12/31/2018 12:00 AM < Back
Sub-Manager Commentary Q4 2018 - Investment Strategies


FIXED INCOME

Short Term Floating Rate Notes

Contributed by Canso Investment Counsel Ltd.

  

The Canso short-term floating rate bond portfolio returned 0.1% in the quarter, slightly behind the benchmark return of 0.4%. The underperformance is attributable to significant spread widening in the GE issues. The high-quality bank covered bond positions were defensive in the period. For the one year period, the portfolio return is flat with the benchmark. Since inception, the return of 1.9% has exceeded the benchmark by 0.5%.

The portfolio yield to maturity increased by 0.4% in the period. The change is attributable to an increase in the CDOR reference rate as well as wider credit spreads. The weight in BBB rated issues increased by 9.8% primarily due to the downgrade of GE. There was a corresponding reduction in A rated issues.

FIXED INCOME

Canso Corporate Value Bond

Contributed by Canso Investment Counsel Ltd.

  
A nasty confluence of events pushed equity markets sharply lower in the fourth quarter. The US Federal Reserve continued to raise administered interest rates, which is broadly negative for asset prices. There are also signs of an economic slowdown, based on surveys of manufacturing company executives. Trade tensions between the US and China contributed to this. Finally, equity markets seemed to come to the realization that many stocks, especially in the technology sector, were expensive.

Falling equity markets caused investors to shift into Government bonds in the quarter. This drove their yields down and led to Government of Canada bonds being the strongest performers in the Canadian bond market. For the most part, yields on Provincial and Corporate bonds also declined, but not by as much as on Government of Canada bonds. This caused credit spreads to widen and Corporate bonds to underperform the broader bond market. Lower quality bonds were the worst performers, with many high yield issues falling in price and even investment grade BBB rated bonds seeing somewhat higher yields.

The very strong performance of Canada bonds in the fourth quarter reversed their year-to-date trend and caused them to be the best performers for the year. Yields actually rose for the year overall so that longer duration Provincials were the worst performers while corporates, especially higher rated issues, performed better.

The Canso Corporate Value portfolios returned -0.4% to -0.3% in the quarter which underperformed the benchmark by 1.2% to 1.3%. Issues of AT&T, Teva and TransCanada lagged in the quarter, partially offset by issues of UniCredit, TD and Black Press. Over the last year, the portfolios returned 1.7%, outperforming the benchmark by 0.6%. For the seven-year period, the portfolios achieved annualized performances of 7.3% to 7.6% which was 3.7% to 4.0% ahead of the benchmark respectively. Since inception, the portfolios returned 8.5% to 8.8% on an annualized basis, outperforming the benchmark by 3.3% to 3.6%.

The portfolios’ average short-term holdings decreased from 84.7% to 82.3%, while average mid-term
holdings increased from 11.9% to 14.0% over the quarter. This was largely the result of the purchase of Bombardier and GE bonds with terms to maturity above 5 years, financed from the sale of short-term holdings. The average long-term holdings remained unchanged over the quarter. The portfolios’ average mid-term and long-term yields increased from 4.4% to 5.8% and 5.1% to 5.9% over the quarter, resulting in the portfolio’s average overall yield increasing from 2.9% to 3.4%. This increased not only resulted from the purchase of higher yielding securities such as Bombardier and GE, but also from portfolio spread widening. In contrast, the portfolios’ average short-term yields remained essentially unchanged. Average investment grade holdings decreased from 90.1% to 88.0% over the quarter. This was largely the result of the purchase of Bombardier with the proceeds of investment grade holdings.

The Corporate Value portfolios’ Federal Government and Canadian corporate holdings decreased 0.6% and 1.7% on average over the quarter in favor of foreign corporate holdings which increased 2.0% on average. The increase in foreign corporate holdings resulted from the purchase of UniCredit and GE Capital Corp with the proceeds of Canadian corporate securities and the sale of an NHA MBS.

