Canadian banks are undervalued, Beutel's Mark Thomson says

The financial sector dominates S&P/TSX earnings.

Sonita Horvitch 3 August, 2016 | 5:00PM
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Mark Thomson, managing director of equities and chair of the board at Beutel, Goodman & Co. Ltd., says that the stocks of the major Canadian chartered banks are not getting sufficient applause, given the banks' dominant contribution to the total earnings of the S&P/TSX Composite Index.

He attributes this, in part, to the "negative narrative formulated by non-domestic short-sellers of Canadian bank stocks." This, he says, is "inhibiting the valuation on Canadian bank stocks."

Thomson points out that there is a big gap between the Canadian banks' collective weighting in the Composite Index of 22.3% versus their 51.1% contribution to the index's total earnings. The financial-services sector, as a whole, has a weight of 35.6% in the benchmark and accounts for 61.6% of its earnings.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Brookfield Asset Management Inc Class A70.37 CAD-0.71
Canadian National Railway Co147.68 CAD0.77Rating
Canadian Pacific Railway Ltd84.36 CAD1.28Rating
Loblaw Companies Ltd84.61 CAD-0.87Rating
Magna International Inc Class A98.53 CAD0.84Rating
Metro Inc59.99 CAD-0.32Rating
Nutrien Ltd83.28 CAD1.29Rating
Royal Bank of Canada128.07 CAD0.13Rating
The Toronto-Dominion Bank84.40 CAD1.37Rating

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Sonita Horvitch

Sonita Horvitch  

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