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MARQUEST WEEKLY COMMENTARY – FEBRUARY 8, 2016.

MARQUEST WEEKLY COMMENTARY – FEBRUARY 8, 2016.

Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

Last week the MSCI World Index was down 2.5 percent. The TSX was down 0.5 percent bolstered by the strength of gold stocks. The C$ was up 0.4 percent against the US$. The Marquest Global Balanced Fund A units closed at $16.19 compared with $16.80 the previous week.

Significant contributors to performance were Avago Technologies (up 3.1 percent), BCE (up 3.1 percent) and Hydro One (up 4.0 percent). Avago completed its acquisition of Broadcom and is now known as Broadcom. Avago and Broadcom specialize in connectivity, increasing bandwidth through faster connections and integrating outside appliances through Bluetooth/Wi-Fi. This acquisition makes them the third largest player in the semiconductor industry. BCE and Hydro One stock prices were strong as Canadians began to realize that Canadian stocks, which have been in a bear market for a few years, may have some value.

Laggards were D.R. Horton (down 12.4 percent), Home Depot (down 8.8 percent) and Novo Nordisk (down 12.5 percent). D.R. Horton is the largest homebuilder in the US. Their Q1 earnings were in line. Management was upbeat. However, analysts are concerned about a slowdown in order growth. Management expects 10 percent increases in revenue and pre-tax income this year. The stock trades about 11 times earnings. Home Depot’s stock price was weak on the general market selloff. Although Novo Nordisk had a good Q4, they lowered their long term outlook. There is a lot of competition in the diabetes space. We took profits and sold out our position.

 

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