You may already know that Canada’s TSX stock market is very poorly diversified. The energy, materials and financial sectors make up three-quarters of the index! Also, our Technology "sector" is basically RIM (Research in Motion) – so when an analyst says you should be overweight or underweight Technology, he’s basically telling you to buy or sell RIM! :)
According to Bloomberg, the TSX was up 7.16% for 2007 – and many are happy with the positive number even though it is not in the double digit range that we have been used to from 2003 to 2006 (inclusive). (As Financial Jungle points out in a comment on this post – the TOTAL return including dividends is approximately 9.62% as the dividend yield was approximately 2.5%)
An analysis of the point contributors to the TSX’s performance for the 2007 year reveals that perhaps the Canadian market faired much worse than the headline numbers might indicate. It turns out that 72% of the market’s performance can be attributed to only 3 stocks. The TSX started the year at 12,908.39 and ended at 13,833.06 for a total gain of 924.67 points. Here were the top 3 contributing stocks:
RIM – 275.02 points added to index
Potash – 260.914 points added to index
Alcan – 130.321 points added to index
And again, as FinancialJungle indicated – the dividends from the stocks in the index made up just over 25% of the total return.
Does that change your take on the market’s overall performance for 2007?