Category

Model Portfolio

April 2019 Portfolio Manager Commentary

The S&P/TSX Total Return Index increased by 13.3% in the first quarter. This gives the Canadian market a very strong start in 2019 which has actually slightly outperformed the MSCI Global (10.4%) and is performing in line with the S&P 500 (13.7%).

The stock markets are currently on the rise due to positive economic expectations. Over the past couple of weeks, the depth and longevity of constructive global perspectives have increased in importance following the most recent economic comments and political statements made by major central banks including that of China, Europe, and the United States.

This staggering global economic bull cycle over a longer horizon has a principal effect on the anticipations of investors in the stock market and it has clearly overcome the contradictions related to the softening of the short-term growth. Even though economic growth and corporate profits growth are presently lower than they were a year ago, their persistence and resilience over the long run are the key factors affecting investors’ psychology.

Our Nasdaq Inovestor Canadian Equity Index (NQICA) rose by 0.6% in March, leading to a YTD positive return of 11.4%, slightly underperforming the market. Looking at contribution factors to the NQICA returns, the best performing stock up 11.16%, was Parkland Fuel Corporation (PKI). On the contrary, the worst performer was The North West Company (NWC), down 9.3% in March.

The most recent rebalancing required the sale of three titles, The North West Company, Parkland Fuel and CAE. They were replaced by Great-West Life Co, Norbord, and Open Text. North West Company saw its ROIC decrease because of an increase in assets without being offset by a corresponding increase in its NOPAT. The catalyst for the sale of Parkland Fuel was the rise in stock prices. The sale of CAE was due to the significant decline in economic value added (EVA) as determined by our quantitative model. Great-West Life Co experienced a substantial increase in NOPAT and that is why we decided to add it to the portfolio. Many cyclical commodity companies have had strong bullish profits for a while and our approach is to increase the sector weights in those cases. Norbord is a holding which entered the portfolio for this reason. Finally, the entry of Open Text is explained both by a high fundamental rating and by an attractive valuation.

StockPointer® US and ADR Equities Model Portfolio Transactions – March 2019

We have rebalanced the Nasdaq Inovestor Global Index based on our US and ADR Model Portfolios, which will be effective on March 22nd after market close. Here are the details for the US Model Portfolio:

Ins:

  1. THOR INDUSTRIES (THO) – Market Trend. Increase in Consumer Discretionary sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. MICRON TECHNOLOGY INC (MU) – Market Trend. Increase in IT sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. THE CHEMOURS COMPANY LLC (CC) –  Intra Sectorial transaction.
  4. WALGREENS BOOTS ALLIANCE INC (WBA) – Intra Sectorial transaction.
  5. SALLY BEAUTY HOLDINGS INC (SBH) –  Intra Sectorial transaction.
  6. BLOCK(H & R) INC (HRB) – Intra Sectorial transaction.

Outs:

  1. UNITEDHEALTH GROUP INC (UNH) – Market Trend. Decrease in Financials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  2. US BANCORP (USB) – Market Trend. Decrease in Financials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  3. LOCKHEED MARTIN CORP (LMT) –  SP Score. No longer within SP score range and not in the top 20 of its sector.
  4. SMUCKER(J.M.)CO (SJM) – SP Score. No longer within SP score range and not in the top 20 of its sector.
  5. PENSKE AUTOMOTIVE GROUP INC (PAG) –  SP Score. No longer within SP score range and not in the top 20 of its sector.
  6. AUTOZONE INC (AZO) –  SP Score. No longer within SP score range and not in the top 20 of its sector.

 

Here are the details for the International Model Portfolio:

Ins:

  1. ARCOS DORADOS HOLDINGS INC (ARCO) – Market Trend. Increase in Consumer Discretionary sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. NXP SEMICONDUCTORS N V (NXPI) – Market Trend. Increase in IT sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. CIMPRESS N.V (CMPR) – Intra Sectorial transaction.

