George Weston Limited (WN.TO) is a Canadian holding company that operates through two divisions: Loblaw Companies Limited (retail division) and Weston Foods (baked goods, fresh and frozen products). They also provide a number of financial products managed via a division called Choice Properties. The company employs more than two thousand making George Weston Canada’s largest private-sector employer.
The company recently announced sales in excess of $14 billion dollars, which beat the same period from a year ago. This can be seen in the company’s share price as it approaches an all-time high of around $135.
So far, 2015 has been an excellent year for the company and their share price enjoyed both technical and fundamental reasons for performing well.
From a fundamental point of view, 2015 has been characterized by the Bank of Canada cutting interest rates and keeping a negative tone on the economy. This left the door open for further stimulus, sending the Canadian dollar lower and stimulating the economy. With the vast majority of revenues coming in from Canada and North America, it is clear that the monetary policy in both countries affects the company’s share price.
Lower oil prices have been a real challenge for the Canadian economy this year. The Bank of Canada accommodated to this move lower and adjusted itself with a new stimulus strategy, and this seems to have paid off. Canada is now adjusting to the damage from low commodity pricing, and use up its idle capacity to produce more goods by mid-2017.
The whole idea of the Bank of Canada’s monetary policy was that lower interest rates will bring a weaker Canadian dollar. This in turn will help exporting companies. George Weston is definitely one of the main beneficiaries of this policy, as it helped them gain competitiveness from exports to the United States.
Next week is the Bank of Canada’s last meeting of 2015. I would like to trade a put option based on the outcome of that meeting and the way the USDCAD pair moves.
The current share price is at the $114 area, but if we see a hawkish Bank of Canada, I would favor a put option trade. The strike price should be when the USDCAD breaks below 1.32. On the other hand, if the outcome is bearish for the CAD, then a call option should be traded when USDCAD breaks the 1.3460 area. For both trades, a one-month expiration date is recommended.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
