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The Best Time to Buy the TSX Venture is Here

Merry Christmas

It goes without saying that 2020 has been one of the most volatile years for small-cap investors yet. But, the best time to buy the TSX Venture is almost here.

After being crushed to a low of around 338 in March following the emergence of Covid-19, the TSX Venture Index catapulted approximately 140% to 816 this week — its highest level since March 2018. The CSE Composite experienced a similar rise from the ashes, soaring roughly 205% since its March low.

These tremendous recoveries are due, in part, to the fact that Covid-19 is acting as a growth catalyst for numerous industries. Last week, Pinnacle published a column that stated,

“The TSX Venture is enjoying a speculative buying frenzy across multiple markets. I haven’t seen this level of speculation on the Venture in a long time. And I can’t remember ever seeing it across so many sectors. From health and wellness to gaming, psychedelics, and even cannabis and gold – speculators are bidding up TSX Venture and CSE-listed deals.”

Creative Destruction Breeds Opportunity on TSX Venture

What we are witnessing today is creative destruction in its purest form. With many old business models crumbling under the weight of Covid-19, investors are becoming increasingly open to new opportunities in sectors such as entertainment, psychedelic medicine, wellness, and crypto to name a few. Not only that, but the Covid-19 crash in early 2020 brought in a whole new generation of speculators. To their credit, Millenials and Generation Z saw the crash in March as an opportunity – and thanks to platforms like Robinhood, were able to capitalize on it. Not to make light of the pandemic, but these investors, many of whom felt like they got left out of the post-Great Recession rebound, saw the “Covid Crash” as their second chance.

As we approach 2021, speculators on the TSX Venture would do well to maintain the open mindset they’ve cultivated over the last year — especially when one considers that a significant buying opportunity for the Venture may be right around the corner…

 

December 22nd is Best Time to Buy TSX Venture

Long-time readers will remember my extensive research on TSX Venture seasonality factors. According to this research, the best time to buy the TSX Venture has historically been December 22nd — give or take a few days.

Why?

For the past seventeen years, on average, the TSX Venture has increased approximately 12.66% within 60 days following December 22nd. In almost a third of those years, the highest level hit for the Venture during those 60 days came in January (2008, 2010, 2013, 2015, 2018, and 2020).

Keep in mind, however, that the timing of this phenomenon is variable. For example, in 2018, the Venture rose from 530.20 on December 21, 2018 to 625.26 on February 4, 2019. Following December 22, 2016, the high within the 60 days occurred on the final day, February 22, 2017. This year, the Venture peaked in the aforementioned 60-day period on January 3, 2020 (but wasn’t far off from that high by February 20th).

TSX Venture Set to Rise After December 22nd

In summary, if you could buy the TSX Venture Index on December 22nd (give or take a day) over the past seventeen years, you would have had the opportunity to sell within the next 60 days for a handsome profit — 100% of the time.

Take a look at the chart below, which illustrates the potential gains within this coming 60-day period for the last seventeen years:

potential % return from TSXV within the 60 days following December 22nd
This chart is for illustrative purposes only and not indicative of any actual investment. These returns were the result of certain market factors and events which may not be repeated in the future. Past performance is no guarantee of future results.

 

The Best Time to Buy TSX Venture as Investment Opportunities Abound

As lockdowns around the world continue to drag on, we want to remind our readers that there’s plenty of reasons to be hopeful about 2021.

The world’s first Covid-19 vaccines are beginning to be distributed to frontline healthcare workers. The Biden administration could lead to new ESG (and potentially cannabis) investment opportunities. And, loose monetary and fiscal policy could propel the price of gold (and by extent, junior miners and the TSX Venture) higher in 2021.

The year ahead — though sure to have its fair share of challenges and disruption — will likely be one of growth as countries around the world look to rebuild their economies. 2021 should be an exciting year for speculators in search of undervalued companies within Canada’s small and micro-cap marketplace.

Wishing you a Merry Christmas and a wonderful holiday season with your loved ones,

Aaron

 

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Aaron Hoddinott

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