FIXED INCOME

Canso Investment Grade Bonds

Contributed by Canso Investment Counsel Ltd.​

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The Canso investment grade bond portfolios returned 0.9% this quarter, underperforming the benchmark by 0.2%. Issues of St Clair Holdings, Scotia Plaza, and PSPIB Re-Summit performed well in the quarter, offset by Shaw, AT&T and General Electric. The one year returns in the Universe portfolios range from 1.5% to 1.6%. Since inception, the Universe portfolios have returned between 3.6% and 3.7%, outperforming the benchmark by 0.8% to 0.9%.

The portfolios saw a decrease in short term bonds and an increase in both the mid term and long term sectors. This was driven by the new issue purchase of Loblaw 2028’s and a few different long issues from General Electric. Durations extended by 0.2 years on average as more attractive spreads in long bonds resulted in purchases of long bonds and sales of shorter bonds. Yields increased in the portfolios on average 0.2%. This was driven by some purchases of higher yielding securities and overall spread widening. The portfolios all saw a decrease in AA & Higher sectors and an increase in their BBB sectors. This was largely driven by General Electric moving from the A sector to the BBB sector as well as a significant increase in the overall General Electric weight in the portfolios. The decrease in AA & Higher was due to sells against these purchases of very short high quality issues. The portfolios saw a decrease in Canadian Corporates and an increase in Foreign Corporates primarily due to an increase in the purchase of General Electric Capital USD bonds. The remaining sector holdings were largely unchanged.

CANADIAN LARGE CAP STOCKS

Mawer Canadia​n Large Cap Stocks

Contributed by Mawer Investment Management Ltd. 

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The S&P/TSX Composite Index (the “TSX”) returned -10.1% in the fourth quarter of 2018. Oil market concerns came to the forefront in the form of a record differential between the Western Texas Intermediate and the Canadian price for crude, while the Bank of Canada acknowledged that the economy may not be as robust as anticipated. Eight of the eleven sectors recorded negative returns with Health Care, Energy and Industrials declining the most. Consumer Staples, Communication Services and Materials had positive returns as investors sought safe-havens.

The Mawer Canadian Equity Fund (the “Fund”) returned -11.3% before management fees, underperforming the benchmark by 1.2%. The Fund’s relative underperformance was due to security selection while sector allocation provided an offset. An overweight allocation to Communication Services, underweight in Energy stocks and a lack of exposure to Healthcare, the worst performing sector, contributed to the positive effect from sector allocation. From a security selection standpoint, selection within Industrials and Energy, and a lack of exposure to gold mining companies within Materials accounted for most of the stock selection impacts.

Within Industrials, factory automation designer ATS Automation shares declined 40% as global economic growth showed signs of slowing. In addition, the company announced a cross-segment European acquisition of Italian company Comecer at what appears to be a premium valuation. Suncor Energy (-23%) and Canadian Natural Resources (-21%) shares fell due to the Canadian oil price differential – both companies are reining in capital expenditures as a result of depressed pricing and government-invoked production cuts for the industry.

On the positive side, Thomson Reuters shares (up 13%) were the largest positive contributor to the Fund’s performance. The company completed the sale of a majority stake in its Financial & Risk unit to private equity firm Blackstone Group. Stable-demand consumer companies also provided positive performance contribution with Loblaw Companies shares up 14% and Rogers Communications shares up 6%. Rogers, the largest wireless service provider in Canada by market share, showed strong results, with increases in revenue, net income and earnings per share as the wireless market in Canada continues to grow.

CANADIAN LARGE CAP STOCKS

QV Investors Canadian Large Cap Stocks

Contributed by QV Investors Inc.

​​The QV Canadian Equity Strategy returned -10.8% in the quarter versus -10.1% for the S&P/TSX Composite Total Return Index (TSX). The one-year return was -13.3% for the strategy compared to -8.9% for the benchmark.

