Also available in PDF: MIR Portfolios August 2018
Investment Commentary (August 2018)
As a result of ongoing headwinds from rising interest rates and ongoing global trade protectionist policies, I am reducing my equity content by 2.5% with cash weights going up by the same amount.
After these changes cash will represent 37.5% and 32.5% of the Income and Growth portfolios respectively.
I am reducing my equity weight for both Europe and the Emerging Markets to a combined total of 6%. Last month the weight was 8.8%. The US has a much stronger economy currently and has the upper hand in these ongoing trade talks.
Further exacerbating the current problems are financial concerns in some Emerging Market countries like Turkey and Argentina. Most of these countries’ debts are denominated in US dollars, so the recent US greenback strength puts enormous financial hardship in Emerging Market countries.
Saudi Arabia’s reaction to a recent Canadian government tweet in regards to a human rights issue seemed quite extreme to me. It looks like Trump and company gave their full blessing to the Saudis to go after Canada. It just shows you how slimy Trump really is.
In regards to NAFTA, I think the Canadian government must give some concessions to the US to get the deal done. Revoking the supply management dairy tariffs seems like a no brainer to me, but at the moment all three Canadian political parties are against getting rid of it. Alternatively, accepting a five year sunset clause seems like a good compromise to me that would be palatable to all three Canadian political parties in addition to the US.
However nothing has been resolved at the moment and this creates a lot of uncertainty in the capital markets.
In terms of North American equity sectors, I remain overweight the 65% US 35% Canada benchmark weights for Financials, Energy, Industrials, Consumer Discretionary and Technology.
I remain underweight Telcos, Consumer Staples, Utilities and Real Estate.
I have just gone to underweight the Materials sector with ongoing headwinds from a rising US dollar globally, combined with slowing of economic growth in China and the continuation of the trade wars.
I remain market weight the Healthcare sector.
I added Shopify to the Growth portfolio in the Technology sector several weeks ago. Their recent quarter showed the continuation of strong revenue growth.
I am removing Facebook from the Growth portfolio’s technology sector. The share price has recovered somewhat from its recent price weakness, but the company indicated in its last quarter that revenue growth would slow markedly and expenses would climb. Alphabet, already in my Growth portfolio, does not appear to have the same negative issues as Facebook and yet it still offers significant growth opportunities.
In the healthcare sector I added Danaher to both portfolios. The US company offers a solid dividend and continues to provide strong growth in free cash flow and dividends.
I am adding Finning International to both portfolios in the Industrial Sector. The company is the Caterpillar dealer for western Canada and offers a solid dividend and good earnings growth prospects.
In the Utilities sector, I am switching out of Emera into Algonquin Power for both portfolios. Algonquin offers better growth prospects and it is much less leveraged than Emera.
Lastly in the Consumer Discretionary sector, I am removing JD.com from the Growth portfolio. While I continue to like the company over the long term, it is facing some very serious financial issues in China predicated largely from Trump’s ongoing trade war. In this current environment in China, I favour only having the larger and stronger Alibaba.
McMurtry Investment Report – Portfolios (August 2018)
|Cash||Alterna Bank – High Interest Savings (2.05% current rate)||Alterna Bank – High Interest Savings (2.05% current rate)|
|EQ Bank – High Interest Savings ( 2.30% current rate)||EQ Bank – High Interest Savings ( 2.30% current rate)|
|Bonds||iShares XSB Short Term||iShares XSB Short Term|
|iShares XFR Floating Rate||iShares XFR Floating Rate|
|iShares CBO 1-5 Ladder Corp||iShares CBO 1-5 Ladder Corp|
|iShares CLF 1-5 Ladder Gov’t||iShares CLF 1-5 Ladder Gov’t|
|Preferreds||Security||Dividend Yield %||Security||Dividend Yield %|
|Enbridge Pfd V Enb.pr.V US||6.20||Enbridge Pfd V Enb.pr.V US||6.20|
|Horizons Active Mgt. Pfd HPR||3.78||Horizons Active Mgt. Pfd HPR||3.78|
