'I have never seen sentiment as bad as this'

Portfolio manager reflects on Canadian market and the area he feels most bullish

'I have never seen sentiment as bad as this'

Sentiment around the Canadian market has never been as negative and that represents an opportunity for investors, according to one portfolio manager.

Rob Taylor, senior vice president and portfolio manager at Canoe Financial, said that speaking to clients has given him an insight into the current mood. He believes there is a real chance for alpha as we get close to the “extreme bottoms”.

He said: “Obviously the sentiment has been negative towards Canada and I can see it when I go out and speak to clients, I have never seen the sentiment as bad as what it is.

“We have more of a value tilt. I always think of us as a good quality company with long-term sustainable growth but whenever you can buy things when the sentiment is negative, that allows you extra opportunity for alpha, and that’s how I feel Canada is right now. It’s extremely negative and that’s probably an opportunity.”

Taylor said it was important to look back at the late stages of the past two business cycles where Canada dramatically outperformed the US and believes this should be a period in which Canada should again thrive.

He said: “We’ve seen 10 years of relative underperformance in Canada compared to the US. We peaked in 2008, and it’s been nothing but down other than few small upticks along the way. So I feel we are getting close to extreme bottoms in that there is more of an opportunity for Canada to outperform here.”

Canoe Financial, which last year won Lipper Fund Awards for Best Fund Group Overall, Best Bond Fund Group and Best Energy Equity for 3 and 5 Years, is bullish on the energy sector despite the TSX being down about 4% this year. Taylor said that Rafi G. Tahmazian, senior portfolio manager and director, who is in charge of the company’s energy funds, is leading that sentiment.

Taylor said: “The energy sector has been a significant underperformer and for the Canadian market to perform well you need energy to perform here - and we’re bullish on the energy sector right.

“We feel the stocks are extremely undervalued and towards long-term trough levels. Any time you can buy cyclical stock when it’s trading at trough multiples at trough earnings, that’s the ultimate opportunity and we think we are there. We’re getting more and more bullish on the fundamentals for oil.

“I know Rafi is as bullish as he’s ever been on the sector and he’s not known as an extremely bullish guy, but as a firm we are getting more and more constructive on the energy sector.”

He added: “We’re towards extremes. The baby has been thrown out of the bath water and maybe we’re getting towards that capitulation point where it’s so negative it could be positive when you look forward.”


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