Negative performance for the portfolio and benchmark was broad-based, with 8 of 11 sectors declining over the quarter. Weakness in the energy and financials sectors contributed the bulk of the decline in the portfolio and index. Stock-specific issues and the fund’s lack of direct gold exposure contributed to underperformance on a relative basis. The gold sub-index advanced over 19% in the period due to the metal’s perceived safe-haven status during challenging markets. As discussed in previous quarters, shares of AltaGas Ltd. have been under pressure since the company’s acquisition of WGL Holdings Inc. earlier this year. The strategy’s top contributing investments were Loblaw Companies Ltd., Fortis Inc. and Alimentation Couche-Tard. The largest detractors were AltaGas Ltd., ARC Resources Ltd. and Cenovus Energy Inc.

We exited our investment in Maxar Technologies Ltd. The company has failed to make any significant progress in reducing debt levels since completing a major acquisition in late 2017. While we feel Maxar owns some attractive assets, a failure to address balance sheet leverage risks the company’s long-term competitive positioning. 

During the quarter, Loblaw completed the spin-out of its 61.6% interest in Choice Properties REIT. As Loblaw shareholders, we received shares of George Weston Ltd. as consideration in this transaction. We also increased our weight in Loblaw during the period. We believe both Weston and Loblaw shares represent good value in the consumer staples space.

With significant pressure on our energy holdings, we optimized our oil sands positioning by increasing exposure to Suncor and reducing it to Cenovus. Suncor has a healthier balance sheet and its fully integrated business model makes it less sensitive to the heavily discounted Alberta oil price. Additionally, we added to our position in ARC Resources Ltd, which has a strong balance sheet and trades near an all-time low price-to-book value. Rising tensions between Canada and Saudi Arabia, and an extended timeline for resolving bribery charges from 2012, have added to uncertainty for shares of SNC-Lavalin Group Inc. Though we believe the fundamental operations of the company and its overhauled governance program remain intact, we felt it was prudent to reduce our position.

When adjusted for currency, Canada was one of the weakest-performing equity markets in 2018. Despite the challenging equity market performance, business fundamentals have been solid in Canada, with TSX net profit margins near 30-year highs. However, this margin level seems unsustainable given the headwinds that tend to arise in the later stages of the business cycle, including rising interest rates. The market’s valuation has improved to a more attractive level with the TSX now trading at a P/E of 13.5x. However, this rises to 17.2x when we strip  out the energy and financials sectors, suggesting the other half of the market remains at above-average levels. The portfolio maintains an above- average cash weight, ready to be deployed into attractive opportunities as they arise.

At a P/E of 12.3x, the portfolio trades at an attractive discount to the market’s long-term average valuation of 15.9x, and its holdings remain better diversified. The strategy’s dividend yield of 3.6% is also at the highest level since 2008. Moving into 2019, we continue to believe the process of selecting good businesses at reasonable prices will add value over the long term and offer downside protection in more challenging markets.

CANADIAN SMALL CAP STOCKS

Mawer Canadian Small Cap Stocks

Contributed by Mawer Investment Management Ltd. 

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The S&P/TSX SmallCap Index posted a 14.4% loss overall in the final quarter of 2018, with all sectors declining. The final quarter of 2018 was characterised by higher volatility as investors became increasingly concerned over slowing worldwide economic growth, an escalating U.S. and China trade war, and higher interest rates. Like previous quarters in 2018, Energy was the biggest driver of negative returns. The industry faced record high differentials for Canadian oil for most of the year, and a sharp decline in world crude prices towards the end of the year. Offsetting the weakness in the Energy sector were gold stocks as investors viewed gold as a safe-haven. The Materials sector, therefore, was one of the best performing sectors this quarter, down only 3%.

