by Zubin Driver
October 27, 2009
Week 2 of Q3 earnings saw a continuation of the trend that has prevailed since markets hit bottom in August. 81% of the companies that have reported thus far for Q3 have beaten analyst expectations. Apple, 3M, Microsoft, and Amazon were notable strong earners from last week's reporting. One downside surprise from last week was potash producer Agrium, who predicted a 90-95% drop in earnings from last year's earnings in the same period due to lower potash prices.
Yet despite all of these strong reports markets were down last week. Other than a few big days of gains at the beginning of October that brought indexes back to the levels they were trading at for the second half of September, broad markets have been trading flat, with some stocks moving to new highs but most just treading water. The major gold producing stocks are another interesting example of a sector that one might expect to have been trading significantly higher given gold's breakout above $1000, yet after an initial rush of breakout buying when bullion breached $1000, gold equities have been drifting lower on indifferent volume. Who knows if it's pullback time, but if equities aren't pushing higher on these robust earnings, how would a string of negative news items hit market levels?
It's Going Around
Everyone's coughing and stuffing pockets with tissues these days as almost half of the people one talks to are getting sick with the onset of flu season. This year's season is surrounded by even more worry due to H1N1. Special H1N1 vaccines are now being distributed as governments attempt to roll out their largest ever vaccination campaign. Many Canadians though, are distrustful of the new vaccine, and it will be interesting to see how many in the end choose to receive the extra strength shot, or any shot at all. It is amazing, considering the high standard to which public health has risen over the last two centuries, particularly in wealthier nations, how new viruses or diseases can still threaten our public health system, and create such high levels of fear.
Economically, the concerns are manifesting in consumer activity as producers of hand sanitisers, breath masks, and vaccines are seeing increased sales volumes in recent months.
They Want You to Drill!
Speaking of campaigns, hey little AU co., when does your next drill program start? Lately investors in the small cap space are mesmerised by big drill intercepts, especially in the gold sector. Exploration companies like Victoria Gold, Canaco, Capella, Appleton, and Atac, are all instances where big intercepts, whether very high grade over 10 or so metres, or reasonable grade over massive lengths of 50 to 250 metres, have caught the market's attention and put these companies in play. Traders flock to these stocks once they make news and become extremely liquid in the process, trading with big swings in between news releases. The tricky part can be in finding out how many holes the company has left in the current program, or whether they're drilling in the same zone that the last news-making hole came from, and if the next round of results doesn't live up to inflated expectations, stop losses are highly recommended!
Best regards,
Zubin
Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com
Canaccord Capital Corporation
Attention: Zubin Driver
P.O. Box 10337 Pacific Centre
2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2
This newsletter is solely the work of the author for the private information of clients. Although the author is a registered Investment Advisor at Canaccord Capital Corporation (“Canaccord Capital”), this is not an official publication of Canaccord Capital and the author is not a Canaccord Capital analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of Canaccord Capital.
The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or Canaccord Capital assume any liability. This information is given as of the date appearing on this newsletter, and neither the author nor Canaccord Capital assume any obligation to update the information or advise on further developments relating to the information provided herein. This newsletter is intended for distribution in those jurisdictions where both the author and Canaccord Capital are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. The holdings of the author, Canaccord Capital, its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this newsletter.
 OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).
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