5i Research Blog

The big news this week comes out of the US, as President Donald Trump said yesterday that his “fire and fury” comments may not have been tough enough, and refused to rule out a preemptive strike against North Korea. The VIX, a measure of market volatility, has surged in price. Behind the scenes there have been a mix of earnings reports this week. Insurers Manulife Financial (MFC) and Sun Life Financial (SLF) reported second-quarter earnings that beat market expectations, benefiting in part from strong growth in Asia. CI Financial (CIX) has reached an agreement to acquire Sentry Investment for $780M in cash and stock, combining two of Canada’s largest independent active asset managers. Valeant Pharmaceuticals (VRX) reported a better-than- expected quarterly profit and said it expected to repay more than $5B in debt earlier than it had targeted. The Ontario Lottery and Gaming Corp. announced it has selected Great Canadian Gaming (GC) and Brookfield Business Partners (BBU.UN) to run its casinos in the Greater Toronto Area. Here are five stories we found interesting this week:

1. Signs of booms and bubbles, and evaluating current markets for these indicators (a longer read)
2. Money-weighted return: how an active manager can profit when everyone buys the same index
3. A road map for transitioning to an ETF portfolio
4. Investment lessons from a quant-icon
5. Investors try to avoid pain by making these poor behavioural decisions.

As many readers know, the Bank of Canada raised its 0.5% benchmark interest rate by a quarter percentage point on July 12. Markets are pricing in another quarter point hike by the end of the year.

Higher interest rates are often viewed as a positive for sectors like financials and materials but seen as a negative for utility stocks. With that, we will center this iteration of the 5i “Industry-At-A-Glance” blog to discuss the midstream oil and gas industry, which we consider more like a utility stock as opposed to an energy sector stock.

The article will highlight which companies are likely to outperform peers due to their ability to defend share price via dividend growth.

Peter Hodson will be live at the Small Cap Power studios to answer your investing questions through a live webinar. 

Join us on August 9, 2017 at 11am ET and get those stock and dividend investing questions answered. 

Submit your questions by emailing submissions@smallcappower.com.

Sign up to join the live Q&A webinar for free here.

Join 5i Research's CEO Ryan Modesto who will be live on BNN this Wednesday August 2nd at 1pm EST. 

Tune-in to hear Ryan's latest top picks, how the past picks have performed, along with him and his team's latest investing insights.

Submit your questions when he's live by calling BNN's Market Call at 1-855-326-6266, or submit your questions on Twitter by using #marketcall during the interview.

We look forward to your questions!

It was a big week for US bank earnings, and markets showed concerns over President Donald Trump’s ability to push through his pro-growth policies, following a setback to the healthcare bill. Bank of America (BAC), the second-largest U.S. bank by assets, beat quarterly earnings expectations but experienced a slowdown in trading revenue and trimmed its expectations for growth in net interest income. Goldman Sachs (GS) dipped after also beating earnings expectations but posted a 40% drop in bond trading revenue. Telecom company Rogers Communications (RCI.B) reported a greater-than-expected 35% jump in second-quarter profit, as a gain in wireless subscribers offset declines in its cable TV business. Canadian Pacific Railway (CP) reported a better-than-expected quarterly profit, as it earned more from higher shipments of commodities, but executives were cautious on grains for the second half of the year. Here are stories we found interesting this week:

1. An overview of factors driving market 'bubbles'
2. ETF Managers made active decisions for passive investors, years ago
3. Three 'simple' lessons learned over the last 10 years
4. If portfolio management is no longer the source of a financial advisor’s value, what is?
5. The 'Top 10' S&P 500 company contributions over the last 35 years

What if I told you that as of June 28, 2017, essentially half way through the calendar year, only one sector out of ten (including REITs with Financials) was negative?

What if I told you that out of those ten sectors, six of them had returned over 5% in the year-to-date period and three of those had returned in excess of 10% over the year-to-date period?

With the TSX flat to slightly negative over the same period, you would likely call shenanigans, but it’s true.

Only one sector is negative for the TSX in 2017 and due to its heavy weighting, it has been the main contributor to the lack of any returns on the TSX so far this year.

1. Guiding principles every investor should, at best, understand
2. What's wrong with active management and how it could stay alive
3. Winning investments require enduring more discomfort/uncertainty than others
4. Answer these questions to see if you can 'wait out the storm'
5. Emerging markets continue to see tailwinds

There has been a lot of focus on the Bank of Canada and the FED recently with talk of where interest rates are going. Here are a few things we think are worth noting.

Here are five investment and finance stories we found interesting this week

This is a guest contribution by Nick McCullum from Sure Dividend 

The Canadian banks hold a special part in the portfolios of many investors, both in Canada and the U.S.

By and large, these stocks are known for giving outsized total returns along with exceptionally high dividend yields. This is quite rare – there are not many pockets of the stock market where entire groups of stocks are considered to be quality investments.

Why is this?