Market Buzz –  Jobless Recovery?

After a sharp week of losses, on Friday, Toronto’s main index ended higher for a fourth straight session as gold miners rallied around record high bullion prices. The four day rally flew in the face of poor job data, which indicated that the Canadian economy is still feeling the aftershock of the deep recession that erupted a year ago.

The unexpectedly large loss of 43,000 jobs came against expectations of a 10,000 job gain and pushed Canada’s unemployment rate up two-tenths of a point to 8.6 per cent and reverses much of the previous two months’ jobs rebound.

Combine the October jobs figure with gross domestic product readings of zero growth in July and a 0.1 per cent shrinkage in August, and you now have a trio of rather stinky economic data points, since the Bank of Canada declared the recession over in July.

This left many analysts wondering if the coming September quarterly GDP data may show that Canada did not emerge from the recession at all.

Again, the hard data certainly suggests we are not out of the woods yet and a prudent approach to your portfolio continues to be in order.

Alas, all is not lost. Despite the lack of broader GDP growth, there are still some individual companies producing strong growth. In fact, we look no further than Bridgewater Systems (BWC:TSX), a mobile personalization company, and a stock we ranked as our top Canadian software selection in 2009, for evidence that growth still exists in specific pockets of the market.

This past week, Bridgewater announced its financial results for the three and nine months ended September 30, 2009. Q3 2009 revenue increased 53 per cent to $15.8 million compared with $10.3 million for the same period last year. Net earnings jumped to $1.7 million, or $0.07 per share fully diluted, from $0.5 million, or $0.02 per share fully diluted, in the prior year period. The company’s cash position increased to $61.5 million, $50.4 million at December 31, 2008, with no debt.

Bridgewater Systems Corporation raised fiscal 2009 guidance and expects revenues of $62-$64 million and net earnings of $9.5-$10.0 million. Prior to this, analysts were expecting the company to report revenues of $61 million and net income of $9.5 million for the period.

Looniversity – It’s All About Earnings – Part 2

Why Do Investors Care About Earnings?

Earnings drive stock prices; it’s as simple as that. Bottom line, higher earnings generally result in higher stock prices (and vice versa). At times, a company with a rocketing stock price might not currently be making much money, but the rising price means that investors are hoping that the company will be profitable in the future–of course, however, there are no guarantees that the company will fulfill current expectations of investors.

When a company is making money, it has two options. First, it can improve its products and develop new ones. Second, it can pass the money onto shareholders in the form of a dividend or a share buyback. It really is quite this simple! In the first case, you entrust the management to re-invest profits in hopes of making more profits. In the second case, you get your money right away.

When is “Earnings Season”?

Earnings Season is Bay Street’s equivalent to schoolchildren getting sent home with their report cards. It happens four times a year as publicly traded companies in Canada are required by law to report their financial results on a quarterly basis. Most companies follow the calendar year for reporting, but they do have the option of reporting based on their own fiscal calendars.

Put it to Us?

Q. I’m new to investing and would like to know if I can sell or buy stock by myself?

– Rene Larmer; Calgary, Alberta

A. In order to buy stocks, you need the assistance of a stock broker since you cannot just phone up a public company and ask to buy their shares yourself (in most cases). For inexperienced investors, there are two basic categories of brokers to choose from; a full-service broker or an online/discount broker.

The latter is better suited for investors who feel comfortable participating, either through their own or other independent source research, in their specific investment decisions. The online broker is a great choice for the “DIY” or do-it-yourself investors. However, if you have no experience or knowledge in the market, a full service brokerage or advisor may be a safer bet. The full service brokerage is designed for the novice investor or those who do not feel comfortable participating in their own investment decisions. The commissions may be higher, but you’ll have the safety of professional guidance. Having said this, be sure to shop around because commissions can vary significantly from firm to firm.

KeyStone’s Latest Reports Section (must be a premium member)

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