|Industrial Alliance IAG.PR.G||3.94||Industrial Alliance IAG.PR.G||3.94|
|Common Stocks||Security||Dividend Yield %||Security||Dividend Yield %|
|Financials||Royal Bank RY||3.70||Royal Bank RY||3.70|
|National Bank||3.89||National Bank||3.89|
|TD TD||3.47||TD TD||3.47|
|CIBC CM||4.48||CIBC CM||4.48|
|Sun Life SLF||3.57||Sun Life SLF||3.57|
|JP Morgan JPM US||1.95||JP Morgan JPM US||1.95|
|Bank of America BAC US||1.94||Bank of America BAC US||1.94|
|Citibank C US||2.50||Citibank C US||2.50|
|Goldman Sachs GS US||1.35||Goldman Sachs GS US||1.35|
|Manulife MFC||3.64||Manulife MFC||3.64|
|T. Rowe Price TROW US||2.35||T. Rowe Price TROW US||2.35|
|iUnits US Regional Banks IAT US||1.64||iUnits US Regional Banks IAT US||1.65|
|Keycorp KEY US||2.40||Keycorp KEY US||2.40|
|Blackrock BLK US||2.49||Blackrock BLK US||2.49|
|Paychex PAYX US||3.25||Paychex PAYX US||3.25|
|PNC Fin’l PNC US||2.62||PNC Fin’l PNC US||2.62|
|Visa V US||0.61|
|Energy||Suncor SU||2.63||Suncor SU||2.63|
|Freehold FRU||5.41||Freehold FRU||5.41|
|Whitecap WCP||3.77||Whitecap WCP||3.77|
|Torc TOG||3.78||Torc TOG||3.78|
|Pembina Pipe Lines PPL||4.87||Pembina Pipe Lines PPL||4.87|
|Enbridge ENB||5.81||Enbridge ENB||5.81|
|Vermilion Energy VET||6.86||Vermilion Energy VET||6.86|
|Centennial Resources CDEV US||0.00|
|Step Energy STEP||0.00|
|Parex Resources PXT||0.00|
|Materials||Agnico Eagle AEM||1.14||Agnico Eagle AEM||1.14|
|Franco Nevada FNV||1.35||Franco Nevada FNV||1.35|
|BMO Global Base Metal ETF ZMT||2.61||BMO Global Base Metal ETF ZMT||2.61|
|Trevali Mining TV||0.00|
|Hudbay Minerals HBM||0.34|
|Industrials||DowDuPont DWDP US||2.21||DowDuPont DWDP US||2.21|
|Applied Materials AMAT US||1.65||Applied Materials AMAT US||1.65|
|Toromont TIH||1.38||Toromont TIH||1.38|
|WSP Global WSP||2.03||WSP Global WSP||2.03|
|Canadian Pacific CP||1.01||Canadian Pacific CP||1.01|
|General Dynamics GD US||1.86||General Dynamics GD US||1.86|
|SNC Lavalin SNC||2.17||SNC Lavalin SNC||2.17|
|Guggenheim Eq WT IND RGI US||1.14||Guggenheim Eq Wt IND RGI US||1.14|
|Honeywell HON US||1.87||Honeywell HON US||1.87|
|Finning FTT||2.58||Finning FTT||2.58|
|Fedex FDX US||1.06|
|Consumer Discretionary||Home Depot HD US||2.09||Home Depot HD US||2.09|
|Sleep Canada ZZZ||2.39||Sleep Canada ZZZ||2.39|
|Stanley Black and Decker SWK US||1.77||Stanley Black and Decker SWK US||1.77|
|Canadian Tire CTC.A||2.21||Canadian Tire CTC.A||2.21|
|Amazon AMZN US||0.00||Amazon AMZN US||0.00|
|Kohl’s KSS US||3.30||Kohl’s KSS US||3.30|
|Magna MG||2.49||Magna MG||2.49|
|Lowes LOW US||1.93||Lowes LOW US||1.93|
|Carnival Cruise CCL US||3.38||Carnival Cruise CCL US||3.38|
|Alibaba BABA US||0.00|
|Telecom||Rogers B RCI.B||2.80||Rogers B RCI.B||2.80|
|Consumer Staples||Alimentation Couche Tard ATD.b||0.67||Alimentation Couche Tard ATD.b||0.67|
|Loblaws L||1.72||Loblaws L||1.72|
|Constellation Brands STZ US||1.42||Constellation Brands STZ US||1.42|
|Unilever PLC UL US||3.18||Unilever PLC UL US||3.18|
|Technology||Apple AAPL US||1.53||Apple AAPL US||1.53|
|Microsoft MSFT US||1.58||Microsoft MSFT US||1.58|
|Open Text OTEX||1.67||Open Text OTEX||1.67|
|Nvidia NVDA US||0.25|
|ETFMG Prime Cyber Sec. HACK US||0.11|
|Alphabet GOOGL US||0.00|
|Utilities||Algonquin Power AQN||5.14||Algonquin Power AQN||5.14|
|Fortis FTS||3.97||Fortis FTS||3.97|
|Healthcare||Abbott Labs ABT US||1.71||Abbott Labs ABT US||1.71|
|Johnson & Johnson JNJ US||2.72||Johnson & Johnson JNJ US||2.72|
|Merck MRK US||2.91||Merck MRK US||2.91|
|US Healthcare iShares ETF IYH US||1.06||US Healthcare iShares ETF IYH US||1.06|
|United Healthcare UNH US||1.42||United Healthcare UNH US||1.42|
|Eli Lilly LLY US||2.28||Eli Lilly LLY US||2.28|
|CVS US||3.09||CVS US||3.09|
|Danaher DHR US||0.64|
|Thermo Fisher Scientific TMO US||0.29|
|IBB Biotech ETF IBB US||0.27|
|Real Estate||Cdn Apt. REIT CAR.un||2.87||Cdn. Apt. REIT CAR.un||2.87|
|InterRent REIT IIP.un||2.42||InterRent REIT IIP.un||2.42|
|Summit REIT SMU.un||5.82||Summit REIT SMU.un||5.82|
|Chartwell REIT CSH.un||3.86||Chartwell REIT CSH.un||3.86|
|European Equity||iShares MSCI Europe XEU||4.39||iShares MSCI Europe XEU||4.39|
|Emerging Markets||iShares MSCI Emer. Mkts XEC||0.96||iShares MSCI Emer. Mkts XEC||0.96|
McMurtry Investment Report – Sector Weights (August 2018)
|Equity Sector Weights (%)|
|Sector||My Weight||TSX Comp||S&P 500||65 % US / 35% CDN|
McMurtry Investment Report Asset Mix (August 2018)
|Asset Mix – Income and Growth Portfolios|