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Model Portfolio

Portfolio Manager’s February Comment for January Results

The Canadian stock market as defined by the S&P-TSX posted another positive return for the month of January. This positive outcome took place despite global worries resulting from the coronavirus potential impact on the economy.

Last month, the S&P/TSX TR realised a 1.7% return, while the S&P500 TR was essentially flat and the MSCI ACWI ex USA declined by 2.7%. On a one-year basis, the S&P/TSX TR was up 15%, the S&P500 TR posted a 21.7% return while the MSCI ex USA lagged with a 10.5% return.

The best TSX sector for January was Information Technology up 9.4% followed by Utilities up by 7.6%. The worst sector for the month was Health Care down 2.6%.

The NQICAT was up 1.5% in January and 16.6% on a one-year basis. The NQICAT’s best performer was Brookfield Infrastructure (BIP.UN) up 11.1% closely followed by Constellation Software (CSU). BIP.UN was up in sympathy with other Utility stocks rallying as long term interest rate were coming down.

The worst performer was Parex Resources (PXT) the only oil stock of the portfolio. Every energy producer’s stocks price of the S&P-TSX Index came down in January. Energy producers were negatively impacted by a weaker outlook for oil demand, again caused by the fears around the Coronavirus and its impact on the economy.

2 stocks were sold and bought in the strategy in January. Norbord (OSB) was sold because its economic performance indicator turned negative. OSB cost of capital was higher than its return on capital as a consequence of its most recent quarterly report. OSB was replaced by Kirkland Lake Gold (KL). KL had the highest SP score in the material sector. Ritchie Bros. Auctionneers (RBA) was the other stock sold. The industrial sector EVA weight had having declined in the aggregate total profit. We had to sell the lowest SP score stock of the industrial sector which happened to be RBA. The consumer discretionary sector weight increased and MTY food group (MTY) was the stock with the best SP score in its sector that was not already in the portfolio.

StockPointer® Canadian Equities Model Portfolio Transactions – January 2020

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Canadian Model Portfolio, which will be effective on January 17th after market close. Here are the details:

In:

1. Kirkland Lake Gold (KL) – Intra-sectoral transaction.

2. MTY Food Group (MTY)– Market Trend – Increase in the Consumer Discretionary sector as seen in the Top 100 index.

 

Out:

1. Ritchie Bros Auctioneers Inc. (RBA) – Market Trend – Decrease in the Industrial sector as seen in the Top 100 index.

2. Nordbord (OSB) – Not in the top performers of its sector.

 

Portfolio Manager’s January comment For Q4 2019

Global equities ended the year with a bang! The S&P/TSX Composite Total Return Index increased by 3.2% in Q4 adding to this years’ gains for a total return of 22.9% in 2019. During Q4, the S&P500 produced an 8.5% return for an annual total return of 28.9% while the MSCI ACWI ex US posted a 9.0% return leading to a 22.1% YTD total return.
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, and finally the year ended with a phase one agreement between the US and China.
In Canada, the best Q4 sectors were Info-Tech up 10.7% and Materials up 7.4%, the worst sector was Healthcare down 6.0%. For the year, Info-Tech and Utilities were the top performers up 63.5% and 31.6%, respectively, while Healthcare was the weakest on, down 11.4%.
NQICA in Q4 returned 2.5% leading to an annual total return of 24.1% versus the S&P/TSX TR composite which returned 3.2% in Q4 and 22.9% YTD.
The worst performers in the NQICA in Q4 were Gildan Activewear (GIL) with a return of -18.1%, due to lower than expected results, and Metro (MRU) with a -7.8% return. On the other hand, the best performers were Parex up 19.0%, due to excellent results and new field discoveries, and National Bank up 10.4% on the back of an excellent Q4.

StockPointer® US and ADR Model Portfolio Transactions – December 2019

We have rebalanced the Stockpointer® US and ADR model portfolios which are effective now. Here are the details for the US portfolio :

Ins:

  1. Domino’s Pizza (DPZ) – Market Trend. Increase in the Consumer Discretionnary sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.
  2. Cummins (CMI) – Intra-sectoral transaction. In the top of its sector.
  3. Medical Properties Trust, Inc. (MPW) – Intra-sectoral transaction. In the top of its sector.
  4. Western Union (WU) – Intra-sectoral transaction. In the top of its sector.
  5. Dunkin’ Brands (DNKN) – Intra-sectoral transaction. In the top of its sector.
  6. Constellation Brands, Inc. Class A (STZ) – Intra-sectoral transaction. In the top of its sector.