The Mawer New Canada Fund (the “Fund”) performed slightly better, declining 13.4% in the quarter before management fees. Both stock selection and sector allocation led to an outperformance of 1.0% over the benchmark. Like many past quarters, a consistent explanation for relative performance to the benchmark rests with Energy and Materials. The Fund was able to better protect capital thanks to a relative underweight in the Energy sector and to security selection as the Fund avoided the worst-performing stocks. In addition, security selection within the Consumer Discretionary and Industrials sectors also contributed positively. Partially offsetting these positives, the Fund was hurt by not owning gold companies.

The top contributor over the quarter was central Canadian apartment landlord InterRent REIT as the tight rental apartment market in Ontario led to strong rent price growth. Solium Capital, a provider of equity plan administration software, delivered strong results during the quarter as recent deals with Morgan Stanley and UBS boosted its brand and visibility in the marketplace. Packaging manufacturer Winpak reported decent results during the quarter and, while price competition remains elevated, it is still benefiting from lower raw material costs.

Conversely, many of the Fund’s long-term top-performing holdings saw adjustments to their valuations, as market participants seemingly lost confidence in their growth prospects. This phenomenon was especially exacerbated for companies with quarterly stumbles or perceived economic clouds on the horizon. Bus manufacturer NFI Group reported weak third quarter results as earnings declined year-over-year due to margin pressure in coach buses and some one-time plant start-up costs.Commercial real estate services and software provider Altus Group reported underwhelming results as its Analytics license revenue declined substantially and profit from its tax business declined by approximately half year-over-year. Other examples included software company Enghouse, mattress retailer Sleep Country, and hardware distributor Richelieu. We took advantage of some of these displacements, reducing some of our higher-priced holdings and purchasing companies at lower valuations yet with strong long-term prospects.

CANADIAN SMALL CAP STOCKS

QV Investors Canadian Small Cap Stocks

Contributed by QV Investors Inc.

Falling commodity prices and severe discounts for Canadian energy products have heavily impacted investor sentiment in Canada. In difficult markets, small cap stocks tend to underperform. This year was no exception with one of the worst years for small cap stocks since the financial crisis.

Weak performance during the quarter was broad-based but particularly acute in the oil and gas sector with oil and Alberta-based natural gas production falling precipitously. The strategy’s energy investments outperformed the benchmark sector, falling 17% versus the benchmark’s decline of 33%. The strategy’s focus on cash-generating businesses within cyclical areas and less valuation risk than the market contributed to relative outperformance.

The strategy’s top contributing investments were Badger Daylighting Ltd., AltaGas Canada Inc. and Element Fleet Management Corp. The largest detractors were AltaGas Ltd., Canadian Western Bank and Superior Plus Corp.

We initiated an investment in Lucara Diamond Corp. Since its mine entered full production in 2013, the company has realized attractive margins and produced a return on equity exceeding 20% with no debt on the balance sheet. The company improves sector diversification and balance sheet metrics of the portfolio, and the shares are trading at a steep discount to our net asset value calculations.

The strategy also initiated an investment in AltaGas Canada Inc. (ACI), a recent  IPO  and  spin-out  from  AltaGas  Inc. With  most  of  the company’s earnings stemming from regulated assets, we expect cash flows and earnings power to be predictable and stable over the long term. ACI trades at an attractive valuation relative to its North American utility peers and the current portfolio, while offering an attractive dividend yield. The partial sale of ACI and a dividend reduction should position AltaGas Inc. on more sound footing to internally fund its growth plans while improving its balance sheet.

We exited our investment in Maxar Technologies Ltd. Although Maxar has a strong legacy as a leader in the Canadian technology space, the company has failed to address heightened debt levels since it made a major acquisition last year. A failure to address balance sheet leverage risks the company’s long-term competitive positioning. During the quarter, Brookfield Infrastructure Partners completed the acquisition of fund holding Enercare Inc. This increased cash levels from the prior quarter.

Over the past two decades, the strategy has weathered numerous market and economic cycles by owning a diversified portfolio of businesses that exhibit above-average profitability and below-average valuations relative to the benchmark. This discipline persists.

