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MARQUEST WEEKLY COMMENTARY – APRIL 13, 2015

MARQUEST WEEKLY COMMENTARY – APRIL 13, 2015

Liis Palmer, Cassels Investment Management Inc.

Monthly Pay Fund

Last week the TSX was up 2.4 percent. The Marquest Monthly Pay Fund A units closed at $4.47 compared to $4.40 the previous week. Good economic news supported Canadian markets. The unemployment rate remained 6.8 percent (better than anticipated) and 28,700 jobs were created in March. Also supportive was the increase in the oil price (up 5.4 percent) and an EIA monthly report raising forecasts for US and global demand growth and lowering forecasts for crude oil production growth in the United States.

Significant contributors in the Fund last week were Royal Bank (up 3.6 percent), Brookfield Asset Management (up 5.2 percent) and DH Corp. (up 7.3 percent). Royal Bank was down 4.3 percent in Q1/15; the banks have been a drag on the Fund’s performance. They go through periods of underperformance but are excellent long term investments. At the same time, Brookfield’s stock price was up 18 percent. Last week Brookfield announced that it will increase its dividend and split its stock 3-for-2. DH Corp successfully completed its financing for the Fundtech acquisition as part of its ongoing transition into a financial services technology company. Fundtech is a global payments hub and the acquisition is accretive to earnings in the first few months. The old Davis & Henderson cheque printing business is now just 20 percent of DH Corp.

Laggards were Brookfield Infrastructure (down 2.1 percent), Inter Pipeline (down 1.9 percent) and Altagas Income (down 2.1 percent).

Global Balanced Fund

Last week, the MSCI World Index was up 1.7 percent. The C$ was down 0.7 percent against the US$. The Marquest Global Balanced Fund A units closed at $18.93 compared with $18.73 the previous week.

Slower-than-expected hiring in the US increased investor speculation that the Fed would delay raising interest rates. The energy sector was positive as the price of WTI oil rose over 5 percent after Saudi Arabia raised prices for crude shipments to Asia. Investors will continue to watch the Iran nuclear talks and traders debate how quickly Iran could increase crude exports if a deal is reached.

Last week in the global equities portion of the portfolio, leading contributors were General Electric (up 15.2 percent), Pfizer (up 4.0 percent) and Comcast (up 4.1 percent). GE launched the sale of the bulk of GE Capital with a deal for the real estate portfolio for a purchase price of $26.5 billion. GE Capital was the biggest cause of concern for GE during the financial crisis but also provided half the group’s earnings in 2013. The company will return to its roots and expects 90 percent of its earnings to be generated by the industrial business by 2018. Analysts support this move as earnings from industrial businesses are more highly rated than earnings from financial services.

Laggards were Banco Santandar (down 3.4 percent), Whirlpool (down 1.5 percent) and HDFC Bank (down 2.3 percent).

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