MARQUEST WEEKLY COMMENTARY – NOVEMBER 23, 2015.

Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

Last week the MSCI World Index was up 2.9 percent. The TSX was up 2.7 percent. The C$ was down 0.2 percent against the US$. The Marquest Global Balanced Fund A units closed at $17.60 compared with $17.33 the previous week.

Significant contributors to performance were Home Depot (up 8.3 percent), Whirlpool (up 7.8 percent) and Walt Disney (up 4.4 percent). Home Depot announced Q3 earnings of $1.36, $0.04 ahead of consensus, and set Same Store Sales and earnings guidance to the high end of the previous range. Q3 Same Store Sales increased 5.1 percent versus 5.2 percent in the prior year.

Whirlpool has an attractive valuation (11 times 2016 earnings) and is essentially part of a functioning duopoly in North America (42 percent market share). Although demand for appliances in emerging markets has been subdued, penetration rates are low and they offer large growth opportunities in the long run.

Walt Disney continues to enjoy the Star Wars excitement. The branded toys and video games sold as part of the Star Wars campaign are expected to reap $5 billion in sales in 2016.

Laggards were Pfizer (down 3.2 percent), HCA Holdings (down 3.0 percent) and Crescent Point Energy (down 1.8 percent). Pfizer (a pharmaceutical giant) and HCA (the largest hospital corporation in the US) both fell as sector rotators moved out of the healthcare index when one of the largest weightings (United Health) adjusted its earnings forecasts down due to the high cost of Obamacare. Interestingly, though United Health’s stock price dropped on the day of the announcement, the stock price ended the week up 1.4 percent. Pfizer is also involved in a proposed $150 billion takeover of Allergan which is likely affecting the stock price. We view the proposed merger as a positive for Pfizer long term. In the near term, the deal may result in Pfizer enjoying a lower tax rate in Ireland.

Crescent Point’s share price fell with the energy complex as natural gas prices continued to fall (futures were down 9.1 percent to $2.15).