In This Week’s Market Observer…
JMRD Wealth Manager Award
- Reg Jackson attends “The ETF Conference”
- NBF Asset Allocation Strategy
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
Wealth Manager Award
We wanted to express our gratitude for all the congratulatory emails and phone calls that we have received since announcing our award on Thursday. We are only as good as the clients we work with and we wanted to reciprocate by saying thank you for entrusting us with your hard-earned savings. We appreciate the opportunity you have provided us over the years.
Exchange Traded Fund (ETF) Conference
On Thursday of this week, JMRD Portfolio Manager Reg Jackson, attended a conference on ETFs. To be specific, the event was sponsored by the Canadian ETF Association in conjunction with Mindpath and focused on the trends and growth of ETFs in Canada and around the world.
Experts from the likes of Vanguard, Bloomberg, Horizons and iShares were all on hand providing updates on this rapidly growing segment.
Rather than write about the conference, we decided to provide the conference overview and encourage you to contact Reg with any comments or questions. We want to try something a bit different by asking for questions on ETFs and next week we will provide answers for all ‘Market Observer’ readers.
We also wanted to provide some quick reference points for those interested in learning more about ETFs.
Try the following websites:
Too wrap up, Reg was asked to sit on the ‘ETF Strategist Discussion Panel’ which was a group of three ETF specialists discussing how to build ETF Portfolios while fielding questions from the audience.
It is JMRD’s belief that to maintain a competitive advantage and to provide the highest level of client service, one must continue to stay up to date on current trends and developments in the world of finance and financial planning. JMRD is considered an expert in ETFs and our on-going due diligence (homework never ends) in this area continues as we strive to improve after-tax returns for our valued clients.
Be on the lookout for new and exciting ETF solutions in the near future from your JMRD Wealth Management Team.
NBF Asset Allocation Strategy – May 2014
Where we in May last month?
The correction in biotech stocks continued at the beginning of the month dragging the rest of the market down at the same time as tensions in Ukraine between pro-Europe and pro-Russian protesters ratcheted up a notch. However, unrealised losses were quickly recouped, as most indices rebounded from their longer-term trends following better-than-expected earnings in North America and Europe.
After setting a new record high on April 2nd, the S&P 500 lost nearly 4% the following week, but still managed to end the month up 0.7%. The S&P/TSX held its ground in April, finishing with a monthly gain of 2.4%.
Playing their safe haven role, U.S. 10-year Treasury notes rallied in the first half of the month, with yields falling from an inter-month-high of 2.81% to a low of 2.62%, before rising a little.
Asset allocation strategy
Fixed income: A firming U.S. economy, inflation bottoming out and the end of the Fed’s bond purchase program drawing near, all signal higher interest rates in the future. We continue to recommend a short duration, with an emphasis on riskier spread products.
Equities: The rebound in the economic surprise index bodes well for risk assets. Barring an escalation of tensions in Ukraine (not our base case scenario), an improving U.S. economy points to higher earnings and further gains for stocks.
Commodities: Gold prices have been in correction mode following the trend for real short-term interest rates observed after the March 19th Federal Open Market Committee meeting. Bullion could fall to its technical support level of around US$1200 per ounce. Our preference goes for gold mining stocks rather than the commodity itself.
JMRD Basket Corner
A busy week for earnings in the JMRD Baskets!
Crescent Point Energy (CPG) – Announced Q1 results and increased their production guidance while the capital budget remains unchanged. A solid quarter for CPG as it remains on track to meet or exceed its targets while paying a sustainable attractive dividend yield of 6.2%. NBF analyst Kyle Preston reiterated his Outperform rating and $52.00 target price which is based on a 1.1x multiple to our CNAV estimate and reflects a 2014 EV/DACF multiple of 9.8x.
CI Financial (CIX) – A solid RRSP campaign delivered record Q1 sales for CIX. Q1 results were once again a testament to CI’s superior fund performance and strong distribution platform. The company remains well positioned to deliver superior AUM growth relative to peers.
Gibson Energy (GEI) – GEI reported Q1 adj. EBITDA of $137 mln, well ahead of NBF estimate of $119M (consensus: $112M) largely owing to stronger Propane & NGL Marketing & Distribution margins. With a payout ratio of 54%, we expect Gibson to increase their dividend by 9% in Q2 2015
Keyera Corp (KEY) – KEY reported Q1 AFFO/sh (FD) of $1.01 (excl. certain non-cash items), above NBF’s estimate of $0.90 on EBITDA of $108M versus our estimate of $99M (consensus: $110M) owing to stronger fee-for-service margins, partially offset by higher G&A expense. Meanwhile, KEY announced a 7.5% dividend increase to $2.58/sh annually (from $2.40/sh).