Outs:

  1. TransDigm Group (TDG) – Market Trend. Decrease in the industrial sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.
  2. Expeditors International (EXPD) – Intra-sectoral transaction. No longer in the top of its sector
  3. Credit Acceptance (CACC) – Intra-sectoral transaction. No longer in the top of its sector.
  4. T. Rowe Price (TROW) – Intra-sectoral transaction. No longer in the top of its sector.
  5. Thor Industries, Inc. (THO) – Intra-sectoral transaction. No longer in the top of its sector.
  6. Lamb Weston (LW) – Intra-sectoral transaction. No longer in the top of its sector.

Here are the details for the ADR portfolio :

Ins:

  1. Megacable (MHSDF) – Market Trend. Increase in the Consumer Discretionary sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.
  2. Banco Santander Brasil (BSBR) – Intra sectoral transaction. In the top of its sector.


Outs:

  1. Elbit Systems (ESLT) – Market Trend. Decrease in the industrial sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.
  2. BBVA Argentina (BBAR) – Intra sectoral transaction. No longer in the top of its sector.

Portfolio Manager’s December comment For November Results

The Canadian stock market realised another month of positive returns in November. This positive outcome unfolded as reported quarterly results were coming in line with investors expectations and in a context of diminishing international trade tensions.

The S&P/TSX Total Return Index rose by 3.6% in November and the S&P 500 also rose by 3.6% while the MSCI World produced a 0.9% positive return. At November end, the 12-months S&P/TSX Total Return Index gain was 15.7% nearly in line with the S&P500 gain of 16.1% and higher than the MSCI World 12-month increase of 11.8%.
The best TSX sector for the month of November was Information Technology up 8.6%, followed by Consumer Staples up 5.8%, and Consumer Discretionary up 5.5%. On the contrary, the worst performing sectors were Health Care (-2.8%), Real Estate (-1.0%) and Material down (0.1%).

Looking more specifically at INOC, the fund was up 5.4% and the best performers in November were Gildan Activewear (+16.4%) the t-shirt manufacturer, Parex Energy (10.1%) an oil producer with assets in Colombia, and Alimentation Couche-Tard. (+10.0%), the Canadian convenience store operator with a global footprint.
On the contrary, the weakest contributor to INOC was Norbord, which was down 4.1%, on after a strong showing in October. The negative contributors were Equitable down 4.1% and TD Bank down 1.8%. All the other constituents of INOC had a positive performance for the month of November.

Portfolio Manager’s November Comment For October Results

The S&P/TSX Total Return Index declined by 0.9% in October, the S&P 500 rose by 2.2% and the MSCI ACWI ex. USA rose by 3.5%. At October end, the YTD S&P/TSX Total Return Index was up 18.1% which was lower than the S&P500 23.2% increase but higher than the MSCI ACWI ex. USA return of 16.0%.

The market made new highs in October as trade disputes concerns were dissipating and Q3 financial results were coming in line to better than expected. At month’s end, the US 10-year treasury yields were firming up in both the US and Canadian markets. The best TSX sector in October was Materials up 2.9%, followed by Industrials, up 1%. On the contrary, the worst performing sector was Health Care principally due to the poor performance of the Cannabis sector.

Looking more specifically at INOC, the best performers in October were Norbord (+19.7%), the Canadian manufacturer of wood-based products and leading producer of Oriented Strand Board. The next best performer was Equitable Group (+9.2%), %), a Canadian bank with the bulk of its business involved in the residential mortgages sector.

The NASDAQ Inovestor Canadian Equity Index YTD and Yearly returns stood at 20.2% and 14.7, ahead of the S&P TSX TR corresponding figures of 18.1% and 13.2%.

The Inovestor strategy was rebalanced in October. We increased exposure to the Industrials with the addition of Ritchie Bros Auctioneers Inc. (RBA) and Evertz (ET). We also added Parkland Fuel Corporation (PKI) as their results are strengthening now that their strategic acquisitions are being successfully integrated.

We exited Bell Canada (BCE), Canadian Imperial Bank of Commerce (CM) and Linamar Corp (LNR). These were the holdings with the weakest economic value added (EVA) figures in their respective economic sector.