Valuations of growth-oriented and expensive high-quality businesses have pulled back with the recent market weakness and less than perfect company execution. We remain focused on businesses that can execute their strategies in challenging periods, with the ability to improve their franchises without relying on exogenous factors. Portfolio cash is at above-average levels, providing ample dry powder to deploy capital as opportunities develop.

The strategy provides higher income generation, a lower payout ratio and stronger balance sheet metrics than the benchmark, which should all contribute to downside support in a more challenging market environment.

US LARGE CAP STOCKS 

Mawer US Equity

Contributed by Mawer Investment Management Ltd. 

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The U.S. equity market as measured by the S&P 500 Index (the “S&P”) declined 8.6% during the quarter. 2018 saw broad global equity declines with pronounced volatility in the final quarter where markets swung up and down by multiple percentage points on many days. The main catalysts of the weakness appear to be concerns about rising interest rates, trade actions, slowing global economic growth, and the flattening of the U.S. treasury yield curve. After peaking in September, the S&P was no different, seeing the lion’s share of its drawdown during the fourth quarter. Eight of eleven sectors experienced declines led by Information Technology and Industrial stocks. The impact of currency was positive for Canadian investors as the U.S. dollar strengthened against its Canadian counterpart over the quarter. All performance values are provided in Canadian dollar terms, unless stated otherwise.

The Mawer U.S. Equity Fund (the “Fund”) returned -4.1%, before management fees, resulting in a relative outperformance of 4.5%. Security selection explains the bulk of the outperformance although sector allocation also contributed positively. Positive effects from sector allocation were primarily thanks to the absence of exposure to the Energy sector, while a lack of Utilities and Real Estate holdings slightly detracted from relative performance. From a security selection perspective, the largest positive impact came from holdings within Financials, supported by the Fund’s stocks within Communication Services, Information Technology and Consumer Staples.

Within Financials, the standout performers were CME Group and Willis Towers Watson. CME owns and operates derivatives and futures exchanges—essentially the infrastructure for many different types of market transactions. Increased levels of volatility have led to higher activity on CME’s various platforms. Willis Towers Watson reported revenue growth that was largely in line with historical quarters with increasing margins which investors seem to have favoured. Consumer Staples company Procter & Gamble also performed well, providing a measure of stability to the Fund.

On the negative side, the market had long been favouring companies with high growth potential, but many of these market darlings were hardest hit as investors began to doubt the sustainability of future growth and the premium that they are willing to pay. Examples in the Fund include Ansys and Alphabet. In the case of Ansys, management indicated that margins are likely to shrink. For Alphabet, decelerating, yet still robust, growth rates, increased regulatory scrutiny and data privacy issues gave investors concern.

INTERNATIONAL LARGE CAP STOCKS 

Mawer International Equity

Contributed by Mawer Investment Management Ltd. 

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The Mawer International Equity Benchmark (the “Benchmark”) fell 6.45% during the period. All sectors in the benchmark, with the exception of Utilities and Real Estate, finished in negative territory while Energy and Information Technology posted the weakest returns. All performance values are provided in Canadian Dollar terms (unless otherwise stated).

The Mawer International Equity Fund (the “Fund”) declined by 4.92% during the quarter (before management fees), outperforming the Benchmark by 1.53%. The Fund’s relative performance was driven primarily by positive security selection in Industrials, Financials, and Materials. Societe BIC, HDFC Bank, and UPL led the gains in each sector respectively. This was slightly offset by negative allocation due to the Fund’s lack of exposure to Utilities and Real Estate and overweight position in Industrials. The depreciation of the Canadian Dollar relative to most other currencies bolstered the performance for Canadian investors.

The top contributors during the period were Glanbia, UPL, and HDFC Bank. Irish nutrition company Glanbia acquired SlimFast in October, which, in our opinion, provides a nice complement to its existing mass-market and lifestyle channels and helped support the stock’s strong performance. UPL is an Indian agrochemical manufacturer. The stock’s performance was aided by the acquisition of agricultural solutions company Arysta and guidance for double digit revenue and EBITDA growth. For its part, Indian bank HDFC Bank released a strong earnings report that showed good margins, strong loan growth, and increased market share in deposits.

