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MARQUEST WEEKLY COMMENTARY – MARCH 23, 2015

MARQUEST WEEKLY COMMENTARY – MARCH 23, 2015

Liis Palmer, Cassels Investment Management Inc.

Monthly Pay Fund

Last week the TSX was up 1.4 percent. The Marquest Monthly Pay Fund A units closed at $4.48 compared to $4.42 the previous week.

Significant contributors in the Fund last week were Algonquin Power (up 9.1 percent), Inter Pipeline (up 6.5 percent) and Brookfield Infrastructure (up 4.5 percent). Algonquin Power, the power generation and regulated utilities business, had unexpectedly delayed the announcement of their quarterly results. The stock price fell substantially as investors worried that there was something wrong. As it turned out, results came in line with consensus and showed nice growth. The stock price recovered part of what it lost immediately.

Laggards were AutoCanada (down 18.9 percent), Restaurant Brands (down 2.0 percent) and Westshore Terminals (down 3.2 percent). AutoCanada, owner of 48 dealerships in Canada, said that vehicle sales were “significantly lower” than forecast in Alberta in the quarter. AutoCanada generates 49 percent of its revenue from that province. Albertans are deferring major purchases of homes and cars. But the cold winter also deterred buyers. StatsCan reported that retail sales in Alberta fell 2.8 percent in January for the fourth consecutive month of declines, reaching their lowest level since December 2013. The decline was largely a result of lower sales at gasoline stations and new car dealers. Sales dropped 1.7 percent across the country in the month. This weakness gives AutoCanada the opportunity to pick up dealerships at cheaper prices. The industry is highly fragmented and ripe for consolidation.

Global Balanced Fund

Last week, the world markets were generally up. The Marquest Global Balanced Fund A units closed at $18.84 compared with $18.69 the previous week. Comments from the US Federal Reserve caused large currency swings. The Fed moved towards normalising monetary policy but cut its forecast for economic growth and lowered its projected path for rate rises. The US dollar dropped and bond and equity markets rose.

Last week in the global equities portion of the portfolio, leading contributors were Banco Santandar (up 7.3 percent), United Health (up 3.1 percent) and Roche (up 6.6 percent). Both the Banco Santandar and Roche prices reflect the euro and swiss franc strength against the US$. Also of note, two weeks ago, Banco Santandar had failed the US Federal Reserve’s capital tests. This failure did not change the group’s dividend policy. Santandar’s US activities account for 10 percent of the group’s net profits, 9 percent of the group’s loan book and 7 percent of customer deposits. This week the stock price moved up to balance the prior week’s weakness.

Laggards were Westshore Terminals (down 3.2 percent), Tata Motors (down 0.2 percent) and Whirlpool (down 0.1 percent). Westshore reported its Q4, which came in below consensus because of some unplanned downtime for maintenance work. The company’s capital projects will modernize the terminal and reduce unplanned downtime. The majority of Westshore’s contracts are long term take-or-pay and its location contributes to strong operating dynamics.

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