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Providing Insider News and Knowledge to Investors

Market Report: Trying to build a base for the broad market and pot stocks

December 10, 2018

An overview of insider sentiment and market trends with daily updates of indicator readings and top-50 tables of companies with net insider buying or selling.

INK Canadian Insider Price Index

S&P/TSX Venture Index

INK Sentiment Indicator*

(TSX-Listed Stocks)

INK Venture Sentiment Indicator*

(TSX Venture-Listed Stocks)

ple INK Sentiment Indicator: 248.0% Indicator Reading: Undervalued

INK Venture Sentiment Indicator: 390.9% Indicator Reading: Undervalued

* Indicators represent companies with buy only transactions divided by companies with sell only transactions of direct ownership equity securities in the public market by officers and directors (exclusive of officers and directors of subsidiaries) filed over the last 60 days. The chart line shows insider sentiment trends by connecting the historic indicator daily readings going back one year. Transactions filed on Saturday and Sunday are aggregated into Friday's

Sam number. Information in this report does not constitute a buy or sell recommendation.

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Providing Insider News and Knowledge to Investors

December 10, 2018

Overview

December 10, 2018 - Although one week does not make a trend, given recent market carnage, the bulls can be forgiven if they point to some positive developments in the Canadian market last week. Nicholas Winton who writes a weekly technical outlook for the INK Canadian Insider Index noted in his Monday write up that the index (-0.8%) outperformed US markets last week, including the S&P 500 (-4.6%). We would add that the Index also outperformed the large-cap S&P/TSX 60 Index (-2.8%). Both developments are notable. In 2008, stocks outside the United States started to stabilize first. Meanwhile, as we explained in our November 19th report (Are we close to turning the corner?), we will have more confidence that the global selling tide is over once the INK CIN Index starts to outperform large-caps which are seen as a relative area of safety during growth scares.

A potential catalyst for a revival in global equities could be a signal from the Federal Reserve that it has ended its tightening campaign. At this point, the central bank is trying to keep its options open for both a December rate hike and additional hikes next year. For investors, those options equate to uncertainty which is only being compounded by ongoing trade friction between the United States and China.

With that in mind, the relative outperformance of the INK CIN Index is still too tentative to draw any conclusions about a solid base for stocks being established. Moreover, it seems as if our indicator is trying to make up its mind whether or not more significant share price weakness is on the way. While a counter-rally from oversold conditions is overdue, we will need

le to see at least a month of INK CIN Index outperformance against the TSX 60 combined with a peak in our INK Sentiment

Indicator to have firm conviction that a strong base of support for stocks has been built.

Last week, oil & gas and gold stocks led the INK CIN Index with Kirkland Lake Gold (Sunny; KL) +13.0%, Yangarra Resources (Mixed; YGR) +8.5%, and Wesdome Gold Mines (Sunny; WDO) +8.4% leading the way. Lagging was Calfrac Well Services (Mixed; CFW) -10.9% which announced a capital spending plan of $190 million for 2019. Most of the spending will go to maintenance capital outside of Canada. The oil & gas service company was followed by consumer stocks AutoCanada (Mostly Sunny; ACQ), -13.2%, and BRP (Mixed; DOO), -17.4%, which were not finding a lot of love on the prospect of higher rates and related fears of a potentially slower economy.

p Core Theme Updates: #2 Taking a diversified approach to growth and #3 Watching for stock-specific opportunities in

Healthcare and Technology

In some more encouraging news for the bulls, our Industrials Indicator has peaked, meaning that we have seen peak insider buying in the sector. Such peaks often coincide with important bases being formed. As such, we are upgrading the sector to undervalued. One of the stocks leading the charge in terms of insider buying in the sector is Morning INK stock Badger Daylighting (Sunny; BAD) which we featured on November 26th. The highest INK Edge ranked stock in the sector is The Caldwell Partners International (Sunny; CWL).

m In the Healthcare sector, insider sentiment is soaring in the Pharmaceuticals industry, home of many cannabis stocks. Our

30-day Pharma Indicator moved above 400% last week, the highest point since early September 2017. As we explained in our October Top 20 Gold Stock Report, the indicator seems to have a decent ability to time the group's highs and lows. In October, it turned down, signalling peak insider selling which correctly signalled an important near-term top established in the group. Now we appear to be close to just the opposite. We are on the verge of peak insider buying which could mean that a tradable base is being built in the group. We are not quite there yet, but if we see a peak in buying during the week, we will

a report on it in our daily morning report and highlight one or two names in the group that make our screens.

