JMRD Market Observer for October 13th 2017 – JMRD US Growth Basket continues to post strong returns – up 24.7% YTD

October 13, 2017

In This Week’s JMRD Market Observer

 

 

  • JMRD U.S. Growth Basket Q3 Update

  • NBFWM Investment Strategy – Autumn 2017

  • JMRD Basket Corner

  • Retirement Corner

  • Reads of the Week

  • Economic Calendar

  • Earnings Reports

 

 

JMRD U.S. Growth Basket Q3 Update

 

Last week we featured the quarterly results of the JMRD Diversified Income and Growth (DIG) Basket and the JMRD All Cap Basket.  This week we turn our attention to the JMRD U.S. Growth Basket.  As per usual, before we get into Basket specifics, we have once again provided below the handy table below showing how the various global indices and commodities performed during the month of September and Year To Date (YTD). 

 

 

 

JMRD US Growth Basket: Q3 2017 Update

 

It was good quarter for the JMRD US Growth Basket, posting a very good return of 8.2% in Q3 versus the S&P 500 Total Return index of 4.5%.  At the end of September, the year to date return of the US Growth Basket was 24.7% versus the benchmark return of 14.2%.  We launched this Basket on January 1, 2014 and since that time the annual compounded rate of return has been 12.1% against the S&P 500 Total Return Index at 10.9%.

 

Most investors who hold this Basket do so in a US dollar account because this Basket invests in US Companies trading in USD.  That said, there are some investors who hold the Basket in a Canadian dollar account as well.  In this case, at the time of purchase, Canadian dollars are converted to US dollars to buy the US stocks and then the totals are converted back again to reflect the value of the stocks in CAD.  Because the USD has depreciated about 7% versus the CAD in 2017, investors’ US denominated investments are worth less when converted back to Canadian dollars.  Taking the JMRD US Growth Basket as an example, above I mentioned the YTD return of 24.7% to the end of September, and this is based in USD.  When the US Basket is reflected in CAD, the return is closer to 16-17%.  During times of a rising USD relative to the CAD, the opposite happens and USD investments held in CAD get a lift in value, which was the case in 2015.

 

How do we decide on which companies to buy in the JMRD US Growth Basket?

 

  • We use a proprietary relative strength technical analysis research that helps us to identify the stronger sectors to invest in. 
  • Relative strength is “a technique that compares the performance of an asset class or holding against other asset classes or holdings.” Relative Strength calculates which investments are the strongest relative performers by comparing each asset class or holding against the other available choices or within a peer group.  Our friends at SIA Charts (siacharts.com) provided the below analogy of relative strength:
    • Relative Strength is used all the time in everyday life, maybe without you even knowing it. You use relative strength at the supermarket when you are trying to find the best looking apples out of the many choices or whether it is fans voting for the relatively strongest hockey players to the All-Star team. The rotten apples may be a little harder to identify in the investment world, but relative strength quickly identifies holdings that we should stay away from just like you would when picking apples.
  • From there, we look to buy the strongest stocks in the best sectors. Stocks can be trading well but if they are in a strong sector, they can still be underperforming.
  • Conversely, we look to avoid weak sectors as weak sectors and companies within those sectors can often stay weak for an extended period of time. 
  • Instead of trying to ‘guess’ when a stock might bottom, we look to identify the strongest companies that are performing well compared to their peers. 
  • For the U.S. Model we select among the top companies in the S&P 100 combined with Credit Suisse’s top picks.
  • There are no energy companies held in the U.S. basket to avoid overlap with our Canadian baskets

 

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. The current annual cash flow is $338 for a yield of 1.06%. 

 

 

 

***The current cash weighting in the Basket is 11%.

 

A lot of the positive performance in the US Basket this year can be attributed to the technology sector.  The tech-heavy Nasdaq Index is up about 22% year to date and even though we’re not necessarily overweight the tech sector, the tech names we hold have added considerable value to the Basket.  Below is a quick analysis of the tech names in the Basket, as well as other names that are sometimes considered quasi-tech.

 

Electronics and Semiconductors – 16.75% weighting

Applied Materials, bought at $23.56 June 2016, 123% return

Broadcom, bought at 149.96 February 2016, 64% return

Microchip Tech, bought at $65.36 November 2016, 40% return

 

Computer Hardware – 6% weighting

Arista Networks, bought at $92.92 November 2016, 105% return

 

Internet – 6.5% weighting

Facebook, bought at $75.04 July 2014, 128% return

 

Consumer Durables – 4% weighting

IAC Interactive, bought at $113.91 Sept 2017, 7.5% return

 

Financial Services – 9.4% weighting

PayPal Holdings, bought at 61.35 Sept 2017, 7.6% return

Visa, bought twice, at an average price of $75.11 in Oct/Nov 2015, 44% return

 

What are the parameters in terms of buying the new Basket?

 

  • The current value of the JMRD U.S. Growth Basket is approximately $31,900 (all figures in US dollars).
  • The initial minimum position is 2 Baskets, or approximately $63,800
  • Subsequent purchases can be made in increments of a half Basket, or about $16,000.
  • The minimum and subsequent purchase amounts are mandated by National Bank Financial Baskets department, not by JMRD.
  • We continue to recommend the US Growth Basket as a core US holding for investors.

 

 

NBFWM Investment Strategy – Autumn 2017

 

Preview:

 

After a dismal performance in 2016, advanced economies are now bouncing back nicely. OECD industrial output surged 5.3% annualized in Q2, the biggest quarterly increase since 2011. This was made possible by a further ramp up in global trade volumes, which reached a new record last quarter. In Japan, the economy has now been expanding for six consecutive quarters, the longest such streak since 2006. In Europe, economic sentiment is the highest in a decade, reflecting increased confidence among both businesses and consumers. What’s more, strong economic performance in the matured economies is complemented by continuing strength in emerging economies. As a result, global GDP growth is on track to accelerate to about 3.5% this year. While we expect a similar performance in 2018, that assumes governments around the world are able to successfully navigate risks posed by the rise of trade protectionism, elevated debt levels and geopolitical uncertainty.

 

See the full article

 

 

JMRD Basket Corner

 

All-Cap Growth Basket

 

New Flyer (NFI) – LA Metro awards a contract to New Flyer for up to 100 Xcelsior Battery-electric 60-foot transit buses to advance its Clean Transit Agenda

 

U.S. Growth Basket

 

Steel Dynamics (STLD) – U.S. steel stocks jump after Kobe Steel crisis deepens

 

 

Retirement Corner

 

 

 

Reads of the week

 

 

 

 

 

 

 

 

 

 

 

Economic Reports

 

Monday October 16th – BoC’s Business Outlook Survey (CAD),

Tuesday October 17th – Import Price Index (US)

Wednesday October 18th – Manufacturing sales (CAD), Housing Starts (US)

Thursday October 19th – Initial jobless claims (US)

Friday October 20th – CPI Sept (CAD), Retail Sales (CAD)

 

 

Earnings Reports

 

Monday October 16th – Netflix Inc.

Tuesday October 17th – Canadian Pacific Railway Limited, Corus Entertainment Inc, The Goldman Sachs Group, Johnson & Johnson, UnitedHealth Group Incorporated, Morgan Stanley,

Wednesday October 18th – AltaGas Ltd., American Express Company, Ebay

Thursday October 19th – Rogers Communications Inc. Class B Non-voting Shares, Bank of New York Mellon

Friday October 20th – Honeywell International

 

 

Enjoy the weekend!

Categorised in: