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Portfolio Manager’s May Comment for April Results

In April, the S&P/TSX increased by 2.4% and the S&P500 rose by 5.3% while the MSCI ACWI ex USA gained 2.8%. At the end of the 12-month period ending April 30th, the S&P/TSX grew by 33.3%, the S&P500 gained 46% while the MSCI ACWI ex USA posted a return of 43.6%.

NQICAT increased by 2.4% while it climbed 37% on an annual basis.

Quaterly results published in April were in line to better than expected for the majority of companies.

The best TSX sectors for the month of April were Materials up 5.4%, followed by Consumer Discretionnary up 5.1% and Telecommunication Services up 3.4%. The worst performing sectors were Health Care down 9.9%, Industrials down 1.1% and Utilities down 0.6%.

The best monthly performers in NQICAT were Canfor up 17.9%, goeasy up 16.2% and Transforce up 14.6%. At the opposite, the weakest contributors were Canadian National Railway down 9.3%, Winpak down 5.2% and OTEX down 3.4%

3 stocks were sold and bought in the strategy in April. The strategy required an exposure reduction to 3 sectors, namely Consumer Staples, Consumer Discretionary and Energy. Empire Company (EMP.A) had the lowest SP score of our Consumer Staples therefore we sold it. We sold Thomson Reuters (TRI) due to its low SP score. Parkland (PKI) was sold since it was the only Energy stock in the portfolio and futhermore its EPI was below 1.

The model required an increased exposure to 1 Materials and 2 Financials. The names that made it into those sectors were Canfor (CFP), Power Corporation of Canada (POW) and goeasy (GSY).

Portfolio Manager’s April Comment For Q1 2021

The performance of equity markets continued its upward trend following the beginning of the vaccination campaign and the anticipation of the complete reopening of the economy.

In Q1, The S&P/TSX Total Return Index rose by 8.1%, the S&P 500 expanded by 6.2% while the MSCI ACWI ex. USA increased by 3.8%.

In Q1, NQICA returned 9.4% leading to a 1-year return of 48.5% versus the S&P/TSX composite which returned 44.2% on an annualized basis.

In Canada, the best Q1 sectors were Health Care up 38.1%, Energy up 28.2% and Financials up 12.7%. The worst sectors were Materials down 7.3%, Info-Tech up 1.0%, and Utilities up 2.4%.

In Q1, the best performers in NQICA were TFI International (TFII), Richelieu Hardware (RCH) and Equitable Group (EQB) up 44.2%, 25.4% and 25.3% respectively.  On the other hand, the worst performers were Kirkland Lake Gold (KL), Alimentation Couche-Tard (ATD.B) and Parkland Corp. (PKI) down 18.9%, 6.6% and 5.8% respectively.

Portfolio Manager’s March Comment for February Results

The S&P/TSX Total Return Index expanded by 4.4% in February and the S&P 500 grew by 2.8% while the MSCI ACWI ex. USA increased by 2.0%. At February end, the 12-month S&P/TSX Total Return Index rose 14.7% behind the S&P500 gain of 31.3% and higher than the MSCI ACWI ex. USA who nevertheless rose by 26.7%. The markets grew on the back of strong company results.

In February, NQICAT increased by 3% while it climbed by 12.9% on an annual basis.

The best TSX sector for the month of February was Energy up 22.4%, followed by Consumer Discretionary up 8.7%, and Financials up 6.7%. At the opposite, the worst performing sectors were Utilities down 5.7%, Material down 4.5% and Consumer Staples down 0.9%.

The best performers in February were Equitable Group up 31.1%, CCL Industries up 14.2% and National Bank up 12.5% due to impressive results.

On the other hand, the weakest contributors were Kirkland Lake Gold down 15.3% as gold prices fell 6.1% during the month. Hydro one was down 8.8% due to rising long-term interest rate and Metro was down 4.3% as investors continue to focus on cyclical stocks and expect lower revenue growth.

Small caps poised for growth in a post-pandemic world

What are we looking for?

Small caps with solid fundamentals.

We believe small capitalization stocks, generally seen as more risky than large caps, will also be more likely than large caps to take advantage of renewed economic activity as the pandemic recedes in the months ahead.

