Canadian Stocks Fall, led by Valeant Pharmaceuticals

The TSX starts the week in the red.

Iain Butler ❯

Chief Investment Advisor, Motley Fool Canada Fool since November 2012 Iain Butler, CFA, is Lead Advisor on Discovery Canada 2017. He is also the Chief Investment Advisor for Motley Fool Canada and is the lead advisor on its flagship Stock Advisor Canada product. Before joining the Fool, Iain was a “buy-side” analyst and through this experience is well-versed in the idiosyncratic ways of the Canadian market. His investing interests are centred on scouring the market for interesting businesses that trade at reasonable prices and offer an appealing risk/reward relationship. Since joining the Fool in 2012, Iain dedicates each day to spreading Foolishness throughout this great country!

Published June 3, 2013 4:54 pm EDT

Unlike our neighbors to the south, the S&P/TSX Composite Index (INDEX:^GSPTSE) was unable to muster enough of a late-day rally to finish the day in the green. The Canadian market closed down 40.6 points or -0.3% to start off this first week of June. Sort of appropriate given that’s about what the outdoor temperature did today as well, at least in this part of the country.

Valeant Pharmaceuticals (TSX:VRX) was the biggest drag on the Canadian index today, as the stock fell 4.9%, seemingly on no news. Valeant has telegraphed that it’s going to issue equity to finance its recent purchase of Bausch + Lomb, and therefore, today’s sell-off could be a result of institutions shorting the stock, hoping to buy it back at a cheaper price through the equity offering.

Also falling on no apparent news was Potash (TSX:POT). The stock was down 2.3% and was the second largest contributor to today’s decline.

On the back of a downgrade by Goldman Sachs, Canadian Natural Resources (TSX:CNQ) and its 2.2% decline was another negative contributor. Goldman took their target from $33 to $28 due to its concerns over the price of oil that CNQ is likely to receive over the 2014/15 periods. B.C.’s decision to decline Enbridge’s Nothern Gateway pipeline was a potential catalyst for Goldman’s move.

Finally, CP Rail’s (TSX:CP) stock fell 1.7% on Monday. This move down was potentially the result of a container train derailment over the weekend in NW Ontario. The stock is down even more in after-hours trade as well after Pershing Square, Bill Ackman’s firm, has disclosed its intent to sell up to 7 million of the CP shares that it owns. CP represents 26% of Pershing Square’s combined assets and they’d like to trim this exposure.

Foolish Takeaway

Once again resource oriented stocks played a significant role in today’s market performance. Because of their heavy-weights in the TSX, these stocks can be lethal for investors that think they are protected with an index fund or ETF linked to the S&P/TSX Composite Index.

We have prepared a Special FREE Report that will clue you into the perils of investing in this kind of product and suggests an easy to implement alternative strategy. It’s called “5 Stocks That Should Replace Your Canadian Index Fund” and you can receive a copy at no charge – just by clicking here.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler is short $40 July 2013 put options on Potash and long Potash shares. The Motley Fool doesn’t own shares in any of the companies mentioned.