The top detractors during the quarter were Tsuruha, Fresenius Medical Care, and ALD. Japanese drug store operator Tsuruha saw its margins impacted by cost inflation due to labour shortages. The company’s integration of a few acquisitions has not been as seamless as anticipated. Fresenius, the world’s largest kidney dialysis company, issued a profit warning due to weaker revenue from emerging markets, increasing costs, and a more negative payer mix in the U.S. The company also announced a weaker outlook for 2019 due to higher investments in home dialysis services and in future growth markets. Finally, European auto leasing company ALD had a difficult quarter as investors turned more negative on the company’s prospects likely due to a reduction in car sales and an increase in bad receivables which was due to two customers declaring bankruptcy.

GLOBAL LARGE CAP STOCKS

QV Global Equity

Contributed by QV Investors Inc. 

 
The QV Global Equity Strategy returned -8.7% in Canadian dollars (CAD) during the fourth quarter, versus -8.8% for the MSCI World Index. In 2018, the strategy returned -2.5% versus -0.7% for the benchmark.

Nearly all major equity markets declined in 2018. The S&P 500 returned -4.4% in U.S. dollars, but a weakening loonie bolstered the return to +4.0% in Canadian dollar terms. Europe and Hong Kong returned -6.8% and -3.0%, respectively, in Canadian dollars, while Japan declined -5.5%.

During the quarter, weak performance was broad-based, with declines in all sectors but utilities and real estate. Within the portfolio, energy holdings were the largest detractor from relative performance while security selection within financials and consumer discretionary was the largest contributor. On a full year basis, underperformance was driven by security selection and an underweight in health care, as well as security selection within industrials.

The strategy’s top contributing investments in the quarter were AutoZone Inc., OSRAM Licht AG and Walmart Inc. The largest detractors were Apache Corp., National Oilwell Varco Inc. and Citigroup Inc. We increased our investments in AT&T Inc. and Michelin. AT&T is near an all- time trough valuation versus its own history and relative to the market. We expect the business to generate stable underlying free cash flow over the next few years and to reduce leverage that was raised to fund the Time Warner acquisition. The shares provide a dividend yield of over 7%.

Michelin is a leading global tire manufacturer. Its exposure to the replacement tire market and the industry’s ability to pass through price inflation over time makes it a relatively low-volatility cyclical. Consistent margin improvement and an aligned management team have led to consistent per share growth over many years. Michelin diversifies the cyclical exposure within the strategy. These increases were funded by the exit of Walmart Inc. and Chevron Corp., which are trading at higher valuations and offered lower risk/reward. Walmart was trading at 21x forward price to earnings and near the lowest dividend yield in recent years. The sale of Chevron reduced the portfolio’s energy exposure.

Equity prices began to factor in a potentially more challenging future as monetary policy continued to tighten in Q4. Macroeconomic policy uncertainty also began to emerge in the form of weaker global economic data. In the ensuing market sell-off, widespread passive and computer-driven trading left very few areas of the market unscathed. With extended corporate leverage, generally elevated asset valuations and high policy uncertainty, stock market volatility seems likely to persist.

The strategy trades at 12.6x P/E, the lowest since 2012. The strategy’s dividend yield is 3.2%, the highest since 2012. Numerous holdings now trade at decade low valuations. Balance sheets remain strong and our businesses are largely positioned in areas where either valuations are very suppressed relative to excesses in the broader market, or cash flows are extremely resilient. While near-term volatility is difficult to avoid in widespread sell-offs, as seen in Q4, we continue to believe that the strategy’s differentiated exposures and emphasis on risk management offer superior risk-reward as the current market cycle continues to age.

