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Pascal Lefrancois

Portfolio Manager Commentary – October 2018

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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

Portfolio Manager Commentary – September 2018

By | Intelligence | No Comments

Horizons Inovestor Canadian Equity ETF (INOC)

The S&P/TSX Total Return Index ended the month of September down 0.89% as the Canadian equity
market was pressured lower on uncertainties surrounding a new trade agreement with the US.
Meanwhile, the Bank of Canada decided to maintain its overnight rate target at 1.5% and adopt a wait
and see approach. The Canadian dollar rose on higher crude oil prices and hawkish comments from
Governor Poloz at the Bank of Canada on a potential rate hike next month. Our Nasdaq Inovestor
Canadian Equity Index (NQICA) fell 1.83% for the same period, 94bps below the benchmark. Our sector allocation contributed -15bps as our decision to overweight discretionary, and underweight health care proved to be detrimental. Our stock selection contributed -79bps as a couple of our stocks clearly underperformed. You will find below the top three and bottom three contributors to performance.

The top three contributors to performance were:

  1. Equitable Group (EQB:CN), a thrifts & mortgage provider, rose 6.4% after origination activity,
    borrowing retention, loan growth all came better than expected in Q2 2018 last month.
  2. Linamar (LNR:CN), an auto part manufacturer, gained 3.7% as investors are optimistic the US
    and Canada will reach a trade agreement that won’t impose auto tariffs on Canadian vehicles.
  3. Couche-Tard (ATD.B:CN), a convenience store operator, increased 3.6% as it posted strong Q1
    2018 results: EPS of $1.15 (beat by $0.09) on Revenues of $19.3B (beat by $1.4B).

The bottom three contributors to performance were:

  1. Canadian Tire (CTC.A:CN), a general merchandise retailer, declined -7.3% after DOL reported
    weaker same-store sales and revised its guidance downward, which is a bad omen for CTC.A.
  2. Norbord (OSB:CN), a wood-based panel maker, dropped -13.8% after CIBC analyst downgraded
    the company’s outlook on lower-than expected building permits in the U.S. housing sector.
  3.  Dollarama (DOL:CN), a chain of dollar store operator, fell -17.6% after disappointing investor
    expectations in its Q2 2018: EPS of $0.43 (miss by $0.01) on Revenues of $868M (miss by $24M).

Best,

The Inovestor Asset Management Team

Release Notes 20180918.1

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Overview

This document details the changes that went into Production for Inovestor for Advisor on September 18, 2018.

Score Card of Apple inc.

Score Card

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The New Score Card Explained

As of September 18th, StockPointer subscribers will have access to a new ScoreCard that will provide more information and more accurate insights to investors. All legacy data remains but will now be displayed differently on the updated version of ScoreCard.

In addition to the upgraded user-interface, three new features have been added:

  • A new rating service that rates companies as Positive, Neutral, or Negative to provide a fundamental outlook of the company
  • A new factors exposure feature that scans the fundamentals of the company by looking at the quality, value, and growth factors as well as the risk exposure
  • Live market data versus the previous day data that featured in the older version

The menu has also been expanded to add a peers section and the navigation tab has been streamlined.

Download User Guide

Score Box

The SP Score is a proprietary scoring system based on StockPointer’s model. It’s a 12 factors algorithm and looks at quality and value factors. The weight for quality is 75% and 25% for value.

Positive Outlook: A company with sound financials who is generating higher returns on capital than costs of capital and who is trading at a reasonable price.

Negative Outlook: A company that is risky and creates very little to no wealth for its shareholders.

Neutral: The stock may have both positive and negative characteristics and fundamentally does not offer enough Quality and Value factors to score well.

Score Card of Apple inc.
This score represents the overall performance of a company by considering multiple risk and performance factors based on the StockPointer® model. A high score indicates a high-quality stock trading at a reasonable price.
The arrow and the number, represents the score variation since the last quarter.
The performance score is the performance portion of the overall score. By clicking on the information icon on the right, a detailed list of the different key performance indicators will be displayed.
The risk score is the risk portion of the overall score. Click on the information icon to obtain a detailed list of the different key performance indicators making up the score. This score evaluates the quality associated with the company. The lower the risk, the more likely the company will continue to perform well.
This figure represents the percentile ranking of the company based on its performance versus other companies listed in that country.
The line chart represents the TTM of the last available quarter and the 4 previous corresponding periods.
The upper card represents the 1y growth and the bottom card represents the 5y average growth.
The system rates the company: Positive Outlook, Negative Outlook and Neutral Outlook.
Quote
The factors exposure is meant to identify how a company is viewed based on numerous factors. The factors used to assess the company are listed under the “Peers” tab.
Quality – A green rating means that the company generates more wealth to its shareholders than the average. A red rating means that the company has unsustainable accounting performance and has a negative outlook.
Value – A green rating means that the company presents good value to investors. A red rating means that the stock is trading at a premium. Good quality and growth stocks will often trade at a premium.
Growth – A green rating indicates that the company is growing while a red rating indicates that either the company’s growth is slowing down or that the company is in a declining phase.
Risk – A green rating means that the company is less risky than the market and a red rating means that the company is riskier than the market.
View New Screener Features

Screener

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Filtering Companies Or Funds

The new screener is a user-friendly feature used to allow subscribers to filter stocks or funds according to a specific criterion. The following features have been included in the upgraded version:

  • Three different datasets to filter from:
    • Stockpointer (same criteria and data found on previous version)
    • StockGuide
    • Fund (data on Canadian funds and ETFs).
  • An “Export To CSV” feature.
  • New screen-able filters such as SPScore, Risk Score, and ratios such as Debt-Equity and Interest Coverage.
Screener screenshot
To start building a new screener, click “Create New Screener”
To select an existing screener, choose one from the list or type the name of the screener in the search box. Screeners can also be filtered by type (Saved or Predefined)

How to filter

Whether predefined or custom screeners, users will be able to screen for companies or funds using an array of different filters. The filters vary between the companies and funds given the different datasets. The filtering behavior and user experience between both datasets are similar, however. All filters can be adjusted based on user preferences.

image of screener
Search stocks based on the price of the previous day close and on the market value of capital or search funds based on NAVPS and AUM.
“Add Filters” function provides additional criteria to be included in the screener.
Display of all selected filters. All filters are modifiable.
While modifying a criterion, either a slider or list will appear to facilitate editing. Can show or hide filters.
When all applicable filters have been selected, click “Search” to screen all companies in accordance with the searched criteria. “Save Screener” provides the capability to retain the screened companies for future use. “Export to CSV” is a new functionality that allows the screener results to be exported to a CSV file.
Screener results are displayed in a list view. PfScan view provides a visual representation of the results.