Outs:

  1. BANCO DE CHILE SPON ADS REP 200 ORD SHS (BCH) – Market Trend. Decrease in Financials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  2. ASSURED GUARANTY LTD (AGO) – Market Trend. Decrease in Financials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  3. TE CONNECTIVITY LTD (TEL) – EPI. EPI fell below 1.

Portfolio Manager Commentary – February 2019

The S&P/TSX Total Return Index increased by 3.1% in February, adding to the strong January returns (8.1%) and leading to a YTD return of 12.2%. This gives the Canadian market a very strong start so far in 2019 which has actually slightly outperformed the MSCI Global (11.2%) and the S&P 500 (11.8%). Most sectors of the Canadian market were positive contributors in February, with Information Technology being the strongest one at an 8.4% increase.

The Canadian central bank & the FED comments have remained highly constructive for the equity markets. Although some analysts were expecting a more hawkish tone for the future, central banks have not indicated such act. Furthermore, the overall earnings and guided earnings have been positive over this period.

In addition, commodity prices, including energy and metals, have been stable which is crucial for the Canadian market. Finally, Canadian banks’ results were in-line to slightly below expectations, except for BMO, that came higher than expected.

Our Nasdaq Inovestor Canadian Equity Index (NQICA) rose by 2.1% in February, leading to a YTD positive return of 10.7%, slightly underperforming the market.  Looking at contribution factors to the NQICA returns, the best performing stock up 14.6%, was Constellation Software (CSU), that outperformed earnings expectations. On the contrary, the worst performer was CCL industries (CCL.B) which was down 3% in February as a result of weaker than expected results.

Portfolio Manager Commentary – February 2019

Horizons Inovestor Canadian Equity ETF (INOC)

The S&P/TSX Total Return Index ended the month of January up 8.1% offsetting in one month most of last year decline of 8.9%, making it one of the best month in the last 20 years. This upturn has been driven by several catalysts including a softening in the tone of last minutes of the FED, relatively strong results from earnings releases of large North American corporations, and the end of the US government shutdown. Meanwhile, prices of most key commodities including crude oil and gold were stronger in the month. Our Nasdaq Inovestor Canadian Equity Index (NQICA) rose 8.1% for the same period, 60bps below the benchmark. Our sector allocation removed 110bps as our decision to underweight Energy and underweight Healthcare proved to be unfruitful in January. However, our stock selection contributed a positive 50bps as a several of our stocks outperformed.

INOC’s constituents were changed on January 18th

Ins:

  1. THE NORTH WEST COMPANY INC (NWC)
  2. PAREX RESOURCES INC (PXT)

 

Outs:

  1. NFI GROUP Inc. (NFI)
  2. WEST FRASER TIMBER CO. Ltd. (WFT)

Best,

The Inovestor Asset Management Team

StockPointer® Canadian Equities Model Portfolio Transactions – January 2019

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Canadian Model Portfolio, which will be effective on January 18th after market close. Here are the details:

Ins:

  1. THE NORTH WEST COMPANY INC (NWC) – Market Trend. Increase in Consumer Staple sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. PAREX RESOURCES INC (PXT) – Market Trend. Increase in Energy sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Outs:

  1. NFI GROUP Inc. (NFI) – Market Trend. Decrease in the Industrials sector as seen in the Top 100 index.
  2. WEST FRASER TIMBER CO. Ltd. (WFT) – Market Trend. Decrease in the Materials sector as seen in the Top 100 index.

You can also find the transactions on Inovestor For Advisors, in the Model Portfolios – StockPointer Canada section.

Please contact us for more information.

