McMurtry Investment Report & Model Portfolios

McMurtry Investment Report Portfolios – January 2017

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McMurtry Investment Report Portfolios (January 2017)

Income Growth
Cash EQ Bank – High Interest Savings (2.0% current rate) EQ Bank – High Interest Savings (2.0% 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 %
  Horizons Active Mgt. Pfd  HPR 4.30 Horizons Active Mgt. Pfd  HPR 4.30
Common Stocks Security Dividend Yield % Security Dividend Yield %
Financials Royal Bank     RY 3.65 Royal Bank     RY 3.65
  TD Bank          TD 3.32 TD Bank         TD 3.32
  Sun Life         SLF 3.26 Sun Life         SLF 3.26
  JP Morgan    JPM  US 2.23 JP Morgan   JPM  US 2.23
  Bank of America BAC  US 1.36 Bank of America  BAC  US 1.36
  Manulife MFC 3.09 Manulife  MFC 3.09
  Firm Capital   FC 6.80 Visa  V  US 0.85
  First Data    FD US 0.00
Energy Freehold    FRU 3.39 Freehold  FRU 3.39
  Whitecap  WCP 2.30 Whitecap  WCP 2.30
  Crescent Point   CPG 1.97 Crescent Point  CPG 1.97
  Inter Pipeline  IPL 5.47
Materials Agnico Eagle   AEM 0.94 Agnico Eagle AEM 0.94
  Aphria APH 0.00
  HudBay Minerals  HBM 0.00
  Trevali Mining TV 0.00
  Roxgold   ROG.V 0.00
Industrials WSP Global    WSP 3.36 WSP Global  WSP 3.36
  Canadian Pacific CP 1.04 Canadian Pacific CP 1.04
  ZCL Composites ZCL 2.47
  Moog MOOG.a US 0.00
Consumer Discretionary Home Depot      HD  US 2.06 Home Depot      HD  US 2.06
  Sleep Canada  ZZZ 2.08 Sleep Canada ZZZ 2.08
  Stanley Black and Decker  SWK US 2.02 Stanley Black and Decker SWK US 2.02
  Dollarama DOL 0.41
Telecom BCE  BCE 4.70 BCE  BCE 4.70
Consumer Staples Alimentation Couche Tard   ATD.b 0.59 Alimentation Couche Tard  ATD.b 0.59
  Loblaws L 1.47 Loblaws L 1.47
  Pepsico PEP US 2.88 Pepsico PEP US 2.88
  Mondelez   MDLZ  US 1.71
Technology Apple   AAPL  US 1.97 Apple  AAPL US 1.97
  Microsoft  MSFT US 2.51 Microsoft  MSFT US 2.51
  Cisco    CSCO  US 3.44 Shopify  SH 0.00
  Facebook FB US 0.00
  Alphabet   GOOGL US 0.00
Utilities Fortis   FTS 3.86 Fortis   FTS 3.86
Healthcare Johnson & Johnson  JNJ  US 2.78 Johnson & Johnson  JNJ  US 2.78
  Walgreen Boots  WBA  US 1.81 Walgreen Boots  WBA  US 1.81
  United Health  UNH US 1.54 United Health  UNH US 1.54
  Bristol-Myers Squibb  BMY  US 2.67 Bristol-Myers Squibb  BMY  US 2.67
  CVS  CVS US 2.53 CVS   CVS US 2.53
  IBB Biotech ETF    IBB  US 0.19
Real Estate Cdn Apt. REIT   CAR.un 3.98 Cdn. Apt. REIT  CAR.un 3.98
  Chartwell REIT  CSH.un 3.83 Chartwell REIT  CSH.un 3.83
  Pure Industrial    PUR.un 5.58 Pure Industrial    PUR.un 5.58


Reasons for my Portfolio Changes

 Peter McMurtry, B.Com, CFA, Financial Writer

January 5, 2017

After my proposed changes to the December portfolios, I remain overweight Financials, Industrials, Consumer Discretionary and Technology. I am market weight materials and healthcare and underweight telecom, consumer staples, real estate and utilities. I have a slight underweight in energy.

For both the Income and Growth portfolios, I have added a 5% weight to the Horizons Active preferred ETF and reduced bonds by the same amount. The largest component of this actively managed ETF is invested in rate reset preferreds that benefit from raising interest rates.  This ETF provides a current yield of 4.3%.

In the financial sector, I have added Manulife to both portfolios with its attractive dividend yield of over 3%.  Rising interest rates greatly enhance the profitability of insurance companies.

