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McMurtry Investment Report – Portfolios (January 2018)
Income | Growth | |||
Cash | Alterna Bank – High Interest Savings (1.95% current rate)Alterna Bank High | Alterna Bank – High Interest Savings (1.95% 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 | 4.14 | Enbridge Pfd V Enb.pr.V US | 4.14 | |
Horizons Active Mgt. Pfd HPR | 3.88 | Horizons Active Mgt. Pfd HPR | 3.88 | |
Trans Canada Pipelines rate reset preferred TRP.PR.K | 4.68 | Trans Canada Pipelines rate reset preferred TRP.PR.K | 4.68 | |
Common Stocks | Security | Dividend Yield % | Security | Dividend Yield % |
Financials | Royal Bank RY | 3.55 | Royal Bank RY | 3.55 |
TD TD | 3.26 | TD TD | 3.26 | |
CIBC CM | 4.24 | CIBC CM | 4.24 | |
Sun Life SLF | 3.51 | Sun Life SLF | 3.51 | |
JP Morgan JPM US | 2.09 | JP Morgan JPM US | 2.09 | |
Bank of America BAC US | 1.63 | Bank of America BAC US | 1.63 | |
Citibank C US | 1.72 | Citibank C US | 1.72 | |
Manulife MFC | 3.13 | Manulife MFC | 3.13 | |
T. Rowe Price TROW US | 2.17 | T. Rowe Price TROW US | 2.17 | |
iUnits US Regional Banks IAT US | 1.55 | iUnits US Regional Banks IAT US | 1.55 | |
Keycorp KEY US | 2.08 | Keycorp KEY US | 2.08 | |
Blackrock BLK US | 1.95 | Blackrock BLK US | 1.95 | |
Visa V US | 0.65 | |||
Energy | Suncor SU | 2.74 | Suncor SU | 2.74 |
Freehold FRU | 4.27 | Freehold FRU | 4.27 | |
Whitecap WCP | 3.28 | Whitecap WCP | 3.28 | |
Torc TOG | 3.18 | Torc TOG | 3.18 | |
Pembina Pipe Lines PPL | 4.75 | Pembina Pipe Lines PPL | 4.75 | |
Enbridge ENB | 5.46 | Enbridge ENB | 5.46 | |
Centennial Resources CDEV US | 0.00 | |||
Parex Resources PXT | 0.00 | |||
Spartan SPE | 0.00 | |||
Materials | Agnico Eagle AEM | 0.97 | Agnico Eagle AEM | 0.97 |
Franco Nevada FNV | 1.17 | Franco Nevada FNV | 1.17 | |
BMO Global Base Metal ETF ZMT | 1.29 | BMO Global Base Metal ETF ZMT | 1.29 | |
Lundin LUN | 1.44 | |||
Trevali Mining TV | 0.00 | |||
Hudbay Minerals HBM | 0.18 | |||
Roxgold ROXG | 0.00 | |||
Industrials | DowDuPont DWDP US | 2.13 | DowDuPont DWDP US | 2.13 |
New Flyer Ind NFI | 2.41 | New Flyer Ind NFI | 2.41 | |
WSP Global WSP | 2.50 | WSP Global WSP | 2.50 | |
Canadian Pacific CP | 0.98 | Canadian Pacific CP | 0.98 | |
General Dynamics GD US | 1.65 | General Dynamics GD US | 1.65 | |
SNC Lavalin SNC | 1.91 | SNC Lavalin SNC | 1.91 | |
Guggenheim Eq WT IND RGI US | 1.12 | Guggenheim Eq Wt IND RGI US | 1.12 | |
Knowles Corp KN US | 0.00 | |||
Consumer Discretionary | Home Depot HD US | 1.88 | Home Depot HD US | 1.88 |
Sleep Canada ZZZ | 1.98 | Sleep Canada ZZZ | 1.98 | |
Stanley Black and Decker SWK US | 1.49 | Stanley Black and Decker SWK US | 1.49 | |
Canadian Tire CTC.A | 2.20 | Canadian Tire CTC.A | 2.20 | |
Amazon AMZN US | 0.00 | Amazon AMZN US | 0.00 | |
Kohl’s KSS US | 4.06 | Kohl’s KSS US | 4.06 | |
JD JD.com US | 0.00 | |||
Telecom | Rogers B RCI.B | 3.00 | Rogers B RCI.B | 3.00 |
Consumer Staples | Alimentation Couche Tard ATD.b | 0.55 | Alimentation Couche Tard ATD.b | 0.55 |
Loblaws L | 1.58 | Loblaws L | 1.58 | |
Pepsico PEP US | 2.69 | Pepsico PEP US | 2.69 | |
Unilever PLC UL US | 3.05 | Unilever PLC UL US | 3.05 | |
Technology | Apple AAPL US | 1.49 | Apple AAPL US | 1.49 |
Microsoft MSFT US | 1.96 | Microsoft MSFT US | 1.96 | |
Open Text OTEX | 1.52 | Open Text OTEX | 1.52 | |
Facebook FB US | 0.00 | |||
Nvidia NVDA US | 0.31 | |||
Shopify SHOP | 0.00 | |||
Alphabet GOOGL US | 0.00 | |||
Utilities | Emera EMA | 4.81 | Emera EMA | 4.81 |
Fortis FTS | 3.69 | Fortis FTS | 3.69 | |
Healthcare | Abbott Labs ABT US | 1.96 | Abbott Labs ABT US | 1.96 |
Bristol Myers BMY US | 2.61 | Bristol Myers BMY US | 2.61 | |
Johnson & Johnson JNJ US | 2.40 | Johnson & Johnson JNJ US | 2.40 | |
Merck MRK US | 3.41 | Merck MRK US | 3.41 | |
US Healthcare iShares ETF IYH US | 1.10 | US Healthcare iShares ETF IYH US | 1.10 | |
Thermo Fisher Scientific TMO US | 0.32 | |||
IBB Biotech ETF IBB US | 0.30 | |||
Real Estate | Cdn Apt. REIT CAR.un | 3.43 | Cdn. Apt. REIT CAR.un | 3.43 |
InterRent REIT IIP.un | 2.96 | InterRent REIT IIP.un | 2.96 | |
Chartwell REIT CSH.un | 3.54 | Chartwell REIT CSH.un | 3.54 | |
European Equity | BMO European ETF ZEQ | 2.07 | BMO European ETF ZEQ | 2.07 |
Emerging Markets | iShares MSCI Emer. Mkts XEC | 2.04 | iShares MSCI Emer. Mkts XEC | 2.04 |
Investment Commentary January 2018
The combination of the passing of US tax reform and continuing global economic growth has encouraged me to reduce the cash content for both portfolios and increase the equity content.