The Inovestor Team

StockPointer® US and ADR Equities Model Portfolio Transactions – December 2018

We have rebalanced the Nasdaq Inovestor Global Index based on our US and ADR Model Portfolios, which will be effective on December 21st after market close. Here are the details for the US Model Portfolio:

Ins:

  1. Six Flags Entertainment Corporation (SIX) – Market Trend. Increase in Consumer Discretionary sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. Blackstone Group L.P. (BX) – Market Trend. Increase in Finance sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. Skyworks Solutions, Inc. (SWKS) –  Intra Sectorial transaction. WDS fell sharply in performance and is replaced by Skyworks Solution.
  4. Penske Automotive Group, Inc. (PAG) – Intra Sectorial transaction. Penske replacing CBRL as CBRL in no longer within SP score range and not in the top 20 of its sector.

Outs:

  1. Eastman Chemical Company (EMN) – Market Trend. Decrease in Materials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  2. Clorox Company (CLX) – Market Trend. Decrease in Materials sector as seen in the Top 100 index therefore decreasing our position in the portfolio.
  3. Western Digital Corporation (WDC) –  SP Score. The company’s score fell sharply well below minimum level.
  4. Cracker Barrel Old Country Store, Inc.(CBRL) – SP Score. The company’s performance was stable, however many companies rose to better performance during the same period.

Here are the details for the International Model Portfolio:

Ins:

  1. Nielsen Holdings PLC (NLSN) – Market Trend. Increase in Consumer Discretionary sector as seen in the Top 100 index therefore increasing our position in the portfolio. There are talks to take the company private.
  2. Lazard Ltd Class A (LAZ) – Market Trend. Increase in Finance sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. BBVA Banco Frances SA Sponsored ADR (BFR) – Market Trend. Increase in Finance sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Outs:

  1. Ternium S.A. Sponsored ADR (TX) – Market Trend. Decrease in the Materials sector as seen in the Top 100 index.
  2. Industrias Bachoco SAB de CV Sponsored ADR Class B (IBA) – Market Trend. Decrease in Consumer Staples sector as seen in the Top 100 index.
  3. Allergan PLC (AGN) – Market Trend. Decrease in Healthcare sector as seen in the Top 100 index.

Portfolio Manager Commentary – October 2018

Horizons Inovestor Canadian Equity ETF (INOC)

The S&P/TSX Total Return Index ended the month of October down 6.27% as investors are selling off risky assets on slower global growth, mounting inflation, peaking corporate earnings and rising bond yields, which coincides with a late-stage of the economic cycle. The Bank of Canada hiked its interest rate to 1.75% citing the economic output is operating close to its potential and trade risks are subdued with NAFTA 2.0. Meanwhile, the Canadian dollar fell 1.91% as commodities retreated. Our Nasdaq Inovestor Canadian Equity Index (NQICA) fell 6.35% for the same period, 8bps below the benchmark. Our sector allocation contributed 82bps as our decision to overweight staples and underweight energy proved to be fruitful. However, our stock selection contributed -90bps as a couple of our stocks clearly under performed. You will find below the top three and bottom three contributors to performance.

The top three contributors to performance were:

1. Metro (MRU), a food retailer, rose 3.3% as investors chose to invest in defensive sectors such as staples, which only declined 0.7% this month as stocks retreated from their highs.

2. Parkland Fuel (PKI), a consumable fuel producer, gained 2.1% after saying it would buy a 75% stake in SOL Investments, the largest independent fuel marketer in the Caribbean.

3. Gildan Activewear (GIL), an apparel manufacturer, increased 0.1% as Moody’s shifted the apparel industry to a positive outlook from stable after watching faster than anticipated growth.

The bottom three contributors to performance were:

1. CAE (CAE), a simulation equipment maker, declined -11.4% as industrial stocks faced a route with several bellwethers like Caterpillar (CAT) and 3M (MMM) warning of higher costs ahead.

2. NFI Group (NFI), a bus manufacturer, dropped -11.7% as industrial stocks faced a route with several bellwethers like Caterpillar (CAT) and 3M (MMM) warning of higher costs ahead.

