Also available in PDF: MIR Portfolios January 2020
Investment Commentary January 2020
Fund Flows into Capital Markets
There remains a considerable amount of cash on the sidelines, albeit diminished somewhat over the last few months. This will provide support for equities in any future market drop.
US Yield Curve
The US Treasury yield curve remains positively sloped, implying the probability of an imminent recession is not high.
US Corporate Debt Spreads
Spreads remain at low levels relative to US Treasuries implying the threat of an impending recession in the US is low.
US/ China Trade War
Both countries are signing a Phase 1 agreement this week.
US Corporate Profit Growth
Year over Year corporate profit growth remains low in the 3-6% range in the US.
Central Bank Monetary Policy
Global central bank policy remains very accommodative with any potential interest rate increases being put on the back burner for now.
I am maintaining the same asset mix as last month. Having some cash on the sidelines will provide a nice buffer if markets turn ugly from any negative trade rhetoric.
Equity Sector Weights
As summarized in my January newsletter, there is a fair amount of equity sector rotation out of defensive interest sensitive groups like Reits and Utilities into the more cyclical sectors like Financials, Industrials, Materials, Energy and Consumer Discretionary.
In that vein I am increasing my exposure to overweight Financials and Materials while I am reducing my Consumer Staples weight accordingly.
I am keeping the overweight for Industrials, Technology, Consumer Discretionary and Energy.
I am maintaining my market weight in Communications, Utilities, Reits and Healthcare.
After the sharp 18% plus rise in EOG over the last thirty days, I am deleting this name from both portfolios in the Energy sector. Proceeds should be repositioned back into the Canadian energy names in my model portfolios.
In the Healthcare sector, I am adding Bristol Myers to both portfolios. The company is very undervalued and offers a strong drug pipeline after its recent acquisition of Celgene.
I am deleting United Rentals from the Growth portfolio in the Industrials sector. Over the last three months the stock has jumped by over 46%. In the same group I am adding Stantec, the Canadian engineering and construction company to both portfolios. Stantec is well positioned to benefit from the pickup in infrastructure spending in addition to oil and gas.
Finally, I am adding Restaurant Brands International to both portfolios in the Consumer Discretionary sector. Both Burger King and Popeye’s are performing very well with Tim Hortons the only poor performer in the company. However, Tim Hortons just announced this past week that the chief marketing executive from McDonald’s Canada has joined Tim Hortons. Hopefully this executive can get Tim Hortons back on track once again with some valuable new marketing ideas that McDonalds currently uses. The easiest one comes to mind is to fix their coffee menu similar to what the latter company did several years ago.
Peter McMurtry, B.Com, CFA
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|McMurtry Investment Report – Portfolios (January 2020)|
|Cash||Alterna Bank – High Interest Savings (2.05% current )||Alterna Bank – High Interest Savings (2.05% current)|
|EQ Bank – High Interest Savings ( 2.30% current)||EQ Bank – High Interest Savings ( 2.30% current)|
|Bonds -Regular||iShares XSB Short Term||iShares XSB Short Term|
|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|
|Bonds – High Yield CORP||iShares XHY US High Yield CDN$||iShares XHY US High Yield CDN $|
|Common Stocks||Security||Dividend Yield %||Security||Dividend Yield %|
|Financials||Royal Bank RY||4.02||Royal Bank RY||4.02|
|Intact Financial IFC||2.11||Intact Financial IFC||2.11|
|TD TD||4.04||TD TD||4.04|
|Sun Life SLF||3.50||Sun Life SLF||3.50|
|JP Morgan JPM US||2.62||JP Morgan JPM US||2.62|
|Manulife Fin’l MFC||3.64||Manulife Fin’l MFC||3.64|
