MARQUEST WEEKLY COMMENTARY – OCTOBER 19,2015

Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

Last week the MSCI World Index was up 0.6 percent. The C$ was up 0.2 percent against the US$. The Marquest Global Balanced Fund A units closed at $17.60 compared with $17.55 the previous week.

Significant contributors to performance were Tata Motors (up 5.8 percent), Pfizer (up 2.8 percent) and Sanofi (up 3.0 percent).

At Tata Motors, JLR (Jaguar Land Rover) overall wholesale volumes were up 55 percent year over year in September. China volumes declined 30 percent but this had been priced into the stock. Sales growth for Jaguar and Land Rover in the UK, Europe and North America was impressive. Analysts expect 16 percent compound annual growth in EPS and the stock trades at 8.8x 2016E price/earnings.

Sanofi had good news. Eli Lilly announced a discontinuation of trials for its CETP inhibitor for lowering LDL cholesterol. Sanofi’s Praluent, which trials in 2016/2017, has lost a competitor. This took the stock price up. Sanofi’s pipeline of potential blockbuster drugs (Praluent for cholesterol, Dupilumab for atopic allergic diseases and the Dengue fever vaccine) has the potential to provide long term earnings growth. Its low valuation (14.5x 2017E price/earnings), strong balance sheet and new management support our positive view on the stock.

Laggards were Banco Santandar (down 6.0 percent), Pulte Homes (down 3.5 percent) and AMC Networks (down 5.8 percent). At 0.7x book value we think that much of the downside of Banco Santandar is priced into the stock. It is a small position.