Alex Cutulenco | December 9, 2015: It was likely a year to forget for many small-cap investors in 2015, yet there were some surprising bright spots. Today’s Year in Review will focus on analyzing the performance of Canadian small-cap stocks during 2015. In the coming days, be sure and look out for our 2016 small-cap sector/stock forecast.
Canadian Investors Take a Hit in 2015, On All Levels
With the Venture index falling to its all-time low in the final days of 2015, it is no surprise that the overall Canadian public markets haven’t performed well.
Defining Small-Cap Stocks:
Our universe of stocks that were examined for this study includes any equities listed on one of the three Canadian exchanges (TSX, TSXV, and CSE), with a market cap of C$50 million – C$2 billion (as of the end of day December 31, 2014). This universe of small cap stocks yields 553 listed companies, with an average market cap of C$343 million.
Within this universe, the by-sector performance was estimated by calculating the Year-to-Date (YTD) price return (as of market close on December 7, 2015), for an Equal Weighted Index (assigning equal weightings to stocks in the sector and basically taking a simple average) and a Market-Cap Weighted Index (assigning an index weighting based on the market cap of a Company).
Sector Performance Overview:
Table 1: Sector performance
| Sector |
YTD Price Return (equal weighted index) |
YTD Price Return (market cap weighted index) |
Total Market Cap |
% of Total Market |
| Basic Materials |
-17.4% |
-15.3% |
$49,406,284,994 |
26.0% |
| Energy |
-44.9% |
-41.6% |
$34,843,227,079 |
18.4% |
| Consumer Staples |
-9.5% |
-9.0% |
$31,353,965,893 |
16.5% |
| Financials |
-19.1% |
-14.6% |
$21,644,363,962 |
11.4% |
| Industrials |
-12.2% |
-6.9% |
$18,133,546,977 |
9.6% |
| Tech & Telecom |
-19.3% |
-7.5% |
$14,648,657,009 |
7.7% |
| Healthcare |
-11.1% |
-3.6% |
$12,208,722,240 |
6.4% |
| Utilities |
8.6% |
7.2% |
$7,534,738,341 |
4.0% |
|
-21.4% |
-18.5% |
$189,773,506,494 |
100.0% |
Overall, the Canadian small-cap market took an 18.5% (market cap weighted) hit during 2015. The largest sector constituent in Canada is Basic Materials, which is a combination of subsets: Metals & Mining, Chemicals, Construction Materials, and Forestry.
Energy was by far the worst performer in 2015, dropping 41.6% (market cap weighted), largely due to the fall in the price of crude oil.
Sub-Sector Performance Overview:
In terms of interesting sub-sectors, software companies represent about 4% of the total small-cap universe, and have gained 17.8% in 2015 (on a market cap weighted basis), largely due to Kinaxis Inc. (TSX: KXS) and its 153.8% surge.
Table 2: Sub-sector performance
| Sub-sector |
YTD Price Return (equal weighted index) |
YTD Price Return (market cap weighted index) |
Total Market Cap |
% of Total Market |
| Software |
-17.4% |
17.8% |
$7,648,961,868 |
4.0% |
| Biotech |
-16.3% |
-17.5% |
$1,634,391,481 |
0.9% |
| Gold |
-4.2% |
4.5% |
$19,697,138,898 |
10.4% |
| Oil & Gas Exploration and Production |
-47.2% |
-45.7% |
$20,627,826,445 |
10.9% |
| Investment Management and Funds |
-18.1% |
-15.2% |
$11,402,919,896 |
6.0% |
| Metals & Mining |
-19.0% |
-16.4% |
$39,493,114,360 |
20.8% |
| Pharmaceuticals |
-16.0% |
1.6% |
$6,398,374,555 |
3.4% |
|
-21.4% |
-18.5% |
$106,902,727,503 |
56.3% |
Interesting to see that gold stocks rose 4.5% (on a market-cap weighted basis), considering that the price of gold fell 9.4% YTD.
