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Portfolio Manager’s November Comment for October Results

In October, the S&P/TSX declined by 3.1% the S&P500 decreased by 2.7% and the MSCI ACWI ex USA lost 2.1%. For the 12-month period ending October 30th, the S&P/TSX posted a negative return of 2.3%. Over the same period, the S&P500 surged 9.7% while the MSCI declined 2.2%.

The NQICAT recorded a net loss of 1.3% in October and a 12-month negative return of 3.1%.

The best TSX sectors for the month of October were Health Care up 7.3%, Consumer Dicretionary down 0.3%, and Utilities down 1.3%. The worst performing sectors were Information Technology down 8.7%, Consumer Staples down 7.5% and Energy down 4.7%.

The best monthly performers in the portfolio were First National up 16.1% and Equitable Group up 13.3%. At the opposite, the weakest contributors were Open Text Corporation, which was down 13.0% and Alimentation Couche-Tard down 11.5%.

2 stocks were sold and bought in the strategy in October. For this rebalancing, the model required an higher exposure to the Materials and Telecommunications sector.

The economic profile of two holdings (Magna international Inc and Sun Life Financial) have felt under the minimum threshold in the course of the quarter and needed to be sold.

The 2 purchases were Quebecor Inc. (QBR.B) and Stella-Jones (SJ). Both stocks had the highest EVA score in their respective sectors.

Portfolio Manager’s October Comment For Q3 2020

In the third quarter, the S&P/TSX Composite Total Return Index increased by 4.7%, the S&P500 total return grew by 8.9% while the MSCI ACWI ex-USA returned 6.4%.

Q3 returns were eye-popping and are pointing to a V-shaped recovery. Growth and technology have continued their outperformance again compared to the rest of the market.

In Q3, NQICA returned 9.8% leading to a year-to-date return of -5% versus the S&P/TSX composite which increased by 4.7% in Q2 and declined 3.1% on a year-to-date basis.

In Canada, the best Q3 sectors were Industrials up 13.2%, Utilities up 9.9% and Materials up 8.8%. The worst sectors were Health Care down 14.4%, Energy down 9.4%, and Telecommunication services up 0.8%.

The NQICA’s worst performers in the third quarter were Constellation Software with a return of -3.4%, Open Text Corporation declined by 2.0% and Magna International with a return of 1.6%.

On the other hand, the best results in the third quarter were Richelieu Hardware with a return of 22.0%, Empire Company with a jump in price of 19.3% while Canadian National Railway share price rose by 18.5%.

Portfolio Manager’s September Comment for August Results

Equity markets had a strong positive monthly performance in August. In the U.S. the performance was particularly strong among technology large cap stocks while in Canada the performance was vigorous among financials large cap stocks. It’s widely believed that the FED market intervention is no stranger to the strong performance of equities as of late.

In August, the S&P/TSX rose by 2.3%, the S&P 500 increased by 7.2% while the MSCI ACWI ex USA gained 4.7%. At August end and over a 12-month period, the S&P/TSX returned 3.8% behind the S&P 500 gain of 21.9% and the MSCI ACWI ex. USA increased by 8.8%.

NQICAT advanced by 1.9% in August and posted a 12-month return of 0.6%.

The best S&P/TSX sectors for the month were Financials up 6.7% followed by industrials up 4.2% and Consumer Discretionary up 1.9%. The worst performing sectors were Health Care down 7.5%, Consumer Staples down 4.7% and Utilities down 2.1%.

NQICAT’s best performers in August were National Bank up 14.5% and Great-West up 12.4% on the back of excellent quarterly results.

At the opposite, the weakest contributors were Alimentation Couche-Tard down 8.5% and Winpak down 6.6% mainly on profit taking and concerns about their respective outlooks.

Portfolio Manager’s August Comment for July Results

The S&P/TSX rose by 4.5% in July and the S&P500 increased by 5.6% while the MSCI ACWI ex USA gained 4.1%. At the end of the 12-month period ending July 31th, the S&P/TSX posted a positive return of 1.9%. Over the same 12-month period, the S&P500 surged 12% while the MSCI ACWI ex USA gained 0.7%.

