Market Buzz

Posted by Ryan Irvine - Keystone Financial

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Here is this week’s Market Buzz, Looniversity and Put it to Us? columns


Market Buzz – Resource Strong TSX Weathers Storm, MOSAID DRIPs

Once again, Toronto’s heavily weighted resource sector insulated the S&P TSX index from the deep equities losses in the United States and emerging markets, where investors sold in reaction to street battles between protesters and Egyptian security forces and fears that the unrest would spread.

Rising energy and materials shares, spurred by surging oil and gold prices, kept Toronto’s main stock index in positive territory on Friday, fending off the selloff that hit stock markets around the world in the wake of the unrest in Egypt.

Oil prices surged as benchmark oil rose US$3.70, or 4.3 per cent, to settle at US$89.34 a barrel on the New York Mercantile Exchange. Oil rose as high as US$89.73 a barrel at one point.

Prices shot up about $2 a barrel in less than half an hour at midday after the White House expressed its concern about the violence in Egypt. The U.S. State Department advised Americans to avoid non-essential travel to Egypt and many airlines cancelled flights in and out of the country.

A quick note from our Canadian Small-Cap Coverage Universe ( – MOSAID Technologies Incorporated, Canada’s leading intellectual property company, announced that Toronto Stock Exchange has accepted notice of the establishment of MOSAID Dividend Reinvestment Plan.

The Plan allows qualified shareholders to acquire additional MOSAID shares by reinvesting any cash dividends paid on their respective shareholdings, without payment of brokerage or administration fees.

Since 2005, MOSAID has demonstrated a track record of continuous dividend payments to shareholders. Management stated that the company’s history of dividend payments, when coupled with the new Dividend Reinvestment Plan, provides shareholders with an effective method of building their investment in MOSAID. We tend to agree and are in favour of plans such as this in good companies.

An information package and enrolment form will be mailed to registered shareholders. An information package only will be mailed to beneficial shareholders, who should contact their financial intermediary to arrange enrolment. A copy of the Dividend Reinvestment Plan is now available on the Investor Relations section of the company’s web site.

Looniversity – Consumer Confidence 101

If you’ve ever watched the markets with even a modest degree of interest, you’ve probably heard of the Consumer Confidence Index (CCI). Ever wonder what the heck it is? Let us put you at ease. In the U.S. (most widely quoted), the CCI is put out by the Consumer Confidence Board and is based on a survey that samples 5,000 households. The CCI is considered one of the most accurate indicators of confidence. It looks at factors including wages, interest rates, spending habits, and even goes as far as calculating the number of “help wanted” ads in newspapers to detect how tight the job market is.

The basic idea behind consumer confidence is that the better the consumers’ current and economic prospects appear, the more likely he/she is to spend and the more he/she spends, the better it is for the overall economy. Of course, the opposite is also true.

When evaluating the index, many people pay close attention to trends or the moving average over the past three to six months. Should the index move above or below the moving average, it is a good indication that consumer confidence is significant. Month-to-month changes are not considered to have as great an impact as the overall trend.

The CCI is watched closely by the U.S. Federal Reserve when determining interest rates, which affect stock prices. Lowering interest rates makes it easier to borrow, which ultimately supports consumer spending and higher confidence – something the stock markets get a warm and fuzzy feeling about.

Put it to Us?

Q. What is a company’s “current ratio”?

– Samantha Miller; Calgary, Alberta

A. The current ratio compares all of a company’s current assets to its current liabilities. In the financial world, the term “current” means less than one year. So, current assets include cash, accounts receivable, inventory, prepaid expenses, and other assets that can be converted to cash within one year. Current liabilities include short-term debt, interest, accounts payable, and any other outstanding liabilities that are due within a year’s time.

When calculating this ratio, you are essentially trying to determine whether a company can meet its short-term obligations. It will likely be able to do so if the ratio is above 1; if the ratio is less than 1, the company may fall short, so some alarm bells are raised. For industries that generally have a large portion of current assets tied up in inventory, a ratio of 1.5 (or even 2) might be a better standard. When analyzing the current ratio, as when looking at any ratio, an investor should make comparisons between companies that operate in the same industry. Different industries have different dynamics and cross comparisons can be somewhat meaningless.

KeyStone’s Latest Reports Section

s – Near-Term Rating Downgraded, Long-Term Maintained (Flash Update)Alternative Financial Services Provider Posts Solid Quarterly Revenue, But Cap Rates Squeeze Margins & Earnings Miss Estimates: Take 137% Profits – SELL (Flash Update)
Cash Rich Junior Gold Producer, Cash Flow Positive and Poised for Acquisitions in 2010 – New Focus BUY (New Buy Report)
Staple Consumer Products Company Announces 16.7% Increase in January 2011 Distribution and Internal Restructuring, Yield 5.54% – Maintain Rating Despite 200%+ Gain for KeyStone Clients (Flash Update)
Alternative Financial Services Provider Posts Solid Quarterly Revenue & EPS, Aggressive Growth Plan Intact, Stock Rating Maintained (Flash Update)
IP Company’s Q2 2011 EPS Exceed Expectation, Strong Cash Position & Yields 3.7% – Share Price Jump