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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