Apart from modestly increasing the sector weight, I have made no other changes to the Energy sector.

I have increased the materials weight to market and have added Trevali Mining, a Canadian pure zinc producer. Zinc has the best supply / demand fundamentals of all the base metals.

In the industrials sector, I have modestly increased the sector weight and also added Canadian Pacific and Moog, a US defense contractor. CP has the most commodity exposure of the North American rails and continues to benefit from their tight operating cost controls. Adding Moog provides exposure to the highly lucrative US defense business that is expected to grow sharply under the new Republican administration. Lastly I removed Stella Jones that is experiencing some material problems in their railway tie business.

In the consumer discretionary sector, I have added both Dollarama and Sleep Canada and have removed Glentex, Aritzia and Time Warner. I am taking profits in Glentex, a US auto parts company and in Time Warner as well. Trump recently indicated his dislike with the proposed AT & T acquisition of Time Warner. I made a direct switch from Aritzia into Sleep Canada and have added the fast growing Dollarama to my portfolios. Both Sleep Canada and Dollarama have very strong same store sales numbers and do not face serious competition from online companies like Amazon. I have slightly reduced my sector weight, but remain overweight the group.

No changes were made to the telecom sector.

I have added Loblaws to the consumer staples area, but remain underweight the group.

I slightly reduced my sector weight in technology, but remain overweight. I removed CGI as it is fully valued at current levels.

No changes were made in the utilities sector.

No changes in the real estate sector except that I have reduced the weight.

Finally I have maintained market weight in the healthcare sector, but have made several changes.

I switched out of Anthem into United Health. The former is in the middle of a merger with Cigna and if the deal does not go through, Anthem will be required to pay a $1.5 billion breakup fee.

United Health is growing faster than Anthem and has been a frequent critic of Obamacare. This is likely to put the company in a favourable light with Trump. I have also added CVS, a major US drug retailer, after its recent share price decline following some market share erosion to Walgreen Boots.  The share price decline overreacted on the downside to this negative news and at current prices provides a buying opportunity.


McMurtry Investment Report – Sector Weights (January 2017)

Equity Sector Weights (%)


My Weight TSX Comp S&P 500




35.00 14.80 24.90


21.40 7.60




11.80 2.80




8.90 10.30


Consumer Disc.


5.00 12.00




4.80 2.70


Consumer Staples


3.80 9.40




2.70 20.80




2.80 3.20


Real Estate


3.00 2.90




0.60 13.60


Totals 100.00 99.80 100.10



McMurtry Investment Report – Asset Mix (January 2017) 

Asset Mix – Income and Growth Portfolios

% Income






















Please see our disclaimer at Copyright ©2017 McMurtry Investment Report. All rights reserved.


Also available in PDF: MIR Portfolios April 2019

Investment Commentary (April 2019)

Asset Mix Changes

Last week both the Canadian and US yield curve inverted where short rates exceeded longer maturities. For most of the past economic recessions, an inverted yield curve occurred 6-18 months before the onslaught of an economic slowdown. Consequently, this signal should not be taken lightly and brushed off as is frequently the case with economists stating that things are different this time.

This week the inversion of the curve went away in both Canada and the US with longer rates now slightly exceeding shorter maturities. However, the negative yield curve is still present in Europe where their economy continues to suffer.

US corporate bond spreads for both investment and High Yield securities had been creeping up in late December. However, year to date corporate spreads over US Treasuries have been coming down once again. Historically when corporate spreads widen this is a danger signal for an economic slowdown. The recent reduction is spreads is a positive sign that the economy may not be as weak as many pundits are saying.

Overall economic activity is definitely slowing globally. This is also true in the US but their economy is still growing on a relative basis much faster than Europe and Canada. Economic growth in the Chinese economy had been coming down sharply, but this week an announcement came out stating that their domestic industrial production started to revive after nearly nine months of decline. Several months ago the Chinese authorities began stimulating their domestic economy by lowering corporate taxes and increasing government spending. Once again this is a positive development.

The Federal Reserve has stopped increasing rates by emphatically stating that there will be no more rate increases for the remainder of the year.

US corporate profit growth has slowed dramatically from last year, while equity prices have rebounded sharply year to date. Equity valuations are no longer cheap as they were in late December.

This week the US / China trade talks have taken a more positive tone which is good for markets.

Taking all these factors into consideration, I have decided to leave the asset mix for both portfolios the same as last month. The jury is still out if an economic recession is imminent or only years away.

