JMRD Market Observer for April 22nd, 2016 – JMRD U.S. Growth Basket & JMRD ETF Basket Q1 Update

April 22, 2016

**April 22nd Issue of The JMRD Market Observer**

In This Week’s JMRD Market Observer Market

 

  • Tax Season
  • JMRD U.S. Growth Basket Q1 Update
  • JMRD Maximum Growth ETF Basket Q1 Update
  • How Technology has Changed in the Financial Industry
  • Retirement Corner
  • Week at a Glance
  • Reads of the Week
  • Economic Calendar
  • Earnings Reports

 

 

Tax Season

 

Tax season is coming to a close and hopefully your reporting has gone smoothly.  Once your taxes are filed and you receive your notice of assessment from CRA or a summary from your accountant, we strongly encourage you to pass this document onto us.  We feel that it is important to start thinking about your 2016 RRSP and TFSA contributions once you know your limit.  In addition, CRA does not pass this information along to us so having your limit on our records will help us to better monitor the situation.

 

Let us know if you have any questions on that or if you require further assistance with your tax reporting.

 

 

JMRD U.S. Growth Basket Q1 Update:

 

We profiled the JMRD DIG and All Cap Baskets in the March 8th Market Observer and this week we will be discussing the JMRD US Growth and JMRD Maximum Growth Exchange Traded Fund (ETF) Baskets.  Before we delve into the numbers, we have once again included the following chart as a reference point for Q1 returns across different asset classes.

 

Graph 1

 

Launched on January 1st, 2014, the 2015 return was 0.14% for the JMRD U.S. Growth Basket, after a 15.0% return in 2014.  In Q1 2016, the JMRD US Basket posted a return of 0.42%, versus the benchmark, the S&P 500 Total Return, of 1.35%.

 

Which companies are currently held in the Basket?

 

  • We continue to include company updates on the holdings in our Market Observers so you can become more familiar with the individual positions.
  • You will find below a full snapshot of all holdings.

 

Graph 2

 

A main contributor to the return in the first quarter was NASDAQ Inc., the company that owns the actual NASDAQ and other stock exchanges.  Merger activity within the industry took prices of most exchange providers higher.  NASDAQ Inc. was up 14%.  Facebook also enjoyed a good quarter as the company is gaining traction with the mobile user as well as with mobile advertisers.  The stock was up 9%.  Another name that boosted the portfolio was Avago Technologies, now known as Broadcom.  This supplier of semiconductors to Apple, among other companies, reported very solid earnings in February which moved the stock higher, up 6% for the quarter.

 

Laggards to the portfolio were defense companies Lockheed Martin and Orbital ATK, the latter we sold.  Jet Blue and L Brands also trailed our expectations and were sold in the quarter, as you will see below.

 

During the quarter we initiated positions in Altria Group, the world leader in smokeless and smoke-able products as well as distributor of spirits.  The company has exemplified consistent dividend growth over the long term, as well as share price appreciation.  We also bought a company called Vantiv which is a growth company in the payment processing, or FINTECH, sector.  Other new positions included Waste Management, a “garbage” company, Dollar General, the discount retailer and United Health Group, a US health care benefit provider.  We also added to our positions in the amusement park company Six Flags and Vail Resorts.

 

We sold positions in Celgene after the shine continued to come off some biotech stocks, which was a continuation from last year.  We also sold Jet Blue as the lower oil price did not help the company as much as we thought it would.  We also sold defense company Orbital ATK after earnings disappointed, L Brands and Apple.

 

As a refresher, the JMRD US basket is best held in US dollar accounts.  The minimum purchase is 2½ Baskets, or approximately $58,000.  Each subsequent purchase is by ½ Basket, or about $11,600.  These are minimums mandate by the Baskets department at NBF, not JMRD.

 

JMRD Maximum Growth Exchange Traded Fund (ETF) Basket Q1 Update

 

As many of you know, JMRD offers an Exchange-Traded Fund (ETF) Basket, which we will provide a full update on below.  We will focus on how we are currently positioned to take advantage of the ever changing financial markets.  The ETF Basket is managed by the JMRD Wealth Management Team and is invested solely in exchange traded funds.  This Basket is meant to provide a diversified equity portfolio that can be used as a long term core holding.

 

In 2015 the ETF Basket posted a return of -1.98%.  Last year it was the higher global component that mitigated the portfolio losses last year but as we start this year, it’s the under performance in the international markets that has resulted in a return of -3.76% in the first quarter.  In contrast, the MSCI World Index was down over 7% in the first quarter.

 

Europe’s and Japan’s central banks continue to utilize stimulative policies in attempts to kick-start their moribund economies.  Both were gaining traction in 2015 but have since showed signs of sluggishness again, especially as growth in China moderates.  The efficacy of negative interest rate policies, prevalent in both Europe and Japan, are also coming into question because of the lack of consist growth and inflation in these regions. We still feel that the accommodative policies provide a decent backdrop for equity gains in the coming quarters because the alternative, bonds investments, provide little in the way of return potential.  The Eurostoxx 50 index is up almost 5% thus far in April, which leads most developed indices.

 

The current asset and geographic allocation of the ETF Basket is follows:

 

Cash: 10.4%

 

Equities: 89.6%

 

Geographic breakdown:

 

18.7% Canada

34.3% United States

30.2% International

6.4% Other (A diversified hedge fund ETF position)

 

Note that ETFs have underlying management fees as well.  The blended annual Management Expense Ratio (MER) for the ETFs in the Basket is 0.37%.  The ETF basket

 

A portfolio snapshot is provided below.

 

Graph 3

 

The minimum JMRD ETF Basket purchase is 2 Baskets or about $34,800 at present which again is mandated by NBF, not JMRD.  Subsequent purchases are in ½ Basket increments, or approximately $8,700.  Because of its geographical diversification, the JMRD ETF Basket is a good core holding in any account.

 

 

How Technology Has Changed In The Financial Industry

 

Further to Reg’s “20 Year Anniversary” email from a previous Market Observer, we came across the graphic below in a recent National Bank publication.  We thought you might enjoy it.

 

Pic 1

 

 

Retirement Corner

 

 

 

Week at a Glance

 

Full report attached.

Week at a Glance

 

 

Reads of the Week

 

 

 

 

 

  • “Metro CFO on the latest quarter and the stock’s strong uptrend” (BNN) Metro Inc. is a stock that National Bank’s technical analyst recently named among the strongest big caps in Canada. While the grocer’s stock has stumbled in early April, Metro has largely seen a strong uptrend, having climbing over 5 percent in the past 3 months and more than 15 percent over the past year. We’ll discuss what’s driving the rising trend and the company’s latest quarter with François Thibault, Metro’s Executive VP and Chief Financial Officer

 

 

 

 

 

Economic Reports

 

Monday April 25thNew Home Sales

Tuesday April 26thConsumer Confidence Index

Wednesday April 27thPending Home Sales MoM

Thursday April 28th – Initial Jobless Claims

Friday April 29th – Personal Spending- Industrial Product Price MoM (CAD) – GDP MoM (CAD)

 

 

Earnings Reports

 

Monday April 25th – Canadian National Railway Co,

Tuesday April 26th – Barrick Gold Corp, PrairieSky Royalty Ltd- Apple Inc, Lockheed Martin Corp

Wednesday April 27thCGI Group Inc, Suncor Energy Inc, Facebook Inc

Thursday April 28th – BCE Inc, Restaurant Brands International Inc

Friday April 29th – TransCanada Corp- Exxon Mobil Corp

 

 

Have a good weekend!

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