The NQICAT recorded a net gain of 8% in July and a 12-month return of -2.3%.
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The best TSX sectors for the month of July were Materials up 13.1%, followed by Consumer Staples up 6.2%, and Information Technology up 6.1%. The worst performing sectors were Financials up 0.1%, Energy up 1% and Health Care up 1.1%.

 

The best monthly performers in the portfolio were Kirkland Lake Gold up 30.9% and Financial National up 22.8%. At the opposite, the weakest contributors were Toronto-Dominon, which was down 0.9% and Great-West down 0.5%.

 

3 stocks were sold and bought in the strategy in July. For this rebalancing, the model required an exposure reduction of to the Materials sector equivalent to 2 stocks. Stella-Jones (SJ) and CCL Industries Inc. Class B (CCL.B) were sold because of their relatively lower SP scores compared to Kirkland and Winpak.
The model also called for the selling of Gildan (GIL) due to a deterioration of its SP score.

 

The model required an increased exposure to Consumer Staples and Consumer Discretionary. The names that made it into those sectors were Empire Company (EMP.A) and Thomson Reuters Corp. (TRI). Richelieu Hardware Ltd (RCH) was bought as a replacement for Gildan.

Portfolio Manager’s July Comment For Q2 2020

In the second quarter, the S&P/TSX Composite Total Return Index increased by 17%, the S&P500 total return grew by 20.5% while the MSCI ACWI ex-USA returned 16.3%.

Q2 returns were eye-popping and are pointing to a V-shaped recovery. Growth and technology have continued their outperformance compared to the rest of the market.

In Q2, NQICA returned 15.2% leading to a year-to-date return of -13.4% versus the S&P/TSX composite which increased by 17% in Q2 and declined -7.5% on a year-to-date basis.

In Canada, the best Q2 sectors were Info-Tech up 68.2%, Materials up 41.6% and consumer discretionary up 32%. The worst sectors were telecommunication services down 2.1%, Utilities up 2.7%, and Financials up 4.8%.

The NQICA’s worst performers in the second quarter were Evertz with a return of -14.3% as the company has been affected by the shutdown of professional sports, Fortis declined by 3.9% given the company’s profile was less attractive during the recovery and Winpak with a return of -3.3% caused by lower than expected sales and profits.

On the other hand, the best results in the second quarter were TFI International with a return of 56.2% as the acquisition of Gusgo Transport has been well received by the market, Canadian Tire jumped 40.1% as the retailer kept its stores open and was able to protect its profits and Parkland Corp. grew by 39.1% helped by rising oil prices.

Portfolio Manager’s June comment For May Results

The Canadian stock market continued to rally in May. The S&P/TSX Total Return Index rose by 3% during the month, while the S&P 500 and the MSCI ACWI ex. USA gained 4.7% and 3.3% respectively. At May end, the year-to-date S&P/TSX Total Return Index loss was 9.7% while the S&P500 shrunk by 5% and the MSCI ACWI ex. USA fell off 14.6%. Despite being in negative territory, all equity indexes are now into a V-shape recovery.

The best TSX sectors for the month of May were Information Technology up 14.6% and Consumer discretionary up 8.1%. At the opposite, the worst performing sectors were Real Estate down 0.4% and Utilities unchanged on the month.

Our best performers in May were Canadian Tire up 20.4%, Parkland Corp up 17.6% and Constellation Software up 16.9%.

On the other hand, the weakest contributors were Kirkland Lake Gold down 7.8%, First National down 4.5% and Equitable group down 3.7%.

Portfolio Manager’s May Comment for April Results

The S&P/TSX increased by 10.8% in April and the S&P500 increased by 12.8% while the MSCI ACWI ex USA gained 7.6%. At the end of the 12-month period ending April 30th, the S&P/TSX was posting a negative return of 7.9%. Over the same 12-month period, the S&P500 gained 0.9% while the MSCI ACWI ex USA posted a decline of 11%. For the U.S and Canadian markets April results were the best monthly returns of the past decades. Over the past 12 months, the strong performance behind the U.S equity market can be explained by its 5 largest technology names (Microsoft, Facebook, Amazon, Apple and Google).
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The best TSX sectors for the month of April were Materials up 33%, followed by Information Technology up 29.3%, and Consumer Discretionary up 20.1%. The worst performing sectors were Telecommunication Services (-0.3%), Financials (0.9%) and Utilities (3.7%).

