JMRD Market Observer for October 24th, 2014: JMRD U.S. Growth Basket Update‏

October 28, 2014

**October 24th Issue of The JMRD Market Observer**

In This Week’s Market Observer…

  • JMRD U.S. Growth Basket:  Third Quarter Update
  • NBFM Monthly Economic Monitor – November 2014
  • Book Launch!
  • JMRD Basket Corner
  • Retirement Corner
  • Week at a Glance
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

JMRD U.S. Growth Basket: Third Quarter Update

The JMRD Wealth Management Team is excited to announce the third quarter update for our recently launched JMRD U.S. Growth Basket.  We launched the new US Basket as we have received numerous requests for a portfolio of US companies that trades in US dollars.   Diversification is important by asset class and currency making the launch of this new Basket very timely.

Note the US Basket has a cash weighting of approximately 20%.  The Team feels there may be an opportunity to add new names or top up existing positions on weakness at some point going into the end of the year.

We will focus on five questions you may have on the new Basket as a way of introducing it:

  • Who should buy it?
  • How do I buy it?
  • What is in the Basket?
  • How do you pick the holdings?
  • What are the parameters in terms of buying the new Basket?

Who should buy it?

1)

  • Clients who have US dollar accounts are the best candidates for the new Basket as they already have US dollars available
  • Remember, if you don’t have US dollars already, a new buyer would first need to convert to US dollars
  • With the recent weakness in the Loonie, it takes more Canadian dollars to buy US dollars

2)

  • Clients who think the Canadian dollar will continue to decline are also good candidates as this is also a currency call
  • For those in this camp, the conversion provides a way to diversify by currency as well

3)

  • The Team is being proactive in this Basket launch as NBF will be rolling out US dollar RSP accounts in the not too distant future
  • The U.S. Growth Basket could be purchased in this new RSP once rolled out

How do I Buy it?

  • The JMRD US Growth Basket is purchased the same way as our other Baskets
  • We would recommend setting up a US dollar account as a start
  • We would need to ‘code’ the account for Basket purchase as per usual – for those interested let us know and we will get the paper work together
  • The Basket is purchased on a fee basis similar to our other offerings

What is in the Basket?

  • We will be featuring company updates on the holdings in up-coming Market Observers so you can become more familiar with the individual positions
  • Find below, a full snapshot of all holdings

 We are pleased to announce that as of the end of September the JMRD U.S. Growth Basket was up 12.1% year to date.

 Note that over the same period, the Dow Jones Industrial Average was up 2.8%, the S&P 500 Total Return was up 8.3% and the NASDAQ posted a return of 7.6%.

4) How do you pick the holdings?

  • We use a proprietary relative strength technical analysis research that helps us to identify the stronger sectors to invest in.
  • 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.
  • The requirements are: Minimum $1B market capitalization, no more than two securities per sector and an initially equal weighted portfolio.

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

  • The current value of the JMRD U.S. Growth Basket is approximately $11,100 (in US dollars)
  • The initial minimum position mandated by is 5 Baskets, or approximately $55,500
  • Subsequent purchases can be made in increments of 1.5 Baskets, or about $16,700

 Note that the minimum and subsequent purchase amounts are mandated by National Bank Financial’s Baskets department rather than by JMRD

NBFM Monthly Economic Monitor – November 2014

 Highlights

  • The global economy is doing better than what’s depicted by the recent stock market collapse and sinking oil prices. But if left unchecked the current fears or concerns have potential to become self-fulfilling and spill over to the real economy via lower investment and consumption spending. Governments have an important role to play in restoring calm by pledging to support growth by all means necessary and by showing competence in dealing with renewed threats of a pandemic.
  • In light of renewed fears about the global economy, the U.S. is once again regarded by many as a beacon of hope. The world’s largest economy is indeed on an uptrend buoyed by an invigorated private sector. Investment spending is soaring and consumers look poised to join the party, more so considering the deleveraging cycle is over. While exports could soften a bit due to the stronger dollar, that shouldn’t prevent the U.S. economy from posting growth of around 2.9% next year. In light of the decline in commodity prices, we have lowered our inflation forecasts for the U.S.
  • While slumping oil prices are not good news for Canada, the overall economic outlook remains positive considering the U.S. resurgence and the stabilizing impacts of the weakening Canadian dollar. Exports should remain the driver of growth for Canada next year, and added support from investment spending can be expected, with both more than offsetting the anticipated moderation of housing and consumption. We remain comfortable with our call for growth to accelerate to 2.5% in 2015. But given its concerns about the global economy, the Bank of Canada will continue to err on the side of caution and delay rate hikes to the last quarter of 2015. Our Canadian inflation forecasts have been revised down to take into account lower commodity prices.