GLOBAL SMALL CAP STOCKS 

Mawer Global Small Cap Equity

Contributed by Mawer Investment Management Ltd. - Paul Moroz

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The Mawer Global Small Cap Equity Benchmark (the “Benchmark”) fell 12.04% during the quarter with Energy, Health Care, and Industrials posting the largest negative returns. Geographically, all regions with the exception of Latin America posted negative performance over the period. All performance values are provided in Canadian Dollar terms (unless otherwise stated).

The Mawer Global Small Cap Equity Fund (the “Fund”) declined 8.10% (before management fees) during the period, outperforming the Benchmark by 3.94%. The Fund’s relative performance was driven by both security selection and allocation. Positive selection was driven by the outperformance of the Fund’s holdings in Industrials, Financials, and Information Technology. S-1 Corp, Oslo Bors, and MYOB Group led the gains in each sector respectively. From an allocation standpoint, the Fund benefitted from its cash position during a declining equity market and being underweight in Energy, the Benchmark’s worst performing sector. Geographically, both allocation and security also drove relative performance. Positive geographic allocation was driven by the Fund’s underweight in the U.S. and overweight exposure to Asia Pacific ex. Japan. Positive selection was driven by the outperformance of the Fund’s holdings in Europe and Asia Pacific ex. Japan.

The top contributors during the period were MYOB Group, Oslo Bors, and S-1 Corp. Australian accounting software provider MYOB was up 16% during the quarter. During the period, the company received an offer from KKR, at a premium to the prior closing price, to take the company private. Oslo Bors is a Norwegian stock exchange. During the quarter, Euronext, the leading pan-European stock exchange launched a €652M takeover bid to acquire the Oslo Stock Exchange. S-1 Corp is the #1 alarm security service provider in South Korea. Despite weaker than expected Q3 earnings, management expects the company to record strong security-product sales in Q4. Management forecasts benefits from its new security services, which uses facial recognition technology, as well as its parking space solution, helping support the 18% stock price appreciation over the quarter.

Softcat, Tsuruha, and XP Power were the top detractors from performance during the quarter. Softcat, a U.K. based reseller of IT software and hardware, was down 21% over the period. Management made comments around potential uncertainty brought on by Brexit tempering FY2019 results. Despite this, the company reported strong results for FY2018 and continued to fuel growth by increasing the share of customer wallet, a focus of the company’s strategy. Tsuruha is a Japanese drug store operator. Margins were impacted by labour inflation and shortage. The company has also been integrating a few acquisitions that have not been as seamless as anticipated. XP Power, a provider of power converters and supplies, fell 26% on the quarter. Management made some comments in October following their earnings release that the rate of growth may moderate, which coincided with the correction in share price.
​The end.



The commentary provided herein was written and contributed by Sub-advisors to the Compass Portfolio Series and compiled by ATB Investment Management Inc. (“ATBIM”).  This report is being provided for information purposes only and is not intended to replace or serve as a substitute for professional advice, nor as an offer to sell or a solicitation of an offer to buy any investment. Although the information has been obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is made as to their accuracy or completeness and ATBIM does not undertake to provide updated information should a change occur.

Any performance data provided for mutual funds assumes re-investment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that may reduce returns. Mutual Funds are not insured by the Canada Deposit Insurance Corporation, nor guaranteed by ATBIM, ATBSI, ATB Financial, the province of Alberta, any other government or any government agency. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Read the fund offering documents before investing. Unit values of mutual funds will fluctuate and past performance may not be repeated.

Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in investment products that seek to track an index.  

ATBIM and ATB Securities Inc. are wholly owned subsidiaries of ATB Financial and are licensed users of the registered trademark for ATB Wealth. This document may not be reproduced in whole or in part; referred to in any manner whatsoever; nor may the information, opinions, and conclusions contained herein be referred to without the prior written consent of ATBIM. ATB Financial, ATB Investment Management Inc. and ATB Securities Inc. do not accept any liability whatsoever for any losses arising from the use of this document or its contents.

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