McMurtry Investment Report Asset Mix (April 2019)
Asset Mix – Income and Growth Portfolios
%Income Growth
Bonds – Regular20.0010.00
Bonds – High Yield5.005.00
Emerging Markets0.000.00

Equity Sectors

The main change to my equity sector recommendations is to reduce the Financial equity exposure from overweight to market weight the 55% US 45% Canada benchmark. This works out to a new weight of 21.25% of my North American equity exposure.

The reason for my reduction in weight for the Financial sector is all to do with interest rates and the slope of the yield curve. Lower rates combined with either a flat or inverted yield curve is not positive for the bank’s net interest margins. A slowing economy normally results in an increase in loan losses, another possible headwind.

For the other groups I remain market weight Energy, Utilities and Healthcare.

I remain overweight Technology, Industrials, Real Estate, Communication Services and Consumer Staples

I remain underweight Materials and Consumer Discretionary.

McMurtry Investment Report – Sector Weights (April 2019)
Equity Sector Weights (%)
SectorMy WeightTSX CompS&P 50055 % US /45% CDN
Consumer Disc.6.404.1010.107.40
Comm. Services8.505.8010.108.17
Consumer Staples6.253.907.305.77
Real Estate3.753.503.103.28

Common Equity Changes

In the Financial Services sector, I am replacing National Bank with Intact Financial for both portfolios. Intact is the largest property / casualty company in Canada and will benefit from the recent departure of AIG, a large US competitor from the Canadian market. Intact is raising insurance rates in Ontario and this will help to increase operating margins. Differing from life insurance companies, property and casualty insurance companies have much shorter term liabilities and are consequently not as negatively affected from flat to falling interest rates as the life companies are.

In the Technology sector, I am deleting Nokia from both portfolios. Huawei, the Chinese company and major competitor to Nokia has been continuously lobbying the global wireless providers to encourage them to continue buying their products. It is only in the US that the Chinese company has been banned with its alleged cybersecurity activities. Thus, Nokia has not been as much of a beneficiary from the 5G wireless ramp up as originally expected. In addition, a law firm has recently alleged that Nokia’s Alcatel – Lucent division has some very serious potential claims for security law violations. This creates a lot of uncertainty. My recommendation is to sell your Nokia shares and use the proceeds to purchase more Cisco, which will be a major beneficiary from the upcoming 5G implementation.

In the healthcare sector I am adding the Swiss dental implant company, Straumann Holdings ADR to my Growth portfolio. This American Depositary Receipt is not very liquid in the US market, so please always use limit orders when buying and selling this security. Despite this shortfall, this is a good quality company and one of the global leaders in the dental implant industry. The company is experiencing strong annual revenue and gross profit growth in addition to record EBITDA margins. The company has strong organic growth and operates in 100 countries globally. The global dental implant market is expected to grow at 4-5% globally this year and Straumann’s organic growth is sharply outperforming its competitors.

Lastly in the Materials sector, I am adding Osisko Metals to my Growth portfolio. The company is a small cap zinc exploration company that operates in both the Far North and in New Brunswick. The company has no long term debt and the level of insider buying is unusually high. Normally I do not even discuss insider buying, but the level of insider buying for this company is extraordinary. The supply / demand situation for zinc is the most favourable for all the base metals with inventory stockpiles at very low levels. Should the Chinese economy rebound the demand for zinc will increase accordingly.

