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McMurtry Investment Report – Portfolios (February 2018)
|Cash||Alterna Bank – High Interest Savings (2.05% current rate)Alterna Bank High||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||4.08||Enbridge Pfd V Enb.pr.V US||4.08|
|Horizons Active Mgt. Pfd HPR||3.66||Horizons Active Mgt. Pfd HPR||3.66|
|Trans Canada Pipelines rate reset preferred TRP.PR.K||4.72||Trans Canada Pipelines rate reset preferred TRP.PR.K||4.72|
|Common Stocks||Security||Dividend Yield %||Security||Dividend Yield %|
|Financials||Royal Bank RY||3.45||Royal Bank RY||3.45|
|National Bank||3.76||National Bank||3.76|
|TD TD||3.22||TD TD||3.22|
|CIBC CM||4.28||CIBC CM||4.28|
|Sun Life SLF||3.42||Sun Life SLF||3.42|
|JP Morgan JPM US||1.95||JP Morgan JPM US||1.95|
|Bank of America BAC US||1.51||Bank of America BAC US||1.51|
|Citibank C US||1.63||Citibank C US||1.63|
|Manulife MFC||3.09||Manulife MFC||3.09|
|T. Rowe Price TROW US||2.03||T. Rowe Price TROW US||2.03|
|iUnits US Regional Banks IAT US||1.44||iUnits US Regional Banks IAT US||1.44|
|Keycorp KEY US||1.96||Keycorp KEY US||1.96|
|Blackrock BLK US||2.05||Blackrock BLK US||2.05|
|Paychex PAYX US||3.12||Paychex PAYX US||3.12|
|PNC Fin’l PNC US||1.90||PNC Fin’l PNC US||1.90|
|Visa V US||0.63|
|Energy||Suncor SU||2.89||Suncor SU||2.89|
|Freehold FRU||4.42||Freehold FRU||4.42|
|Whitecap WCP||3.38||Whitecap WCP||3.38|
|Torc TOG||3.50||Torc TOG||3.50|
|Pembina Pipe Lines PPL||5.22||Pembina Pipe Lines PPL||5.22|
|Enbridge ENB||5.92||Enbridge ENB||5.92|
|Centennial Resources CDEV US||0.00|
|Parex Resources PXT||0.00|
|Materials||Agnico Eagle AEM||0.96||Agnico Eagle AEM||0.96|
|Franco Nevada FNV||1.26||Franco Nevada FNV||1.26|
|BMO Global Base Metal ETF ZMT||1.29||BMO Global Base Metal ETF ZMT||1.29|
|Trevali Mining TV||0.00|
|Hudbay Minerals HBM||0.19|
|Industrials||DowDuPont DWDP US||2.02||DowDuPont DWDP US||2.02|
|New Flyer Ind NFI||2.21||New Flyer Ind NFI||2.21|
|WSP Global WSP||2.51||WSP Global WSP||2.51|
|Canadian Pacific CP||0.98||Canadian Pacific CP||0.98|
|General Dynamics GD US||1.50||General Dynamics GD US||1.50|
|SNC Lavalin SNC||2.01||SNC Lavalin SNC||2.01|
|Guggenheim Eq WT IND RGI US||1.07||Guggenheim Eq Wt IND RGI US||1.07|
|Honeywell HON US||2.01||Honeywell HON US||2.01|
|Consumer Discretionary||Home Depot HD US||1.76||Home Depot HD US||1.76|
|Sleep Canada ZZZ||2.03||Sleep Canada ZZZ||2.03|
|Stanley Black and Decker SWK US||1.51||Stanley Black and Decker SWK US||1.51|
|Canadian Tire CTC.A||2.10||Canadian Tire CTC.A||2.10|
|Amazon AMZN US||0.00||Amazon AMZN US||0.00|
|Kohl’s KSS US||3.34||Kohl’s KSS US||3.34|
|Magna MG||1.99||Magna MG||1.99|
|Lowes LOW US||1.56||Lowes LOW US||1.56|
|Alibaba BABA US||0.00|
|JD.com JD US||0.00|
|Telecom||Rogers B RCI.B||3.21||Rogers B RCI.B||3.21|
|Consumer Staples||Alimentation Couche Tard ATD.b||0.55||Alimentation Couche Tard ATD.b||0.55|
|Loblaws L||1.61||Loblaws L||1.61|
|Pepsico PEP US||2.69||Pepsico PEP US||2.69|
|Unilever PLC UL US||2.99||Unilever PLC UL US||2.99|
|Technology||Apple AAPL US||1.51||Apple AAPL US||1.51|
|Microsoft MSFT US||1.81||Microsoft MSFT US||1.81|
|Open Text OTEX||1.62||Open Text OTEX||1.62|
|Facebook FB US||0.00|
|Nvidia NVDA US||0.25|
|Alphabet GOOGL US||0.00|
|Utilities||Emera EMA||4.92||Emera EMA||4.92|
|Fortis FTS||3.98||Fortis FTS||3.98|
|Healthcare||Abbott Labs ABT US||1.79||Abbott Labs ABT US||1.79|
|Bristol Myers BMY US||2.50||Bristol Myers BMY US||2.50|
|Johnson & Johnson JNJ US||2.36||Johnson & Johnson JNJ US||2.36|
|Merck MRK US||3.17||Merck MRK US||3.17|
|US Healthcare iShares ETF IYH US||1.03||US Healthcare iShares ETF IYH US||1.03|
|United Healthcare UNH US||1.27||United Healthcare UNH US||1.27|
|Thermo Fisher Scientific TMO US||0.28|
|IBB Biotech ETF IBB US||0.31|
|Real Estate||Cdn Apt. REIT CAR.un||3.57||Cdn. Apt. REIT CAR.un||3.57|
|InterRent REIT IIP.un||2.88||InterRent REIT IIP.un||2.88|
|Chartwell REIT CSH.un||3.72||Chartwell REIT CSH.un||3.72|
|European Equity||BMO European ETF ZEQ||2.09||BMO European ETF ZEQ||2.09|
|Emerging Markets||iShares MSCI Emer. Mkts XEC||2.01||iShares MSCI Emer. Mkts XEC||2.01|
Investment Commentary (February 2018)
As highlighted in both my recent blog and newsletter, global economies continue to expand in unison and the probability of an impending recession remains low.