The screen (access and save it on the Inovestor for Advisors platform)

We screened North American stocks focusing on the following criteria:

  • Market capitalization between $250-million and $1-billion;
  • StockPointer (SP) performance score of 75 or higher. The score mainly considers risk-adjusted return on capital, earnings per share growth and free cash flow per share. The score varies between zero and 100;
  • Sales growth higher than 4 per cent over 24 months – we are looking for a company that can grow at a reasonable rate;
  • One-year return lower than 50 per cent – we are trying to eliminate companies with too much short-term price? momentum as they could be subject to mean reversion, that is, eventually revert to their long-term average levels.

For informational purposes, we have also included the recent stock price, price-to-earning ratio, one-year earnings per share growth and dividend yield. Please note that some ratios may be shown as of end of previous quarter.

More about Inovestor

Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisors can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

What we found

 

TICKER NAME PRICE MKT. CAP ($MIL) SP PERF. SCORE 24M SALES GRTH. (%) 1Y PRICE RTN. (%) P/E 1Y EPS GRTH. (%) DIV. YIELD (%)
RAY-A-T Stingray Group, Inc. 7.09 520 82.1 48.9 17.8 20.9 -3.6 4.2
SIS-T Savaria Corporation 16.74 855 79.9 45.8 30.8 30.4 18.9 2.9
ITIC-Q Investors Title Company 163.77 310 79.4 51.3 -4.8 7.9 25.0 1.1
HIFS-Q Hingham Institution For Savi 245.00 516 78.0 23.3 27.3 11.9 30.2 0.8
FMNB-Q Farmers National Banc Corp. 13.83 390 77.9 27.5 -13.0 9.4 14.8 3.2
CSW-A-T Corby Spirit And Wine Limite 16.80 477 77.4 4.8 -0.8 15.3 16.6 5.0
RBNC-Q Reliant Bancorp Inc 21.77 355 77.0 91.0 0.1 10.9 39.2 2.2
AGM-N Federal Agricultural Mortgag 83.11 872 75.9 4.6 16.4 10.1 5.2 3.9
CCBG-Q Capital City Bank Group, Inc 24.50 411 75.8 42.1 -13.7 12.7 2.4 2.5
BFC-Q Bank First Corp 69.10 533 75.3 42.1 9.4 15.0 30.6 1.2
TVK-T Terravest Industries, Inc. 17.55 324 75.0 4.2 6.4 10.3 32.7 2.3

*Market cap and recent stock price figures are in native currency.

Music service provider Stingray Group Inc., based in Montreal, has the highest SP performance score of our list. Sales increased vigorously in the last two years partly because of a series of acquisitions. The stock price rose moderately in the last year as the broadcasting and commercial music segment held out, but the radio segment (mostly ads), which counts for 50 per cent of Stingray’s total revenues, fell 40 per cent on a nine-month basis. The company managed to protect its earnings per share despite this bleak time. As radio commercials and social activities return more to pre-pandemic levels, we expect investors to positively re-evaluate the company.

Laval, QC.-based, Savaria Corp., an accessibility and patient handling company, has increased its sales by 45.8 per cent in the past two years, thanks largely to the acquisition of Garaventa Lift, an elevator company. With the pandemic spotlight on long-term care and retirement residences, older people may be more inclined to consider adapting their house to their reality rather than move, which would benefit Savaria. The company announced on Feb. 4 it had acquired Swedish-listed Handicare Group AB, another patient handling company, to reinforce their already well-positioned business in this industry.


Investors Title Co.,
a title insurance provider headquartered in Chapel Hill, N.C., trades at a modest price earnings ratio of 7.9. The company has profited from the booming U.S. residential real estate market over the past two years, achieving 51.3 per cent higher sales over that period, and 25 per cent higher EPS in the past year. If teleworking persists, the strong residential market could very well remain. Despite impressive results, the market appears to be particularly cautious: The company’s stock still trades about 20 per cent below its all-time high of US$204, reached in March, 2018.

Anthony Ménard is an investment analyst at Inovestor Asset Management.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free: inovestor.com/en-CA/store/

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Portfolio Manager’s February Comment for January Results

The S&P/TSX posted a negative return for the month of January. The outcome took place in an environment where volatility peaked as GameStop (GME) rose rapidly at the end of the month. The S&P/TSX fell mostly at the end of the month, investors were potentially chilled by the speculation.