The best monthly performers in the portfolio were Kirkland Lake Gold (39.1%) and Parkland Fuel Corp (33.1%). At the opposite, the weakest contributors were Great-West Life Co, which was down 5.7% and Royal Bank of Canada down 1.8%.

4 stocks were sold and bought in the strategy, in April. For this rebalancing, the model required an exposure reduction to 2 sectors namely Consumer Discretionary and Energy. MTY Group (MTY) was sold for several reasons including its negative exposure to the COVID-19 pandemic, Parex Ressources (PXT) was sold as weak oil prices put severe pressure on its margins.

The model called for the selling of Brookfield Asset Management (BAM.A) and Brookfield Infrastructure Partners L.P. (BIP.UN) due to a deterioration of their respective performance scores.

The model also required an increased exposure to Materials and Financials. The names that made it into those sectors were Winpak (WPK) and First National (FN). The other 2 names purchased in this rebalancing were Fortis (FTS) as a replacement for Brookfield Infrastructure Partners L.P. (BIP.UN) and Sun Life Financial as a replacement for Brookfield Asset Management (BAM.A).

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Portfolio Manager’s April Comment For Q1 2020

The performance of Global equities has been severely impacted by the COVID-19. The S&P/TSX Composite Total Return Index declined by 20.9% in Q1 more than offsetting last years’ gains for an annualized negative total return of -14.2%. For Q1, the S&P500 total return was -19.6% also erasing last returns for an annualized total return of -7% while the MSCI ACWI ex US posted a -23.3% return leading to a negative -15.1% annualized total return.

The obvious of this year’s first quarter is the COVID-19 and its impacts on the economic activity. In this period of turbulence, the COVID-19 often decides who is the winner or the loser.

NQICA in Q1 returned -24.9% leading to a 1-year return of -16.3% versus the S&P/TSX composite which returned -20.9% in Q1 and -14.2% on a 1-year basis.

In Canada, the best Q1 sectors were Info-Tech down 3.8%, Utilities down 6.2% and Telecommunication Services down 9.2%. The worst sectors were Energy down 38.2%, Healthcare down 37.3%, and Consumer Discretionary down 33.3%.

The worst performers in the NQICA in Q1 were MTY with a return of -61.2%, as a majority of its franchises needed to close because of the COVID-19, Gildan with a return of -53.3% given its discretionary profile and closing some of its manufacturing facilities and Parkland Fuel Corp. with a return of -50.7% given the lower traffic at its gaz station. On the other hand, Metro delivered a 6.6% return, as its groceries and drug stores benefits from increased volume, Constellation Software realized a 1.5% return as it was not directly impacted from the COVID-19 while Canadian National was down only 5.8% despite the hostage of its network by pressure groups earlier this year and the upcoming economic slowdown.

Canadian Model Portfolio update: COVID-19

With the current COVID-19 spreading all over the global. Here is a quick portfolio update:

  • On February 20, S&P/TSX TR achieved new highs closing at $17,944. Since then the benchmark is down -20.29%. Whereas Inovestor Canadian model portfolio is down -17.44%
  • YTD the S&P/TSX is down -15.90% and Inovestor Canadian model portfolio is down -14.26%
  • The best performing stocks in our Canadian model portfolio since 20 February: Dollarama Inc -0.6%, Metro Inc -0.7% and Telus Corpotation -9.1%
  • The worst performing stocks in our Canadian model portfolio since 20 February: Parex Resources Inc -34.7%, Equitable Group Inc. -30.7% and Parkland Fuel Corp -28.6%
  • We remain focus on the long term and avoid current market noises. We believe our portfolio companies are fundamentally sound and should performed well on the long term