Most active public-market buying insiders last week

From December 3rd to 7th as filed and reported by mid-day December 8th (000's):

SDavid Binet buys $1,547 Thomson Reuters (Mixed; TRI)

Cole Caciavillani buys $1,029 Aphria (Mixed; APHA) Vic Neufeld buys $1,026 Aphria John Cervini buys $1,000 Aphria C.J. Prieur buys $940 Manulife Financial (Mixed; MFC)

Additional results are available on the CA Screening page of the INK Research website.

Key Investment Themes

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#1 Taking a diversified approach to growth

We replaced our first theme "Positioned for late cycle global growth" with "Taking a diversified approach to growth." The change is driven by a reduction in exposure to economically-sensitive stocks in the two most economically-sensitive sectors, Energy and Basic Materials in the latest INK CIN rebalancing. The Energy sector dropped to 14% from 15.5% currently. While exposure to the Basic Materials sector jumped to 16% from 12%, the increase is due to the arrival of three new gold stocks which can be viewed as hedges against a stagflationary slowdown or bust. There are also some subtle changes worth noting in the remaining two economically-sensitive sectors. We see a financially conservative tilt within Industrials as plane and train maker Bombardier is replaced by soon-to-be cash-rich Aimia (Sunny; AIM). Within Consumer Cyclicals, supply chain companies Airboss of America (Mixed; BOS) and Magna International (Mixed; MG) have been replaced by domestic consumer-focused Cineplex (Mostly Sunny; CGX) and MTY Food Group (Mostly Sunny; MTY).

#2 Hedging bad outcomes with gold and defensive stocks

The Fed traditionally has a tricky time avoiding a recession when it is raising rates. This time it has to not only get it right on the pace of rate hikes but also the tempo of its asset reductions. So, it really is different this time. That alone could mean lower stock prices in the short-term if investors demand that valuations reset lower in order to make risk-taking more attractive. Should such an environment unfold, gold stocks could outperform as gold historically has a negative correlation with stock returns.

Meanwhile, the INK CIN Index continues to maintain a decent exposure to REITs or REIT operators, a group that has the potential to do well during the early stages of rising price inflation or if interest rates start to decline. Based on our indicators, insiders also see value in the Utilities sector, a group that should do well once long-term rates have peaked.

#3 Watching for stock-specific opportunities in Healthcare and Technology

le Based on the healthy level of our Technology Indicator we are adding the sector to this theme as one to watch for stock

specific opportunities. We continue to be on the lookout for stocks in Healthcare that have sunny outlooks. When it comes to marijuana stocks, we would consider hedging any long exposure with at least a partial short position in the Horizons Medical Marijuana ETF (HMMJ).

#4 Waiting for better times ahead for the Canadian oil patch

We replaced "Expecting better for the Canadian oil patch" with "Waiting for better times." This is based on reduced exposure to Energy stocks in the INK CIN Index as well as a relatively tepid response by insiders to the recent pullback in sector share

p prices. We have also downgraded this theme to the fourth spot on our list. Nevertheless, insiders continue to signal that

stock-specific value situations exist for contrarian investors with investment horizons over one year.

INK CIN Index Rebalancing and the INK Edge Outlook

Every November and May we rank all the names in our INK CIN Index stock selection pool (about 700 TSX-listed names) using our rules-based INK Edge outlook process which looks at a stock's value, insider commitment, and price momentum. For existing Index constituents, they must rank in the top 30% of all stocks in order to stay. Those that fail to meet the threshold are replaced with the highest-ranking stocks not already in the index. For more on the Index's methodology and a

m complete list of rebalancing adds and drops visit . Live INK CIN Index performance stated on

November 14th, 2014.

INK Edge outlook ranking categories (Sunny, Mostly Sunny, Mixed, Cloudy, Rainy) are designed to identify groups of stocks that have the potential to out- or under-perform the market. However, any individual stock could surprise on the up or downside. As such, outlook categories are not meant to be stock-specific recommendations. For background on our INK

Sa Edge outlook, please visit our FAQ #5 at .

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Providing Insider News and Knowledge to Investors

December 10, 2018

Sector Sentiment Indicators

Sentiment indicators represent companies with buy-only transactions divided by companies with sell-only transactions of direct ownership equity securities in the public market by officers and directors (exclusive of officers and directors of subsidiaries) filed over the last 60 days.