StockPointer® Canadian Equities Model Portfolio Transactions – October 2019

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

In:

1. Ritchie Bros Auctioneers Inc. (RBA) – Market Trend. Increase in the Industrial sector as seen in the Top 100 index.

2. Evertz (ET) – Market Trend – Increase in the Industrial sector as seen in the Top 100 index.

3. Parkland Fuel Corporation (PKI) – Market Trend – Increase in the Energy sector as seen in the Top 100 index.

Out:

1. Bell Canada (BCE) – Market Trend. Decrease in the Telecommunications Services sector as seen in the Top 100 index.

2. Canadian Imperial Bank of Commerce (CM)- Market Trend. Decrease in the Financial sector as seen in the Top 100 index.

3. Linamar Corp (LNR) – Market Trend – Decrease in the Consumer Discretionary sector as seen in the Top 100 index.

Portfolio Manager’s Q3 Commentary

The S&P/TSX Composite Total Return Index increased by 2.5% in the third quarter. This adds to this years’ gains for a YTD return of 19.1%. During Q3, the S&P500 produced a 1.2% return for a YTD rate of 18.7% and the MSCI ACWI ex USA posted a 1.1% return leading to a 16.6% YTD total return.

Over the 3rd quarter, most company results were inline or better than expected. Interest sensitive sectors such as Utilities and REITS performed the best due to lower long-term interest rates.

In addition, the FED confirmed its dovish stance by reflecting the FED meeting minutes that were perceived to be accommodating. The FED had hinted that they would be open to reduce rates further if economic slowdown was visible. As a result, the Financials sector had the strongest sector rally in the month of September compared to the rest of the market.

NQICA in Q3 returned 3.9% leading to a YTD return of 21.1% versus the S&P/TSX composite which returned 2.5% in Q3 and 19.1% YTD. The one-year return for NQICA is 8.2% in comparison to the S&P/TSX which generated 7.1%.

The worst performers in the NQICA in Q3 were Stella Jones (SJ) with a return of -17.8%, due to the departure of the CEO, and CCL Industries (CCL.B) with a -16.52% return, due to poor quarterly results and increased insider selling. On the other hand, the best performers were Equitable Group (EQB) up 43.46%, due to excellent quarterly results and improvement in the Canadian real estate statistics, and Metro Inc. (MRU) up 19.11% based on great earnings and a positive update on the integration o the Jean-Coutu acquisition.

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

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

We have rebalanced the Nasdaq Inovestor Global Index based on our US and ADR Model Portfolios, which will be effective on September 20th after market close. Here are the details for the US Model Portfolio:

Ins:

1. Bristol-Myers Squibb Co. (BMY) – Market Trend. Increase in the Healthcare sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.

2. Lamb Weston Holdings Inc. (LW) – Intra-sectoral transaction.

3. Progressive Corp (Ohio) (PGR) – Intra-sectoral transaction.

Outs:

1. Sally Beauty Holdings Inc. (SBH)– Market Trend. Decrease in the Consumer Discretionary sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.

2. Kroger Co. (KR) – Not in the top performers of its sector.

3. Blackstone Group Inc. (BX) – Not in the top performers of its sector.

Here are the details for the International Model Portfolio:

Ins:

1. Brookfield Infrastructure Partners L.P. (BIP) – Market Trend. Increase in the Utilities sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.

Outs:

1. Unilever PLC (UL) – Market Trend. Decrease in the Consumer Staples sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.

Portfolio Manager’s September comment For August Results

The Canadian market has been the best performer in August due in part to a strong rally in previous metals (such as gold and silver) and a vigorous GDP of 3.6 versus 3.0 expected. On the other hand, the US GDP was weaker than expected at 2.0 versus 2.3. Global markets were also down as a result from fears of an economic slowdown: Brexit, Hong Kong unrests, inverted interest curve and tariff issues.

The S&P/TSX Total Return Index rose by 0.2% in August, the S&P 500 decreased by -1.8% and the MSCI World by -2.1%. At August end, the YTD S&P/TSX Total Return Index was up 17.1% which was higher than the S&P500 (16.7%) and higher than the MSCI World of 13.5%.

The best TSX sector in August was Information Technology up 7.7%, mainly due to the performance of Shopify, followed by Materials up 5.7%, with gold up 16.7% and silver up 15.4%. On the contrary, the worst performing sector was Health Care (-13%) principally due to the performance of the Cannabis sector.

Looking more specifically at INOC, the best performers in August were Metro Inc. (+9.43%), a Canadian food retailer in Quebec and Ontario, followed by Brookfield Infrastructure Partners (+8.21%), a publicly traded limited partnership involved in the acquisition and management of infrastructure assets globally. Both stocks rallied based on their defensive attributes and as of a result of the inversion of the yield curve.

On the contrary, the weakest contributor to INOC was Parex (PXT), which was down 9.62%, on weak energy prices. The other negative contributors were Linamar (LNR) and CCL Industries (CCL.B) due to disappointing results.