In my opinion the recent stock market decline was not a precursor of a more serious economic meltdown, but simply a valuation correction.
I am reducing my cash component by 3% and using the proceeds to add to my US equity exposure. Please exercise caution in buying as markets will continue to experience a sharp increase in volatility.
I am also reducing my Canadian weight of the North American equity exposure from 45% to 40% with the US now representing 60%.
I am leaving the fixed income selections the same as short duration is critical in a rising rate environment.
My equity sector bets are as follows:
- Continue to overweight financials, industrials, technology and consumer discretionary
- Continue to underweight utilities, REIT’s, telcos and consumer staples
- Continue to market weight healthcare and materials
Resulting from the continuing sharp increase in US shale production in conjunction with a US dollar that is in the midst of bottoming versus global currencies, I am reducing my sector weight in Energy from Market Weight to Underweight once again. I am also deleting Spartan Energy from the Growth portfolio in conjunction with lowering my energy exposure. The price discount between Western Canadian Select crude prices and West Texas Intermediate is at the upper end of its historical range as a result of ongoing pipeline issues.
In the Industrial sector, I am adding Honeywell to both portfolios. It has recently declined in this market selloff and now provides a good entry point. The company’s product mix is well diversified and in recent years the percentage of recurring business has been rising. As indicated in my mid month blog, I am removing Knowles from the Growth portfolio with its high percentage of revenues coming from Apple.
In the Financial sector I am adding National Bank to both portfolios. It has continued to outperform the other Canadian banks with its strong management and increased exposure into the highly profitable wealth management area. I am also adding the US payroll processor, Paychex, to both portfolios.
US employment continues to expand and Paychex specializes in small to midsized businesses. As indicated in my mid month blog I have added PNC, a large US regional bank to both portfolios. US financials continue to benefit from rising rates, less government regulation and strong loan growth.
In the healthcare sector I am adding United Healthcare after its recent share price decline to both portfolios. It is the largest medical insurance company in the US and is growing rapidly.
In the Consumer discretionary area, I am adding Dollarama to the Growth portfolio. The stock has declined quite a bit in this recent market decline, yet its overall revenue and earnings growth continues to shine. I am also adding Magna, the Canadian auto parts company to both portfolios. As a result of the recent market decline and ongoing NAFTA uncertainty, the stock’s PE multiple remains very low. Should any positive news emulate from these NAFTA talks, the share price will respond favourably. The company has a large percentage of revenues derived from Europe and is heavily involved in the new automobile technology towards both electric and driverless cars. I also added Lowes in my mid month blog to both portfolios. Both Home Depot and Lowes are benefitting from both the home repair and new home construction markets and their revenues have not been affected by the presence of Amazon.
I am also adding Alibaba to the growth portfolio. Alibaba is the Chinese equivalent of Amazon and is growing at a rapid rate. Although the stock has a high PE, it is not high when compared to both its historical and its projected earnings growth rate.
Finally in the technology sector, I am reinstating Apple to both portfolios. The stock has come down a long way from its recent high as a result of both an overall market selloff combined with some disappointing sales projections from its new high priced iPhone. The stock is very cheap at current levels and the company continues to buy back stock which increases earnings per share.
McMurtry Investment Report – Sector Weights (February 2018)
|Equity Sector Weights (%)|
|Sector||My Weight||TSX Comp||S&P 500||60 % US / 40 % CDN|
McMurtry Investment Report Asset Mix (February 2018)
|Asset Mix – Income and Growth Portfolios|