Investment Q&A

Q: There was a question asked from Brian on HCAL on May 26. You mentioned HCAL was 1.25x leveraged and uses a covered call which would limit its upside potential. However, I do not believe HCAL uses a covered call strategy (if you can confirm this). If this is true, would your answer still be the same?

Q: Can you recommend etfs to setup a smith maneuver account with target dividend of around 4-5%?
If you think I can get diversification from individual stocks then please go ahead to recommend that list.
Thank you for your service.

Q: What are your thought on the HCAL Etf?Do you like it or would you prefer EEB or RBNK? Any comments would be appreciated. Thank You.

Q: Hello. Trying to understand 2021 distributions from HCAL. According to the website the 2021 T3 distributions, per unit, was comprised of 0.07729 of eligible dividends and 3.50973 of capital gains for a total per unit distribution of 3.58702.

As it holds solely CAD banks, shouldn’t the eligible dividend portions be higher?

I’m confused!

Q: A while ago I asked 5I to run the numbers on HCAL as an example of one of Hamilton's new leveraged ETF's comparing both a covered call and similar market ETF and speculate on the return of their other ones ...... Below in quotations is the answer I got .....

" HCAL 1 month 1.7%, three months 0.85%, YTD 34.9%

ZWB 0.9%, 1.65%, 23.7%

ZEB 1.05%, 1.72%, 29.9%

The difference is likely very closely related to the leverage impact. We would not expect HDIV to be different. " .....

Clearly the Hamilton product out performed both the covered call and regular banking market ETF's

Please clarify the following answer given to Craig this morning ? .....

" For a long-term hold, we would side with either VUN or ZWH, as HYLD would cap long-term capital gains due ot the coverd call strategy. We would be fine with the prospects of both ZWH and VUN but side with VUN for a broader exposure to higher growth areas. "

Q: I have been looking into HCAL lately as an alternative to buying Canadian bank stocks directly. I'm aware that it uses a little bit of leverage and possibly some covered call writing to increase returns and am comfortable with the increased risk. I noticed that it appears to rebalance its holdings quarterly moving 80% of the funds into the 3 most oversold banks. I'm assuming that this would create a fair amount of capital gains each year within the fund. Would this create a capital gains for the holders of the ETF at year end or would the holders only claim the capitals gains once the ETF is sold? If so would this be better held in a registered account? Additionally a portion of the distributions would be due to dividends from the banks. Would this portion of the distributions count as eligible dividends for the holders of the ETF?

Q: I have been looking at HCAL, for the dividends. I not sure I understand the Non-Cash distribution. They are showing a non-cash distribution in the amount of $2.324 payable in December. They state the distribution will not be paid in cash but will automatically reinvested in additional units of the ETF and immediately consolidated so the number of units held by the unitholder and the net asset value of the ETF, will not change. So, what does change, with the non cash distribution?

Q: For a consistent and reliable distribution, and some growth, HCAL or HDIV or some of both?

Q: Thank you for your answer on my inquiry on these new leveraged ETF's HCAL and HDIV ..... Your answer showed HCAL beat both the covered call bank ETF and the bank ETF { albeit under the short one year time frame of the ETF's existence } ...... A while ago I asked 5I to crunch the numbers on all of the big five banks from the turn of the century to the date of the question and give the annual return { dividend plus capital gain } .... The answer I got was an annual return of 11% on the low end to 14% on the high end ..... Your answer to my question on HCAL included the following quote .... " But we would cautious on seeing them as 'safe'. In a bad market, or course, weaker returns will be worsened with leverage. " ...... It is my understanding that these securities are not structured like the 2X and 3X leveraged ones that rebalance daily to achieve the required return ...... My question is regarding your caution on safety ...... Can I not ignore the down turns in favour of the long term return of the banking sector while collecting a superior return ? Those historical 11% to 14% annual bank returns are averaged including the down turns .... It seems to me looking at the sector's long term history the security would offer the same safety as the banking sector with a superior return ..... Please advise if I am looking at this correctly ? I am considering the security to represent my weighting in the banking sector ...... I am delaying my purchase until I fully understand your remarks on " safety " ....... Thank you for your help .....

Q: I'm intrigued by these new slightly leveraged ETF's HCAL and HDIV . HDIV has only been around for a few months but HCAL has a year under it's belt going from $15 to $23 . Could 5I give me the percentage of return for each in that time period of HCAL, ZWB, and ZEB { dividend plus capital gain } ? So I can do a little comparing ....And would it be safe to assume any deviation would indicate the effect of the leverage used ? And can I assume that the construction of HDIV { I'm a sucker for high yield } will react similarly ? I am considering what for me would be large positions { 5%-7% } as part of the relatively safe equity income part of my portfolio ? Would you endorse my thesis that they are relatively safe among their unleveraged peers ?

Q: If bank stocks generally rise in a rising interest rate environment, would this ETF perform more positively or negatively given that it is also leveraged as the ETF's cost of borrowing would also increase at the same time?

Q: HI!
I thinking of investing in HCAL but wonder how much growth the Canadian banks have for the next year as they have recovered so well. What are your thoughts?

Q: I like the concept of HCAL; investing in Canadian banks with a little extra torque and a higher dividend yield than any of the banks. Is it fine as a long-term hold? I know many of the leveraged ETF's are not suitable for long-term but understand the structure of this one is different. Can you please explain the difference between this and the double and triple levered ETF's.
Do you recommend HCAL for long-term bank exposure.

Q: I have been looking at this for some time and it (appears to me anyway) a great way to get broad exposure to the banks with some limited leverage. What is your take on this ETF??

Q: For a total investment return over a long time frame, which ETF do you think will perform better?

HCAL - Leveraged, No DRIP, 0.65 MER
RBNK - DRIP availablity, 0.33 MER

Thanks,

Q: Could you give me your take on this ETF compared to investing in the banks directly. Risk level?