MARQUEST WEEKLY COMMENTARY – MAY 4, 2015

Liis Palmer, Cassels Investment Management Inc.

Monthly Pay Fund

Last week the TSX was down 0.4 percent. Canada’s GDP was unchanged in February; the drop in oil well drilling was offset by gains in consumer spending. Copper advanced roughly 6 percent, the most since June 2012. WTI Crude Oil was up 3.5 percent. NYMEX natural gas futures were up 9.7 percent. The Marquest Monthly Pay Fund A units closed at $4.35 after the monthly $0.075 distribution ($4.43 before the distribution) compared to $4.47 the previous week.

Significant contributors in the Fund last week were Teck Resources (up 8.4 percent), Valeant Pharmaceuticals (up 5.9 percent) and Transcontinental (up 1.9 percent). Due to weak Chinese demand coking coal prices have fallen to an 11 year low of US$84.50/ton, down 23 percent year to date. After cutting its dividend and with significant liquidity, Teck has strengthened its ability to weather further commodity price volatility. Investors thought it got too cheap. Valeant beat estimates for quarter and raised guidance to $10.10-$10.40 EPS and $10.4B-$10.6B revenue.

Laggards were Enbridge (down 3.3 percent), Brookfield Asset Management (down 2.7 percent) and Pulte Homes (down 5.0 percent). Despite a preponderance of weak US economic data releases last week, the bright spots were Initial Jobless Claims and Pending Home Sales which should be positive for Pulte going forward.

Global Balanced Fund

Last week, the MSCI World Index was down 0.7 percent. The C$ was up 0.2 percent against the US$. The Marquest Global Balanced Fund A units closed at $18.24 after the $0.09 monthly distribution ($18.33 before distribution) compared with $18.51 the previous week. US GDP data released fell short of expectations, rising at a 0.2 percent rate last quarter. Slumping US business investment and exports were cited as reasons and support the US Federal Reserve’s decision to keep rates at zero. At the same time, applications for jobless benefits declined last week to the lowest level in 15 years, showing employers view a first-quarter slowdown in the economy is probably temporary. It was a holiday shortened week in Europe and Asia.

Last week in the global equities portion of the portfolio, leading contributors were Banco Santandar (up 2.9 percent), General Electric (up 1.0 percent) and Siemens (up 1.0 percent). The fixed income portion of the portfolio also contributed to performance. The New Albertson bonds (up 4.0 percent) and Canexus bonds (up 2.3 percent) showed price strength. We have raised the fixed income portion of the portfolio to 26.4 percent.

Laggards were Whirlpool (down 9.5 percent), United Health (down 5.5 percent) and Home Depot (down 4.5 percent). Whirlpool is the biggest producer of major home appliances globally under brand names such as Maytag, Jenn-Air and KitchenAid. Q1 results were weak in Brazil and tepid in North America. The company reduced guidance for 2015 earnings due to foreign exchange headwinds and weak Brazilian demand. Whirlpool trades at 12 times 2016 earnings. United Health had a strong Q1 but its competitors in the managed care industry showed weakness which took share prices down across the sector. With the recent acquisition of Catamaran, the United Health platform has the strategic advantage of branding and scale in the Medicare operating landscape which is on an upswing with potentially better funding in 2016 and continued popularity among seniors