Is Air Canada’s Rally Set To Continue?
Securities and Exchange Commission. Flaherty himself has lobbied hard for it since he became finance minister in 2006 with the election of the Conservative government. The federal government hopes the new commission will improve Canada’s reputation for being lax on white-collar crime. Recently, regulators were criticized for their oversight of Sino-Forest Corp, one of several North American-listed companies with Chinese operations whose accounting disclosure practices came under scrutiny. In the infamous Bre-X scandal of the late 1990s, investors lost billions of dollars after a massive gold find turned out to have been a fake. No one was ever charged with fraud, and the lone figure who was charged with insider trading was acquitted. Canada has been criticized by the International Monetary Fund for being the only advanced economy without a national capital markets regulator. The version of the plan revealed on Thursday is less ambitious than earlier efforts, but is designed to win over additional provinces before its 2015 launch. Still, the French-speaking province of Quebec, led by a separatist government, rejected the plan and hinted at fighting it in court. Flaherty said the agreement “represents the best of what can be achieved when a shared responsibility becomes a mutual goal.” He expects others to join the plan quickly, but the intention is to push ahead with the initiative even if there are holdouts. The three governments said they would enact provincial legislation and complementary federal legislation by the end of 2014 so that the new regulator can start operating in July 2015. TOUGHER WATCHDOG SOUGHT The new body will replace the Ontario Securities Commission, which is now Canada’s major securities regulator, and the British Columbia Securities Commission as well as their counterparts in any other provinces that choose to participate. The plan is intended to make it easier for companies and investors to navigate the system by eventually having a single set of rules nationwide, and to give Canada a single voice in global discussions of regulatory issues.
Air Canada was also invited to the S&P/TSX Composite, however,which is much like a Canadian version of the S&P 500. Although there are not nearly as many S&P/TSX Composite funds as there are S&P 500 funds, Air Canada’s presence in the index may increase some funds’ willingness to add shares of the airline. Additionally, investors will now see Air Canada shares in the same index as WestJet shares, decreasing the perception of WestJet as the financially healthy Canadian airline, and Air Canada as the financially unhealthy one. Turnaround at Air Canada Although Air Canada is not the strongest player in the industry, its compelling valuation makes it my top pick in the airline industry. Through a combination of growing earnings, positive industry trends, and shifting investor sentiment, Air Canada shares have more than tripled off oftheir lows last summer. Despite this impressive rally, I view these factors as continuing drivers for shares going forward. Possible risks to this rally include an economic slowdown, more aggressive capacity additions, or a spike in jet fuel prices. Barring any of these situations, I see Air Canada as an excellent value in an industry that is itself broadly undervalued. As with any company, however,investors should watch Air Canada and the airline industry as a whole closely for any positive or negative news that could affect their investments. Warren Buffett has claimed that investing in airlines is a surefire way to lose your hard-earned cash. But two airlines are breaking all the rules by keeping costs low and avoiding direct competition — leading to enviable profits.