Last month, The S&P/TSX declined 0.3% while the S&P500 was down 1% and the MSCI ACWI ex USA increased by 0.2%. On an annual basis, the S&P/TSX was up 3.5%, the S&P500 soared 17.2% while the MSCI ex USA rose 14.4%.

The best TSX sector for January was Health Care up 34.8% followed by Utilities up by 2.6% and Information Technology up 1.5%. The worst sectors for the month were Consumer Staples down 4.2%, Materials down 3.5% and Consumer Discretionary down 2.6%.

The NQICAT was up 0.2% in January. On an annual basis, the NQICAT was up 0.7% while the S&P/TSX was up 3.5%.

The NQICAT’s best performers were Transforce (TFII), Richelieu Hardware (RCH) and Telus (T). TFII was up 30.1% due to a favorable reaction from the acquisition of UPS operations. RCH increased by 13.4% due to an excellent quarterly report. T was up 5.9% in the anticipation of the Telus international spin out (TIXT).

The worst performers in the NQICAT were Alimentation Couche-Tard (ATD.B) and Canadian National Railway (CNR). ATD.B dropped 10.1% based on the acquisition of Carrefour which was negatively perceived by investors. CNR fell 7.4% due to a weak outlook given by the management.

2 stocks were sold and bought in the strategy in January. We sold Great-West Lifeco (GWO) because the model recommended a shift from the financial sector to the material sector. It had one of the lowest scores of our financials. GWO has been replaced by CCL Industries (CCL.B) as the company had the highest SP score in the material sector.

We sold Fortis (FTS) because its score had decreased and other players with higher scores were available in the same sector. We replaced it with Hydro One (H) which had the highest score in the utilities sector.

 

Portfolio Manager’s January Comment For Q4 2020 Results

Global equities ended the year on a strong finish. The S&P/TSX Composite Total Return Index increased by 9% in Q4 for a total annual return of 5.6%. During Q4, the S&P500 produced a 12.1% return for an annual total return of 18.4% while the MSCI ACWI ex US posted a 17.1% return leading to an annual return of 11.1%.

There was a number of drivers behind this strong finish. Firstly, most company’s results were inline or better than expected. Secondly, central banks have maintained a dovish tone. Finally, the arrival of highly potent anti-COVID vaccines.

In Canada, the best Q4 sectors were Health care up 29.9% and Consumer discretionary up 20.4%. The worst sectors were Consumer Staples down 6.0% and Materials down 4%.

For the year, Info-Tech and Utilities were the top performers up 80.3%% and 19.5% respectively while Energy and Health Care were the weakest down 30.8% and 23.6%

NQICA in Q4 returned 7.3% leading to an annual total return of 2% versus the S&P/TSX TR composite return of 9% in Q4 and 5.6% for the year.

The best performers in NQICA were First National up 8.9%, Equitable Group up 6.6% and Stella-Jones up 4.8% on the back of excellent Q3 results.
On the other hand, the worst performers in Q4 were Richelieu Hardware down 12.6% and Metro down 4.8% on profit taking.

Portfolio Manager’s December Comment for November Results

Equity markets had a strong positive monthly performance in November. In Canada the performance was particularly strong among Energy and Health Care (cannabis) stocks. In the U.S., the performance was notoriously strong among Energy and Financials stocks. Two of the key drivers behind the performance of this rally were the sucessful results achieved by Pfizer and Moderna clinical trials for their Covid vaccine.

In November, the S&P/TSX rose by 10.6%, the S&P 500 increased by 10.9% while the MSCI ACWI ex USA gained 13.5%. At November end and over a 12-month period, the S&P/TSX returned 4.3% behind the S&P 500 gain of 17.5% and the MSCI ACWI ex. USA increased by 10%.

NQICAT advanced by 7.6% in November and posted a 12-month return of -1.1%.

The best S&P/TSX sectors for the month were Health Care up 35% followed by Energy up 18.6% and Consumer Discretionary up 16.3%. The worst performing sectors were Materials down 4.8%, Consumer Staples up 2.6% and Utilities up 5.4%.

NQICAT’s best performers in November were Parkland up 22.2% and TD up 19.7%. On the opposite, the weakest contributors were Kirkland Lake Gold down 8.5% and Metro down 3.6% mainly because of sector rotation out of defensive/Covid related stocks.

 

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.