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Peter Brimelow

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Sept. 26, 2003, 12:59 a.m. EDT

Can Can time?

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By Peter Brimelow, CBS.MarketWatch.com

NEW YORK (CBS.MW) -- Can Canada? It may be that time again.

The long-held popular wisdom was that Canadian markets would outperform the U.S. in periods of commodity price inflation.

Inflation? Something that happened back in the 1970s, when dinosaurs ruled the earth.

Recently, I was struck that two energy and gold-oriented letters, John Myers' Outstanding Investments and Chris Temple's National Investor, both went out of their way to defend their current interest in Canada (see Sept. 22 column).

A number of readers wrote me to confirm that Canada exists (this happened if you write about Canada in U.S. publications). They included Bill Powers of Canadian Energy Viewpoint http://www.canadianenergyviewpoint.com/ -- a new Chicago-based letter, arguably a sign of increasing interest in the Great White North.

Certainly Powers' argument is, well, powerful: "The investment thesis behind the Canadian Energy Viewpoint is a simple one: Investment in Canadian oil and gas firms is the best way to profit from a falling U.S. dollar and rising energy prices."

I asked Mark Hulbert to scan the Hulbert Financial Digest database to see what stocks, traded on Canadian exchanges, were currently recommended by letters that had outperformed the market over the last five years.

Powers' Canadian Energy Viewpoint hasn't been around long enough -- just 13 months.

But, intriguingly, there were five letters currently recommending Canadian exchange traded stocks that had beaten the market over five years: Investment Reporter, The Dines Letter, The International Harry Schultz Letter, Global Investing and Successful Investing.

Of these, Dines, Schultz and Global Investing have had checkered records over the long term, by HFD's count. Their success in recent years suggests that their sector is coming into vogue.

Investment Reporter, however, has done well over the short and the long term.

For many years, Investment Reporter was edited by Patrick McKeough. He's now running Successful Investing, which has outperformed the market over the two years he's been there.

Mark and I include it in this market-beating group because it's always a methodological problem how to credit a record when editors move -- and because McKeough, who's been in the business since the rip-roaring days of the 1960s Canadian mining market, has quietly emerged as one of the top investment letter editors on the continent. McKeough's a fundamentalist, following Ben Graham-type techniques of price in relation to working capital etc., adapted to Canadian conditions because (he once told me) the extremes of undervaluation and overvaluation are rarely seen in that cool climate.

McKeough has said that he rarely times the market. But his most recent issue contains this comment:

"The Labor Day indicator contends that if the market rises on the day after Labor Day, then it will make further gains by the end of the year. Confirmation of this occurs when the market ends the week after Labor Day up. The outlook is positive in Canada on both counts.

"On Aug. 29, the S&P/TSX Composite index closed at 7,510.32. On Sept. 2 (the first day after Labor Day), the index closed at 7,566.86. This rise suggests the index will gain further by New Year's Eve. The index also ended the week after Labor Day up at 7,612.50. This reinforces the first part of the Labor Day indicator. "

I've never heard of the Labor Day indicator, but if has McKeough says he has, I'll listen.

Only one Canadian exchange-traded stock is currently recommended by three of our market-beating letters: Teck Cominco Ltd. . The rest are recommended by two of the market-beaters:

Editor's note: The most recent edition of the Hulbert Financial Digest is now available by either e-mail or regular mail. Highlights this month include:

  • Does time heal all wounds? The HFD revisits the '87 crash.

  • The least- and most-popular stocks and mutual funds among investment letters.

  • Profiles of The Buyback Letter, Investors Intelligence, Medical Technology Stock Letter and Value Line Convertibles Survey

For more information or to subscribe to the Hulbert Financial Digest,click here.

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