Market Call Tonight for Friday, September 8, 2017
David Cockfield, managing director and portfolio manager at Northland Wealth Management
FOCUS: Canadian equities and ETFs
The Canadian equity markets continue to move sideways. Investors have lots to be worried about, i.e. difficult NAFTA negotiations, higher interest rates and falling real estate prices in the previously hot Toronto housing market. However, the TSX level of 15,000 seems to be offering resistance to further declines. Canadian banks, a good measure of Canada’s economic health, turned in another excellent quarter including dividend increases. A surprisingly robust GDP growth rate of 4.5 per cent in the second quarter, following a 3.7 per cent growth rate in the first quarter, placed Canada well ahead of other members of the G7. The background for equity markets remains positive but the worries remain.
TD BANK (TD.TO)
The second-largest Canadian chartered bank is focused on retail banking. TD has acquired significant banking operations in the U.S. and now has more branches in the U.S. than it has in Canada. For several years their U.S. assets have produced mediocre results, causing TD shares to lose their previous premium value. They have underperformed their Canadian counterparts. Recently, U.S. results have shown a marked improvement. This, plus a planned repurchase of 20 million shares, make the bank a buy. Last purchased in May at $64.41.
VERMILION ENERGY (VET.TO)
A medium-sized Canadian oil and gas company with the majority of its assets in Europe. The company has been successful in applying North American technology to develop European oil and gas prospects. This has been done without creating problems with very environmentally sensitive European authorities. The company has an excellent yield of 6.2 per cent. Last purchased in September at $40.68.
ISHARES S&P NORTH AMERICA TECHNOLOGY ETF (IGM.US)
This ETF mirrors the S&P North American Technology Sector Index. The top five holdings are Apple, Microsoft, Amazon, Facebook Class A and Alphabet Class A & B shares. This ETF allows Canadian investors to participate in the best tech sector companies in the world. Past performance has been excellent but it has recently been hit by the strong Canadian dollar. Management cost is a low 0.47 per cent. Last purchased in September at $153.82.
PAST PICKS: OCTOBER 7, 2016
- Then: $51.78
- Now: $53.95
- Return: 4.19%
- Total return: 6.31%
- Then: $59.10
- Now: $138.03
- Return: 133.55%
- Total return: 133.55%
BMO LOW VOLATILITY U.S. EQUITY ETF (ZLU.TO)
- Then: $29.39
- Now: $28.75
- Return: -2.17%
- Total return: -0.74%
TOTAL RETURN AVERAGE: 46.37%