|Bank of America BAC US||2.07||Bank of America BAC US||2.07|
|Morgan Stanley MS US||2.68||Morgan Stanley MS US||2.68|
|T. Rowe Price TROW US||2.39||T. Rowe Price TROW US||2.39|
|PNC Fin’l PNC US||2.86||PNC Fin’l PNC US||2.86|
|Suncor SU||3.78||Suncor SU||3.78|
|Canadian Natural Resources CNQ||3.57||Canadian Natural Resources CNQ||3.57|
|Freehold FRU||7.80||Freehold FRU||7.80|
|Pembina Pipe Lines PPL||4.79||Pembina Pipe Lines PPL||4.79|
|Enbridge ENB||6.22||Enbridge ENB||6.22|
|Trans Canada TRP||4.34||Trans Canada TRP||4.34|
|Whitecap Resources WCP||6.17||Whitecap Resources WXP||6.17|
|Parex Resources PXT||0.00|
|Materials||Agnico Eagle AEM||1.20||Agnico Eagle AEM||1.20|
|Franco Nevada FNV||1.00||Franco Nevada FNV||1.00|
|VanEck Vectors Gold ETF GDX US||0.69||VanEck Vectors Gold ETF GDX US||0.69|
|BMO Global Base Metals ETF ZMT||2.45||BMO Global Base Metals ETF ZMT||2.45|
|Osisko Metals OM.V||0.00|
|iShares Global Gold ETF XGD||0.56|
|Industrials||Toromont TIH||1.52||Toromont TIH||1.52|
|NFI Group NFI||5.82||NFI Group NFI||5.82|
|Air Products APD US||2.00||Air Products APD US||2.00|
|WSP Global WSP||1.63||WSP Global WSP||1.63|
|United Technologies UTX US||1.91||United Technologies UTX US||1.91|
|Stantec STN||1.54||Stantec STN||1.54|
|Aecon Group ARE||3.28||Aecon Group ARE||3.28|
|Honeywell HON US||2.01||Honeywell HON US||2.01|
|TFI Int’l TFII||2.34||TFI Int’l TFII||2.34|
|Consumer Discretionary||Home Depot HD US||2.42||Home Depot HD US||2.42|
|Target TGT US||2.14||Target TGT US||2.14|
|Restaurant Brands Int’l QSR||3.16||Restaurant Brands Int’l QSR||3.16|
|Amazon AMZN US||0.00|
|Lowes LOW US||1.82||Lowes LOW US||1.82|
|Communication Services||Rogers B RCI.B||3.08||Rogers B RCI.B||3.08|
|Alphabet GOOGL US||0.00|
|Consumer Staples||Alimentation Couche- Tard ATD.B||0.57||Alimentation Couche Tard ATD.b||0.57|
|Loblaws L||1.86||Loblaws L||1.86|
|Constellation Brands STZ US||1.55||Constellation Brands STZ US||1.55|
|Sysco SYY US||2.13||Sysco SYY US||2.13|
|Unilever PLC UL US||3.21||Unilever PLC UL US||3.21|
|Technology||Apple AAPL US||0.99||Apple AAPL US||0.99|
|Microsoft MSFT US||1.26||Microsoft MSFT US||1.26|
|Open Text OTEX||1.52||Open Text OTEX||1.52|
|Paychex PAYX US||2.91||Paychex PAYX US||2.91|
|Cisco CSCO US||2.97||Cisco CSCO US||2.97|
|Logitech Int’l LOGI US ADR||1.56||Logitech Int’l LOGI US ADR||1.56|
|ETFMG Prime Cyber Sec. HACK US||0.14|
|Visa V US||0.62|
|Utilities||Algonquin Power AQN||3.93||Algonquin Power AQN||3.93|
|Northland Power NPI||4.45||Northland Power NPI||4.45|
|Fortis FTS||3.51||Fortis FTS||3.51|
|Healthcare||Abbott Labs ABT US||1.69||Abbott Labs ABT US||1.69|
|Becton Dickinson BDX US||1.15||Becton Dickinson BDX US||1.15|
|Merck MRK US||2.73||Merck MRK US||2.73|
|United Healthcare UNH US||1.47||United Healthcare UNH US||1.47|
|CVS Healthcare CVS US||2.74||CVS Healthcare CVS US||2.74|
|Bristol Myers BMY US||2.76||Bristol Myers BMY US||2.76|
|Danaher DHR US||0.43|
|Thermo Fisher Scientific TMO US||0.23|
|Straumann ADR SAUHY US *||0.51|
|Real Estate||Cdn Apt. REIT CAR.un||2.63||Cdn. Apt. REIT CAR.un||2.63|
|CT Reit CRT.un||4.96||CT Reit CRT.un||4.96|
|US Real Estate SPDR XLRE US||3.06||US Real Estate SPDR XLRE US||3.06|
|InterRent REIT IIP.un||1.98||InterRent REIT IIP.un||1.98|
|Dream Industrial DIR.un||5.30||Dream Industrial DIR.un||5.30|
|Summit REIT SMU.un||4.57||Summit REIT SMU.un||4.57|
|European Equity||iShares MSCI Europe XEU||3.56||iShares MSCI Europe XEU||3.56|
|Emerging Markets||iShares MSCI Emering Markets XEC||2.81||iShares MSCI Emerging Markets XEC||2.81|
* Be careful purchasing and selling Straumann ADR’s as it is very illiquid. Always use a limit order.
|McMurtry Investment Report – Sector Weights (January 2020)|
|Equity Sector Weights (%)|
|Sector||My Weight||TSX Comp||S&P 500||55 % US /45% CDN|
|McMurtry Investment Report Asset Mix Jan. 2020)|
|Asset Mix – Income and Growth Portfolios|
|Bonds – Regular||20.00||10.00|
|Bonds – High Yield||5.00||5.00|