MARQUEST WEEKLY COMMENTARY – AUGUST 24, 2015
Liis Palmer, Cassels Investment Management Inc.
Monthly Pay Fund
Last week the TSX was down 5.6 percent. The Marquest Monthly Pay Fund A units closed at $3.67 compared to $3.88 the previous week. Concerns about an economic slowdown in China after drops in China’s stock market, the devaluations of the Yuan and poor Chinese manufacturing numbers caused global markets to sell off. WTI fell to $40.29/barrel which caused further weakness in Canadian energy stocks in particular and the Canadian market in general.
Significant contributors in the Fund last week were BCE (up 1.7 percent) and Lennar Corporation (up 1.6 percent). Lennar is a US home builder benefitting from the recovery in the US housing and employment markets.
Bank of Nova Scotia (down 6.4 percent), Brookfield Asset Management (down 6.9 percent) and Canadian Natural Resources (down 12.1 percent) were last week’s laggards.
Global Balanced Fund
Last week the MSCI World Index was down 5.3 percent. The C$ was down 0.6 percent against the US$. The Marquest Global Balanced Fund A units closed at $17.59 compared with $18.22 the previous week. Concerns about an economic slowdown in China after drops in China’s stock market, the devaluations of the Yuan and poor Chinese manufacturing numbers caused global markets to sell off. The question is whether the economic recovery in the US can compete successfully against weaker emerging markets economies. The strong US dollar has hurt US exporters and multinationals but the domestic housing market and job market have been showing strength.
Significant contributors to performance were BCE (up 1.7 percent) and Whirlpool (up 0.1 percent).
Laggards were Disney (down 7.8 percent), Keyera (down 11.7 percent) and Wells Fargo (down 7.2 percent). Disney trades at 19x 2015 and 17x 2016 earnings. Its earnings are expected to grow at 18% in 2105 and 12% in 2016. Disney has a strong balance sheet, is buying back stock and has consistent mid-teens earnings growth. No doubt there will be negative sentiment until there is more visibility in the changing Pay TV landscape. However, Disney is a critically acclaimed content creator and event/sport content curator. Its ownership of sports, news, entertainment and kids content and its holding in Hulu (an OTT – Over-the-top service) position it well.