On the movie Jurassic Park, Ian Malcolm, played by Jeff Goldblum, is an expert hired by Jurassic Park as part of the diligence process to approve the park as a public attraction. The concept of a live dinosaur park seemed a good idea at the time, according the the park’s creator.
One of the lines I liked in the movie was by Jeff Goldblum’s character, when he was asked if he was married. He replied “No, but I’m always on the lookout for a future ex-Mrs. Malcolm”. Can we, as investors, avoid the future ex-good stock idea? Like Jurassic Park, the original deal that the current Canadian Government tried to make with SNC Lavelin must have also seemed like a good idea at the time. Both the dinosaur park and the SNC deal ended bad. As even more evidence pours in regarding the interference (which is becoming more and more undeniable) by the PM of Canada in the SNC scandal, investors are becoming more wary of getting caught in another politically driven stock meltdown. Certainly, the SNC scandal, along with potentially more incriminating news linked to the PM of Canada to come out of the Norman scandal might cause some investors to be wary of investing in companies who may have close ties to the current Government of Canada.
One way to spot connections to the current GOC leaders is to examine political donations by corporations. I did a bit of research on the subject of political donations, and found that only Quebec allows for non disclosure of top donors to a political party.
This lack of disclosure may explain why a scandal like the SNC affair might be more inclined to emerge from that province. So too, do bailouts and “favours” provided by the GOC seem to appear more frequently to companies based in PQ. Here are the top 4 public companies supporting the current Liberal government through disproportionate donations to their party. I’ve included their charts:
CanWest Global (not a public company)
Bombardier (the second largest disclosing corporate donor) received a large taxpayer funded gift by the newly elected Federal government immediately after the election. SNC Lavelin were listed as the 4th largest in disclosed donations. Here is an article in the Globe covering the subject.
Beyond the above noted stocks, there was an enquiry about a year ago into the marijuana industry and an unusual spike in volume and price. This was prior to the Fed announcement surrounding the anticipated rollout of its legalization in Canada. Given the strong connections to the current Federal government by the industry, there was some banter about unusual trading volume prior to the report surrounding the legalization dates. While nothing became of the enquiry, it was indeed an interesting situation to see the stocks spike as they did at that time.
My take on staying safe within the current political environment
My bottom line in looking at politically connected public companies: No one factor should influence your decision to trade a stock – including the unknown potential for political scandals. However, knowing all the facts before investing – including risks which may include political risk – should be taken into consideration.