 Monthly Economic Monitor

Book Launch

 Alena Schram, a resident of Stella, Ontario, and a valued (and now famous) client of the JMRD Team, is about to launch a book entitled The Opinionated Old Cow:  Ruminations from the Field.”  We want to congratulate Alena on this remarkable feat and provide our readers with a link to the publisher’s site (below) which includes more information on her new book.

From Alena…

“Believe it or not, my book “The Opinionated Old Cow:  Ruminations from the Field” is about to be published, and celebrated at two events (one can never have too many launches), one hosted jointly by Kingston’s independent bookstore and the publisher;  the other by The Lodge on Amherst Island.

 

Since I know you’re bursting with eagerness to hear:  paperback copies will be available at bookstores and also through the publisher (www.cowdyhouse.com) and, from 1 November, as an eBook from Amazon (or, if you’re Canadian, Indigo).”

JMRD Basket Corner

 DIG Basket

Canadian Pacific (CP) – “Canadian Pacific Pushes for Rail Mergers as CSX Talks End” 

All Cap Growth Basket

 AutoCanada (ACQ) – Announced the acquisition of Toronto Dodge Chrysler, their 4th auto dealer in the Greater Toronto Area and 46th across eight provinces in Canada

Magna International (MG)“Magna stock has room to power higher after pullback” 

US Growth Basket

 Dow Chemical (DOW) – Dow Chemical 3Q earnings handily topped expectations as sales increased 5% helped by higher prices across geographical regions. The company announced record EBITDA in Performance Plastics and significant improvement in Performance Materials. DOW has paid $1.3B in dividends and spent $3.1B on buybacks so far this year and says it remains committed to reaching financial targets and paying back shareholders amid “volatile global macroeconomic conditions.”

Haliburton (HAL) – Halliburton announced on Monday its board has approved a 20% increase to its quarterly dividend, while also reporting a 16% jump in revenue during the third quarter. The company also said Monday that gains in both its completion and production and drilling and evaluation segments’ revenue helped drive up overall earnings during the period. Its results outpaced market expectations.

Illumina (ILMN) – On Tuesday, Illumina raised its 2014 guidance as third-quarter results topped analysts’ expectations–thanks to strong demand for the gene-sequencing company’s products. For the year, the company again raised its per-share earnings estimate to $2.63 to $2.65 on revenue growth of about 30%, from its previous estimate for per-share profit of $2.26 to $2.28 on revenue growth of 25% to 26%. The shares traded higher by over 10% on the news and a new year-high on Thursday

Lockheed Martin (LMT)  – Lockheed Martin reported a forecast-beating 1.7% rise in third quarter profit and raised its 2014 earnings outlook for the third time this year. However, the company said forecast sales and margins will drop sequentially in 2015, even if lawmakers approve the Pentagon’s existing budget plan. The downbeat 2015 sales guidance was a surprise as peers had recently indicated they expected the Pentagon budget–which accounts for two thirds of Lockheed sales–to have stabilized, even though the defense department is spending temporarily at 2014 levels since next year’s limit has yet to be approved by Congress. The shares reversed course, after trading as low as $166.18 and moved higher during the week, trading at $181.00 on Thursday afternoon.

 Retirement Corner

  1. “Approaching retirement: The perks of staying on the job” (The Globe and Mail) 
  2. “Why Canadians need to get more aggressive with retirement savings” (The Globe and Mail) 

 Week at a Glance

Monthly Economic Monitor

Reads of the Week

  • Tax credits for kids (Investment Executive) There are various federal tax credits and deductions available for clients who are raising families Tax Credits for Kids
  • Quantitative Easing Update (Calculated Risk Blog) With QE3 expected to end next week, here is an updated timeline of QE (and Twist operations):

 Economic Reports

Monday October 27th – Markit US Services PMI, US Pending Home Sales

Tuesday October 28th – US Durable Goods Orders, US Consumer Confidence Index

Wednesday October 29th – US FED Interest Rate Decision

Thursday October 30th – US GDP, US Initial Jobless Claims, US Personal Consumption

Friday October 31st – Canada GDP; US Personal Spending, US Personal Income, U. Of Michigan Consumer Confidence

Earnings Reports

Monday October 27th – DH Corp, Precision Drilling, Merck,

Tuesday October 28th – Norbord, First Service Corp, Horizon North Logistics, Dupont, Facebook

Wednesday October 29th – Barrick, Agnico Eagle, Cameco, Methanex, Sherritt, Suncor, Teck Resources, Kraft, MetLife, Sealed Air Corp, Visa

Thursday October 30th – Altagas, Bombardier, Canadian Oil Sands, Constellation Software, Goldcorp, Superior Plus, MasterCard, Mosaic,

Friday October 31st – Chevron, Exxon Mobile

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