3. Equitable Group (EQB), a mortgage and thrift company, fell -12.2% as the Bank of Canada raised its interest rates, another sign the Canadian real estate market could cool even more.

Best,

The Inovestor Asset Management Team

StockPointer® Canadian Equities Model Portfolio Transactions – October 2018

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Canadian Model Portfolios, which will be effective on October 19th after market close. Here are the details:

 

Ins:

  1. Parkland Fuel Corporation (PKI) – Market Trend. Increase in Energy sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. West Fraser Timber Co. Ltd. (WFT) – Intra Sectorial transaction. WFT replaced OSB, whose score fell below minimum.

 

Outs:

  1. Power Financial Corporation (PWF) – Market Trend. Decrease in the Financial sector as seen in the Top 100 index.
  2. Norbord Inc (OSB) – SP Score. OSB score fell below minimum.

 

You can also find the transactions on Inovestor For Advisors, in the Model Portfolios – StockPointer Canada section.

Please contact us for more information.

 

The Inovestor Team

 

It is recommended that you do your own analysis prior to investing in any stock that we suggest. The information contained in this message is provided for informational purposes only and should not be interpreted as investment advice or recommendation to buy or sell any specific securities.

ADR-Large Portfolio Transactions – September 3rd 2018

We have rebalanced the Nasdaq Inovestor Global Index (Link on Nasdaq) based on our US and International Model Portfolios, which will be effective on Septemeber 21st after market close. On July 12th Vina Concha Y Toro was delisted  from the NYSE. Here are the transaction details for the ADR:

Buys:

 

1) Ternium S.A. Sponsored ADR (TX) – Market Trend. Increase in the Materials sector as seen in the Top 100 index therefore we increased our position in the portfolio.

2) Compania Cervecerias Unidas S.A. Sponsored ADR (CCU) – Market Trend. Increase in the Consumer Staplers sector as seen in the Top 100 index therefore we increased our position in the portfolio.

3) Diageo plc Sponsored ADR (DEO) – Stock replacement.  VCO was delisted on July 12th.

4) Allergan pcl (AGN) – Market Trend. Increase in the Health Care sector as seen in the Top 100 index, we increased our position in the portfolio.

 Sells:

1) Golar LNG Partners LP (GMLP) – Market Trend. Decrease in the industrials sector as seen in the Top 100 index.

2) Signet Jewelers Limited (SIG) – Market Trend.  We decreased the number of holdings in Consumer Discretionary sector following index allocation.

3) Infosys Limited Sponsored ADR (INFY) – Market Trend. Decrease in the Information Technology sector as seen in the Top 100 index.

You can find the transactions on Inovestor For Advisors, under the section Model Portfolios – StockPointer US.

 

The Inovestor Team

US-Large Portfolio Transactions – September 3rd 2018

We have rebalanced the Nasdaq Inovestor Global Index (Link on Nasdaq) based on our US and International Model Portfolios, which will be effective on Septemeber 21st after market close. Here are the transaction details:

Buys:

 

1) Hormel Foods Corporation (HRL) – Market Trend. Increase in the consumer staples sector as seen in the Top 100 index therefore we increased our position in the portfolio.

2) Allstate Corporation (ALL) – Market Trend. Increase in the Financials sector as seen in the Top 100 index therefore we increased our position in the portfolio.

3) Eastman Chemical Company (EMN) – Market Trend. Increase in the Materials sector as seen in the Top 100 index, we increased our position in the portfolio.

 Sells:

1) Sherwin-Williams Company (SHW) – Market Trend. Decrease in the industrials sector as seen in the Top 100 index.

2) Pinnacle West Capital Corporation (PNW) – Market Trend.  We decreased the number of holdings in utilities sector following index allocation.

3) Apple Inc. (AAPL) – Market Trend. Decrease in the Information Technology sector as seen in the Top 100 index.

You can find the transactions on Inovestor For Advisors, under the section Model Portfolios – StockPointer US.

 

The Inovestor Team