Peter McMurtry, B.Com, CFA
Financial Writer
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McMurtry Investment Report – Portfolios (April 2019)
CashAlterna Bank – High Interest Savings (2.35% current rate)Alterna Bank – High Interest Savings (2.35% current rate)
 EQ Bank – High Interest Savings ( 2.30% current rate)EQ Bank – High Interest Savings ( 2.30% current rate)
Bonds -RegulariShares XSB Short TermiShares XSB Short Term
 iShares CBO 1-5 Ladder CorpiShares CBO 1-5 Ladder Corp
 iShares CLF 1-5 Ladder Gov’tiShares CLF 1-5 Ladder Gov’t
Bonds – High Yield CORPiShares XHY US High Yield CDN$  iShares XHY US High Yield CDN $ 
Common StocksSecurityDividend Yield %SecurityDividend Yield %
FinancialsRoyal Bank RY4.05Royal Bank RY4.05
 Bank of Montreal BMO4.00Bank of Montreal BMO4.00
 Bank of Nova Scotia BNS4.89Bank of Nova Scotia BNS4.89
 Intact Financial IFC2.69Intact Financial IFC2.69
 TD TD4.08TD TD4.08
 Sun Life SLF3.90Sun Life SLF3.90
 JP Morgan JPM US3.16JP Morgan JPM US3.16
 Bank of America BAC US2.17Bank of America BAC US2.17
 Citibank C US2.89Citibank C US2.89
 Morgan Stanley MS US2.84Morgan Stanley MS US2.84
 T. Rowe Price TROW US3.04T. Rowe Price TROW US3.04
 Keycorp KEY US4.32Keycorp KEY US4.32
 PNC Fin’l PNC US3.10PNC Fin’l PNC US3.10
EnergySuncor SU3.85Suncor SU3.85
 Freehold FRU7.43Freehold FRU7.43
 Torc TOG5.62Torc TOG5.62
 Pembina Pipe Lines PPL4.55Pembina Pipe Lines PPL4.55
 Enbridge ENB6.04Enbridge ENB6.04
 Trans Canada TRP4.91Trans Canada TRP4.91
   Parex Resources PXT0.00
MaterialsAgnico Eagle AEM1.15Agnico Eagle AEM1.15
 Franco Nevada FNV1.29Franco Nevada FNV1.29
   Osisko Metals OM.V0.00
   iShares Global Gold ETF XGD0.20
IndustrialsToromont TIH1.55Toromont TIH1.55
 Air Products APD US2.44Air Products APD US2.44
 WSP Global WSP2.06WSP Global WSP2.06
 Canadian Pacific CP0.94Canadian Pacific CP0.94
 CNR 1.79CNR1.79
 Raytheon RTN US2.03Raytheon RTN US2.03
 Aecon Group ARE3.33Aecon Group ARE3.33
 Guggenheim Eq WT IND RGI US1.35Guggenheim Eq Wt IND RGI US1.35
 Honeywell HON US2.07Honeywell HON US2.07
 TFI Int’l TFII2.45TFI Int’l TFII2.45
Consumer DiscretionaryHome Depot HD US2.80Home Depot HD US2.80
 Sleep Canada ZZZ3.77Sleep Canada ZZZ3.77
 Canadian Tire CTC.A2.88Canadian Tire CTC.A2.88
 Amazon AMZN US0.00Amazon AMZN US0.00
 Lowes LOW US1.75Lowes LOW US1.75
Communication ServicesRogers B RCI.B2.78Rogers B RCI.B2.78
   Facebook FB US0.00
   Alphabet GOOGL US0.00
Consumer StaplesAlimentation Couche- Tard ATD.B0.64Alimentation Couche Tard ATD.b0.64
 Loblaws L1.79Loblaws L1.79
 Constellation Brands STZ US1.69Constellation Brands STZ US1.69
 Unilever PLC UL US3.06Unilever PLC UL US3.06
TechnologyApple AAPL US1.54Apple AAPL US1.54
 Microsoft MSFT US1.56Microsoft MSFT US1.56
 Open Text OTEX1.58Open Text OTEX1.58
 Paychex PAYX US2.79Paychex PAYX US2.79
 Cisco CSCO US2.59Cisco CSCO US2.59
   Kinaxis KXS0.00
   ETFMG Prime Cyber Sec. HACK US0.15
   Visa V US0.64
UtilitiesAlgonquin Power AQN4.58Algonquin Power AQN4.58
 Northland Power NPI5.12Northland Power NPI5.12
 Fortis FTS3.64Fortis FTS3.64
HealthcareAbbott Labs ABT US1.60Abbott Labs ABT US1.60
 Becton Dickinson BDX US1.23Becton Dickinson BDX US1.23
 Merck MRK US2.65Merck MRK US2.65
 US Healthcare iShares ETF IYH US1.84US Healthcare iShares ETF IYH US1.84
 United Healthcare UNH US1.46United Healthcare UNH US1.46
   Danaher DHR US0.52
   Thermo Fisher Scientific TMO US0.28
   Straumann ADR SAUHY US *0.63
   IBB Biotech ETF IBB US 0.28
Real EstateCdn Apt. REIT CAR.un2.76Cdn. Apt. REIT CAR.un2.76
 InterRent REIT IIP.un2.03InterRent REIT IIP.un2.03
 Dream Industrial DIR.un5.83Dream Industrial DIR.un5.83
 Summit REIT SMU.un4.35Summit REIT SMU.un4.35
European EquityiShares MSCI Europe XEU2.96iShares MSCI Europe XEU2.96

* Be careful purchasing and selling Straumann ADR’s as it is very illiquid. Always use a limit order.

Peter McMurtry, B.Com, CFA

Please see our disclaimer at disclaimer ©2019 McMurtry Investment Report™. All rights reserved.