and hold any of the marijuana companies or Shopify from here on in? It goes as one more data point to show that being nimble in trading continues to be a key characteristic in being able to outperform – a passive investor does not see the converse index which is the “TSX negative 30”, which contains the list of non-bankrupt companies which have depreciated the most over the past three years – that in itself would be an interesting future exercise.