MacDonald, Dettwiler & Associates (MDA) – Strong revenue, as expected while the company’s satellite pipeline represents bids worth over $2 billion, even after recent contract wins, indicating additional active bids.
Whitecap Resources (WCP) – WCP reported Q1 operating and financial results in line with expectations, with production of 26,508 boe/d (71% liquids) and CFPS of $0.50 (in line with consensus). During the quarter, the company realized a cash netback of $42.30/boe, up ~10% versus the prior quarter. At the end of the quarter, the company had net debt outstanding of $470.8 mln, or 1.2x annualized Q1 D/CF, with credit facilities recently expanded to $1.0B. WCP results were strong with multiple data points (capital efficiencies, netbacks, operational performance) validating NBF’s view that WCP is the best yield player in the Canadian E&P space, with strong fundamentals to support its sustainability.
Pembina Pipeline (PPL) – PPL reported EBITDA of $316-mln, ~25% above our estimate of $255-mln and consensus at $253-mln. All four businesses beat (grand slam!), led by NGL Midstream (strong propane prices), but also strong beat on conventional crude / NGL pipelines (Montney), gas processing services (also Montney driven), and oil sands pipes (Peace River). Dividend bumped 4%. A growth machine, executing $4.4-bln of projects, while eyeing up the next $2-bln worth. Estimates up 5% longer-term, combined with lower debt levels = $3 (7%) increase to target to $48. Reiterate Outperform rating
Canyon Services (FRC) – Canyon’s EBITDA came in at $27.4M (20% margin vs 11% Q4/13) compared to NBF at $17.9M and consensus at $19.7M. A 40% beat vs consensus. FRC has been running flat out since January and was short of both people and equipment in Feb and March, despite an increase in hiring in 2013. The robust activity levels are expected to persist throughout the second half of the year. Strong visibility, but not yet seeing much in terms of the impact on pricing (margins up mostly a function of utilization).
Stantec (STN) – Stantec announced that it has signed a letter of intent to acquire SHW Group (“SHW”), a US-based firm specializing in building engineering (architectural, interior design, planning, and engineering). SHW is one of the top education architecture firms in the US and the leading education design firm in Texas. Closing of the transaction is expected in May 2014. Although relatively modest in size (300 employees, which is at the low-end of STN’s “sweet spot” of 300 to 800 people and vs. Stantec’s more than 13,000 employees), the acquisition will strengthen STN’s expertise in the key market of education where the company targets a top-tier position. Most of SHW’s client are public institutions and include premier US colleges and universities as well as numerous school districts in Texas, Michigan, Virginia and Maryland.
First Asset Morningstar U.S. Value Index ETF (XXM) – First Asset MSCI Low Risk Weighted series of ETFs are designed to capture the effect of low volatility and deliver strong risk-adjusted returns over time vs the broader market: “Decade’s Best Gains Came by Avoiding Volatility: Riskless Return” (Chicago Tribune) http://www.chicagotribune.com/sns-wp-blm-news-bc-volatility30-20140430,0,4694444.story
1)“ Living in Retirement: It’s all about Pensions” (Globe and Mail)
2)“Should your life expectancy be part of your financial planning?” (Financial Post)
Week at a Glance
Reads of the Week
“Canadian Stocks are Breaking Out” (All-Star Charts)
“Bubble? What bubble? Toronto condo sales booming once again” (Globe and Mail)
Monday May12th – None
Tuesday May 13th – US Retail Sales
Wednesday May 14th – Canada Teranet/National Bank Home Price Index, Canada Existing Home Sales
Thursday May 15th – US Empire Manufacturing Index, US Initial Jobless Claims, US Industrial Production, US Philly FED Business Outlook
Friday May 16th – US Housing Starts and Building Permits; U. of Michigan Consumer Confidence
Monday May12th – Inter Pipeline, Northland Power
Tuesday May 13th – Encana, Innergex, Riocan,
Wednesday May 14th – Crombie REIT, Cisco, Deere
Thursday May 15th – Air Canada, CAE, Just Energy, Power Corp, Stantec, Walmart
Friday May 16th – Onex Corp