Tag

Canada

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.

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.

StockPointer® Canadian Equities Model Portfolio Transactions – July 2019

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

In:

  1. Telus Corporation (T) – Market Trend. Increase in Telecommunication sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Out:

  1. IA Financial Corporation (IAG) – Market Trend. Decrease in the Financial sector as seen in the Top 100 index.

StockPointer® Canadian Equities Model Portfolio Transactions – April 2019

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

Ins:

  1. Great-West Lifeco Inc. (GWO) – Market Trend. Increase in Financial sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. Norbord Inc (OSB) – Market Trend. Increase in Materials sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. Open Text Corporation (OTEX) –  Market Trend. Increase in Information Technology sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Outs:

  1. The North West Company Inc (NWC) – Market Trend. Decrease in the Consumer Staple sector as seen in the Top 100 index.
  2. Parkland Fuel Corporation (PKI) – Market Trend. Decrease in the Energy sector as seen in the Top 100 index.
  3. CAE Inc. (CAE) –  Market Trend. Decrease in the Industrials sector as seen in the Top 100 index.

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® Canadian Equities Model Portfolio Transactions – April 2019

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

Ins:

  1. Great-west Lifeco inc. (GWO) – Market Trend. Increase in Financial sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  2. Norbord Inc (OSB) – Market Trend. Increase in Materials sector as seen in the Top 100 index therefore increasing our position in the portfolio.
  3. Open Text Corporation (OTEX) –  Market Trend. Increase in Information Technology sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Outs:

  1. THE NORTH WEST COMPANY INC (NWC) – Market Trend. Decrease in the Industrials sector as seen in the Top 100 index.
  2. Parkland Fuel Corporation (PKI) – Market Trend. Decrease in the Energy sector as seen in the Top 100 index.
  3. CAE Inc. (CAE) –  Market Trend. Decrease in the Industrials 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

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.

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