Sector

Energy

Sentiment Indicator

One Day Change

Six Month Indicator Trend

Indicator Reading: Undervalued

270%

9%

Basic Materials Indicator Reading: Undervalued

Industrials Indicator Reading: Undervalued

le Consumer Cyclicals Indicator Reading: Undervalued

Consumer Non-Cyclicals Indicator Reading: Undervalued

p Financials

Indicator Reading: Undervalued

Healthcare

m Indicator Reading: Undervalued

Technology Indicator Reading: Undervalued

a Telecommunication Services SIndicator Reading: Fair-Valued

312% 386% 350% 325% 629% 429% 238% 33%

-7% -64%

25% -29% 29%

-33%

Utilities

Indicator Reading: Fair-Valued

400%

- Please see individual sector reports for a list of companies with net insider buying and selling on a sector basis -

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Providing Insider News and Knowledge to Investors

December 10, 2018

Top-50 Companies with Net Buying

Public-market transactions of equity securities by company officers and directors over the past 60 days sorted by dollar amount. Where Sector and Industry are blank, classification for these companies has not been identified and may not be available.

Ticker(root) Company Name

Sector

Industry

Net $ Value

GSY

goeasy

Consumer Cyclicals

Household Appliances

7,441,545

DRM

DREAM Unlimited

Financials

Real Estate Development & Operations

6,061,278

ATA

ATS Automation Tooling Industrials

Industrial Machinery & Equipment

4,167,935

ECA

Encana

Energy

Oil & Gas Exploration and Production

4,051,192

APHA TSGI HOT MAXR EIT ARX TWC CLR KEL TOU T CWX ABX AX JWEL TI NVA D PHM RAY LMC KXS BRG HRX IAG TCL NGD YGR WRG BNE TNT WJA PD FONE ECN CFP CIX DII

Aphria

Healthcare

Alternative Medicine

3,166,643

The Stars Group American Hotel Inc Prop R Maxar Technologies Canoe EIT Income Fund ARC Resources TWC Enterprises Clearwater Seafoods Kelt Exploration Tourmaline Oil

le TELUS

CanWel Building Materials Barrick Gold Artis REIT Jamieson Wellness Titan Mining Nuvista Energy Dream Office REIT

p Protech Home Medical

Stingray Digital Group Leagold Mining Kinaxis Inc. Brigadier Gold Heroux-Devtek Ind All Ins & Fin Ser Inc Transcontinental

m New Gold

Yangarra Resources Western Energy Services Bonterra Energy True North Comm. REIT WestJet Airlines

a Precision Drilling

Flower One Holdings ECN Capital Canfor CI Financial

SDorel Industries

Technology Financials Technology Financials Energy Consumer Cyclicals Consumer Non-Cyclicals Energy Energy Telecommunication Services Consumer Cyclicals Basic Materials Financials Consumer Non-Cyclicals Basic Materials Energy Financials Healthcare Consumer Cyclicals Basic Materials Technology Basic Materials Industrials Financials Industrials Basic Materials Energy Energy Energy Financials Industrials Energy Healthcare Financials Basic Materials Financials Consumer Cyclicals

Application Software Hospitality REITs Communications & Networking Closed End Funds Oil & Gas Exploration and Production Golf Courses Aquaculture Oil & Gas Exploration and Production Oil Exploration & Production - Onshore Integrated Telecommunications Services Construction Supplies & Fixtures Wholesale Gold Mining Commercial REITs Special Foods & Welbeing Products Zinc Ore Mining Oil & Gas Exploration and Production Office REITs Healthcare Facilities & Services Radio Broadcasting Gold Mining Enterprise Software Gold Mining Aircraft Parts Manufacturing Life & Health Insurance Commercial Printing Services Gold Mining Oil & Gas Exploration and Production Oil & Gas Drilling Oil & Gas Exploration and Production Commercial REITs Airlines Oil & Gas Drilling Alternative Medicine Corporate Financial Services Forest & Wood Products Investment Management & Fund Operators Home Furnishings

2,818,682 2,788,437 2,719,438 2,505,620 2,486,463 2,053,527 2,011,489 1,914,886 1,858,168 1,724,278 1,714,739 1,690,383 1,665,824 1,576,182 1,512,823 1,379,453 1,199,095 1,100,000 1,043,750

961,770 923,482 904,500 884,060 792,697 731,198 725,455 713,526 670,548 622,520 619,404 562,500 545,665 519,176 502,999 491,649 481,250 473,045

SPB

Superior Plus

Energy

Oil & Gas Refining and Marketing

463,951

RUS

Russel Metals

Basic Materials

Metal Service Centers

462,988

ACQ

AutoCanada

Consumer Cyclicals

Auto Vehicles, Parts & Service Retailers

456,683

MKP

MCAN Mortgage

Financials

Retail & Mortgage Banks

444,480

TGOD

Green Organic Dutchman Healthcare

Alternative Medicine

442,790

AXIS

Axis Auto Finance

Financials

Personal & Car Loans

416,315

PBH

Premium Brands Holdings Consumer Non-Cyclicals

Food Processing

416,220

MFC

Manulife Financial

Financials

Life & Health Insurance

415,065

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