I am also reducing my Canadian equity exposure and increasing both my US and Emerging Market equity weight.
The ongoing NAFTA negotiations are not going well for Canada currently and this creates a lot of uncertainty in the Canadian markets. Should some type of NAFTA revocation occur, the effect will be the following:
- Lower Canadian dollar relative to US $
- Increase in Canadian Equity stock market volatility
- Slower Bank of Canada interest rate increases relative to the US
You will notice that my benchmark equity sector weight goes to 55% US and 45% Canada, from last month’s 50/ 50.
For the Income portfolio only I am increasing the preferred equity weight by 5% to the new 15% exposure. Rate reset preferreds offer an attractive dividend yield that will rise with rising rates.
For both portfolios, I am adding a rate reset preferred, Trans Canada Pipeline Preferred K that offers a very attractive 4.68% current yield with a minimum reset yield of 4.9% on May 31, 2022.
In the fixed Income area, I am still recommending short duration bonds, 1-5 year ladder ETf’s preferably in higher yielding corporate issues and floating rate bond ETF’s.
My new equity sector weights are as follows relative to my revised benchmark of 55% US 45% Canada.
Maintain overweight in:
- Financials
- Technology
- Industrials
- Consumer Discretionary
Maintain underweight in:
- Utilities
- REITS
- Telcos
- Consumer Staples
Increase Materials weight to Market Weight
Maintain Market Weight
- Healthcare
- Energy
In the Materials sector, I am increasing the equity weight and adding Hudbay Minerals to the Growth Portfolio. I am also adding BMO Global Base Metal ETF to both the Income and Growth portfolios. These two additions will materially increase the base metal exposure to the security selection.
In the Industrial sector, I am adding Knowles Corp, a US producer of both microphones and hearing aids. Faster smart phones and mobile devices like Amazon’s Alexa are using more sophisticated microphones and Knowles is one of the global leaders in this area.
In the Consumer Discretionary area, I am adding JD, a Chinese E-commerce company that shares the very large Chinese market with Alibaba. Differing from Alibaba, JD owns most of its logistics transportation companies it uses to deliver its products to the consumer. Wal Mart recently bought 12% of the company.
In the REIT sector, my holding in Pure Industrial received a 100% cash offer at $8.10 per share from Blackstone Group, representing a very large premium from the company’s recent share price. Consequently I am removing Pure Industrial from both portfolios.
Finally in the Healthcare sector, I recommended the sale of Aphria at the beginning of this year in a blog that was sent out. In addition I am recommending the sale of both Celgene and Knight Therapeutics from the Growth Portfolio. Celgene is a very high quality biotech company that will be facing stiff competition from its main drug over the next few years. The stock is very cheap but needs to make a large acquisition to improve its drug pipeline. Proceeds from the sale can be invested in the IBB biotech ETF, a more diversified way to play the biotech space. Knight Therapeutics also needs to make some accretive acquisitions before its earnings and cash flow can begin to accelerate. While both Celgene and Knight are not expensive companies on a net asset value basis, there are many other companies currently growing much faster that do not have these issues.
McMurtry Investment Report – Sector Weights (January 2018)
Equity Sector Weights (%) | ||||
Sector | My Weight | TSX Comp | S&P 500 | 55 % US / 45 % CDN |
Financials | 27.32 | 34.60 | 14.80 | 23.71 |
Energy | 12.22 | 19.70 | 6.10 | 12.22 |
Materials | 6.83 | 11.50 | 3.00 | 6.83 |
Industrials | 12.50 | 9.50 | 10.30 | 9.94 |
Consumer Disc. | 10.20 | 5.40 | 12.20 | 9.14 |
Telecom | 1.20 | 4.70 | 2.10 | 3.27 |
Consumer Staples | 3.00 | 3.70 | 8.20 | 6.18 |
Technology | 16.00 | 3.20 | 23.80 | 14.53 |
Utilities | 1.30 | 3.80 | 2.90 | 3.31 |
Real Estate | 1.40 | 2.90 | 2.90 | 2.90 |
Healthcare | 8.04 | 1.00 | 13.80 | 8.04 |
Totals | 100.01 | 100.00 | 100.10 | 100.06 |
McMurtry Investment Report Asset Mix (January 2018)
Asset Mix – Income and Growth Portfolios | ||
% | Income | Growth |
Cash | 22.50 | 17.50 |
Bonds | 10.00 | 5.00 |
Preferreds | 15.00 | 10.00 |
Equities | 52.50 | 67.50 |
CDN | 18.90 | 25.65 |
US | 23.10 | 31.35 |
Europe | 5.25 | 5.25 |
Emerging Markets | 5.25 | 5.25 |
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