MARQUEST WEEKLY COMMENTARY – NOVEMBER 9, 2015.

Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

Last week the MSCI World Index was down 0.1 percent. The C$ was down 1.7 percent against the US$.  The Marquest Global Balanced Fund A units closed at $17.76 compared with $17.59 the previous week.

Significant contributors to performance were General Electric (up 4.1 percent), Wells Fargo (up 3.8 percent) and JP Morgan (up 7.2 percent).

Laggards were Sanofi (down 6.8 percent), Aetna Health (down 5.7 percent) and Time Warner (down 8.0 percent).

Sanofi’s stock price fell after the company announced flat EPS growth for 2016 and 2017 based on falling diabetes drug sales forecasts.  Trading around 15 times earnings, the stock reflects this pause in growth.  However, the pipeline of new drugs implies double digit EPS growth post 2017.  Key pipeline assets are Praluent (cholesterol lowering, peak sales Eur5.5bn), Dupilumab (atopic dermatitis and severe asthma, peak sales Eur5.0bn) and Dengue vaccine (peak sales Eur1.2bn with first approvals expected late 2015).

Time Warner reiterated guidance for 2015 EPS around $4.60-$4.70.  However the company is increasing programming and technological investment to keep up with the changing content consumption patterns of consumers.  This expensive retrenchment will create a more defensible base for Time Warner’s premium content assets in films, television, and cable programming to grow in the shifting distribution environment.  Time Warner’s HBO has produced very successful content such as: Game of Thrones, Sex and the City, Boardwalk Empire and The Sopranos.  Content is valuable.