Table 3: Software Companies
| Ticker | Company Name |
Price Close |
Company Market Cap |
YTD Price Change |
| KXS.TO | Kinaxis Inc |
$46.95 |
1,143,630,842.96 |
153.8% |
| ESL.TO | Enghouse Systems Ltd |
$64.06 |
1,703,180,003.72 |
54.4% |
| DSG.TO | Descartes Systems Group Inc |
$26.10 |
1,996,875,940.93 |
51.3% |
| TCS.TO | Tecsys Inc |
$8.51 |
104,803,424.26 |
6.4% |
| MNW.TO | Mitel Networks Corp |
$10.64 |
1,292,737,621.35 |
-14.0% |
| NYX.V | NYX Gaming Group Ltd |
$2.35 |
119,377,305.92 |
-37.3% |
| HGN.TO | Halogen Software Inc |
$7.50 |
166,807,480.12 |
-11.8% |
| SY.V | Symbility Solutions Inc |
$0.27 |
64,105,591.03 |
-29.3% |
| CMG.TO | Computer Modelling Group Ltd |
$9.73 |
764,198,062.81 |
-18.5% |
| SYZ.V | Sylogist Ltd |
$7.21 |
177,690,889.40 |
-27.2% |
| VGO.V | Vogogo Inc |
$0.78 |
37,552,080.18 |
-70.5% |
| GXI.TO | GuestLogix Inc |
$0.26 |
34,691,222.34 |
-67.7% |
| SLC.V | Slyce Inc |
$0.18 |
23,895,479.15 |
-80.3% |
| CHA.CD | ChitrChatr Communications Inc |
$0.30 |
10,755,216.68 |
-81.3% |
| EXO.V | EXO U Inc |
$0.21 |
8,660,706.85 |
-89.7% |
| YTD Price Return (Equal Weighted Index) |
-17.4% |
|||
| YTD Price Return (Market Cap Weighted Index) |
17.8% |
Final Thoughts
Utilities was the only sector in Canada to see positive returns in 2015, yet it didn’t help the economy as it only constitutes 4% of the overall small-cap universe. Energy and Metals & Mining saw the worst losses, as commodity and energy prices took large hits in 2015. It was interesting to note the poor performance from Financial firms, with names like Alaris Royalty Corp (TSX: AD), GMP Capital (TSX: GMP), Canaccord Genuity Group (TSX: CF) dropping 35%, 37% and 40%, respectively. Also note, there were only eight companies with a triple-digit return, as seen in Table 4.
Table 4: Best performing small-caps
| Identifier | Company Name | TRBC Industry Name | Price Close (CAD) |
Company Market Cap (CAD) |
YTD Price Change |
| ACC.TO | Amica Mature Lifestyles Inc | Homebuilding |
$18.39 |
572,527,686.45 |
161.6% |
| KXS.TO | Kinaxis Inc | Software |
$46.95 |
1,143,630,842.96 |
153.8% |
| CRJ.TO | Claude Resources Inc | Diversified Mining |
$0.76 |
149,643,960.27 |
141.3% |
| EDT.TO | Spectral Medical Inc | Medical Equipment, Supplies & Distribution |
$0.82 |
157,946,476.85 |
134.3% |
| TRX.V | Tribute Pharmaceuticals Canada Inc | Biotechnology & Medical Research |
$1.25 |
142,149,603.75 |
115.5% |
| BCN.V | Bacanora Minerals Ltd | Specialty Mining & Metals |
$1.76 |
172,894,259.95 |
112.0% |
| UNS.TO | Uni-Select Inc | Auto, Truck & Motorcycle Parts |
$62.27 |
1,334,607,939.73 |
103.5% |
| NFI.TO | New Flyer Industries Inc | Heavy Machinery & Vehicles |
$27.07 |
1,502,919,713.71 |
100.8% |
Alex can be reach at: alex@gravitasfinancial.com
