Market Overview

This Expert Is Buying The 'Decimated' Toronto Venture Exchange

This Expert Is Buying The 'Decimated' Toronto Venture Exchange

  • The TSX Venture Exchange is down 80 percent in recent years.
  • The decline has created buying opportunities for contrarian investors.
  • The relatively weak Canadian dollar is extremely beneficial to certain Canadian companies that do business in the United States.
  • There’s no question it has been a rough year for U.S. equity markets, but it has been a horrible year for the Toronto Venture Exchange. Despite the weakness, analyst Sujan Lahiri believes that the 2015 decline has created some TSX Venture buying opportunities.

    New Lows

    While U.S. markets have recovered to new all-time highs following the Financial Crisis, the TSX Venture recently dropped to a total market cap less than its low point of the 2008 crisis. “It has to be the most beat up developed country index,” Lahiri added.

    Related Link: Miners: The Best Way To Play A Rate Hike?

    Time To Buy?

    According to Lahiri, it’s rare to see entire indices fall more than 80 percent, which is the decline that the TSX Venture had endured in the past couple of years. As global commodity prices have collapsed, the TSX Venture, which is heavy with mining and oil companies, has fallen right along with them. In fact, 70 percent of the companies in the TSX Venture are materials and energy companies.

    However, that certainly doesn’t mean that all these companies are worthless. “Be a contrarian investor here. Even the good companies are dragged down during a multi-year bear market,” Lahiri advised.

    Stock Picks

    Lahiri urges traders to look for TSX Venture-listed companies that have nothing to do with the commodities business, including technology companies. In addition, investors should look for companies that are well positioned to take advantage of the relatively weak Canadian dollar, such as companies incorporated in Canada that conduct business in the United States and convert funds back to Canadian currency.

    This logic recently helped Lahiri identify Telesta Therapeutics and Urbanimmersive Technologies as buying opportunities, two stock picks that have subsequently produced 100 percent gains.

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

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