Canada’s engineering companies ride the stock market rollercoaster
As financial markets in Canada and the world slide and slither, an article by a financial analyst in the Globe and ...
As financial markets in Canada and the world slide and slither, an article by a financial analyst in the Globe and Mail suggested that it might be a good time to invest in shares of companies who are in the infrastructure construction business.
Fabrice Taylor, writing in the Globe’s Report on Business on October 22, noted that following the global financial meltdown governments might be looking to stimulate their wounded economies by spending on roads, bridges, hospitals and other infrastructure. “This isn’t white elephant material either,” wrote Taylor. “Infrastructure … is crumbling in North America. So, assuming [the U.S.] stimulus package is approved, which is likely, and that we follow suit here in Canada if things get worse, which is also quite possible, who benefits? Infrastructure providers, of course.” He then went on to notice that Genivar Income Fund could be a relatively safe investment.
Canada only has a handful of publicly traded companies who specialize in consulting engineering. How are their shares doing on the markets? Are they being battered, along with everyone else?
At least in the short term it would seem so. Last Friday, the share price of SNC-Lavalin of Montreal, Canada’s oldest publicly traded and largest engineering company (it also owns, operates and maintains infrastructure) closed on the Toronto Stock Exchange at $31.67. Six weeks earlier, on September 19, the share price was $45.00. SNC-Lavalin’s highest 2008 share price was trading around June-July above $60.00.
Shares in Stantec of Edmonton closed at $19.35 in Toronto last Friday. On September 19, they were $29.00. At the beginning of the year Stantec’s shares were trading at almost $40.00.
Genivar Income Trust of Montreal’s shares on the TSX closed on Friday at $17.25, down from $23.61 on September 19.
And IBI Income Fund (a planning and development consulting firm) of Toronto saw its share price fall, from $19.10 on September 19, to $12.50 on October 31.
On the New York Stock Exchange, AECOM Technology, which employs a large number of Canadian consulting engineers, closed at US $17.63 on October 24. This compares with $34.50 in June, AECOM’s highest share price in a year.
Happily, however, in the first trading day of November, the price of the shares was rising again.
Of course, the financial turmoil hits all companies, directly or indirectly, and not even the experts seem to be able to figure out where we’re heading.
In a subsequent column, the Globe and Mail’s Fabrice Taylor quoted from Jeremy Grantham, someone he calls “one of the sharper investing minds in the world.” Grantham is chairman of GMO, a large Boston investment firm. He predicted the fall of major banks a year ago, and yet he has apparently admitted the world financial market is very difficult to work out.
Here is Taylor quoting Mr. Grantham: “I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don’t. And I have no idea, really, how this will work out. I certainly wish it hadn’t happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.”