WHAT ARE WE LOOKING FOR?
When markets are unstable and volatility is on the rise, investors tend to investigate alternative defensive products in order to protect their wealth. The materials sector can be seen as defensive insofar as gold (its production being a key part of this sector) is negatively correlated to the market.
Last month, because of the strong rally of gold and silver, materials was one of the best performing sectors in Canada. The sector rose 5.7 per cent in August compared with the S&P/TSX Composite Index, which gained 0.2 per cent. Year to date, the sector has advanced 22.9 per cent compared with 14.8 per cent for the S&P/TSX.
Today, we will take a deeper dive into this sector and analyze some companies that have benefited from this trend.
We screened the Canadian materials sector by focusing on the following criteria:
Market capitalization greater than $1-billion;
A positive 12-month sales change – a positive figure shows us that there is growth and progress in the company’s operations;
A positive 12-month change in the economic value-added (EVA) metric – a positive figure shows us that the company’s profit is increasing at a faster and greater pace than the costs of capital. The EVA is the economic profit generated by the company and is calculated as the net operating profit after tax minus capital expenses;