I am an accredited or eligible investor as defined in National Instrument 45-106.




Liis Palmer, Cassels Investment Management Inc.

Monthly Pay Fund

Last week the TSX was down 1.8 percent. WTI oil was down 7.4 percent. The Marquest Monthly Pay Fund A units closed at $3.98 compared to $4.03 the previous week. The week ended with hopes for a resolution to the Greek debt crisis and gains in China’s equity markets reflecting hope that the Chinese government would backstop further losses. The weak oil price reflected the advance towards a nuclear deal with Iran which would allow Iranian oil back into global markets.

Significant contributors in the Fund last week were RioCan Real Estate (up 4.4 percent), HCA Holdings (up 3.8 percent) and Pulte Homes (up 1.9 percent). HCA is a leading hospitals group in the US. They are benefitting from a recent Supreme Court decision with regard to ObamaCare.

Cameco (down 7.5 percent), West Fraser Timber (down 3.6 percent) and Ag Growth (down 4.5 percent) were last week’s laggards.

Cameco is one of the world’s largest uranium producers at 14% of global production. Forest fires in Saskatchewan have halted uranium shipments but so far, there has been no impact on deliveries or sales. Production has not been affected and management has stressed that there is sufficient inventory in the supply chain to meet delivery requirements. Cameco trades at 1x NAV and 9.5x NTM EV/EBITDA, well below its historical median of 12.7x. Positive catalysts include Japanese refueling, two Chinese reactor start-ups and ongoing production constraints.

We met with Ag Growth last week. Although their international operations are going well and the Westeel acquisition is progressing, there is concern about drought in western Canada. Ag Growth depends on crop volumes. We have been lightening our position although at this point Ag Growth is trading at a substantial discount to its peers. It has historically traded at premiums to its peers given strong earnings growth and free cash flow as well as a high dividend.

Global Balanced Fund

Last week, the MSCI World Index was down 0.1 percent. The C$ was down 0.7 percent against the US$. The Marquest Global Balanced Fund A units closed at $18.44 compared with $18.31 the previous week. There was hope at the end of the week that a resolution to the Greek debt issue could be found. The Chinese markets also strengthened at the end of the week reflecting the series of measures launched by the Chinese government to stabilize securities markets including interest rate cuts, selling bans on big shareholders and direct buying by the People’s Bank of China.

Significant contributors to performance were Pfizer (up 4.2 percent), Novo Nordisk (up 6.9 percent) and Whirlpool (up 4.5 percent). Novo Nordisk is the leader in the strong and growing diabetes market. They describe their pipeline of new drugs as the “best ever.” Novo published new Phase III data last week confirming best-in-class efficacy and weight loss profile for its new once-weekly injectable semaglutide (once weekly GLP-1 analogue) which is expected to launch in 2017. Meanwhile, US approval of Tresiba (long acting insulin) is expected in October with a subsequent strong launch.

Laggards were Tata Motors (down 8.5 percent), Aetna (down 6.2 percent) and Keyera (down 4.3 percent). The acquisition of Humana weighs on Aetna’s stock price however; this is a potentially transformative deal for Aetna, whose Medicare Advantage enrollment stands to more than triple on a pro forma basis, while its total enrollment increases more than 50%. Scale is very important in this industry.

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