Monthly Performance Review

Transcription

1 Monthly Performance Review ScotiaMcLeod November 3, 2015 S&P/TSX Composite Short Sellers Cause Panic on the S&P/TSX S&P 500 Strong October Ends the Sell in May Cycle November 3, 2015

2 S&P/TSX Index Performance Review October 2015 ScotiaMcLeod Monthly S&P/TSX Index Performance Review October 2015 Short Sellers Cause Panic on the S&P/TSX The S&P TSX Composite index gained 1.7% through the month of October on a price only basis. With 242 stocks in the index at month end, 165 rose, 73 declined and 4 were unchanged. The S&P TSX small cap and mid cap indices outperformed the broader index, while the large cap underperformed. Seven of the ten sectors in the S&P/TSX index rose modestly through October, led by the Energy index (up 7.6%), while the remaining 3 sectors retreated. For a second month in a row, the Healthcare sector had the biggest impact on the S&P/TSX Composite losing 45.7% as Valeant was hit again after a stock commentary site run by a short seller accused the company of an Enron like strategy of recording fake sales by using phony customers Index Returns (price only) October YTD S&P/TSX Composite +1.67% 7.54% S&P/TSX % 7.06% S&P/TSX Completion +2.98% 8.98% S&P/TSX SmallCap +4.30% 12.53% Top 10 Point Contributors Enbridge Inc. (+43.4) Canadian Natural Resources Ltd. (+37.9) Suncor Energy Inc. (+37.2) Canadian National Railway Co. (+26.1) Bank of Nova Scotia (+25.7) Brookfield Asset Management Inc. (+25.5) Rogers Communications Inc. (+17.3) Bank of Montreal (+16.7) Manulife Financial Corp. (+16.4) Toronto Dominion Bank (+16.0) Top 10 Point Detractors Valeant Pharmaceuticals International Inc. ( 297.6) Alimentation Couche Tard Inc. ( 17.2) Canadian Pacific Railway Ltd. ( 9.0) Husky Energy Inc. ( 15.1) Potash Corp of Saskatchewan Inc. ( 6.3) Tourmaline Oil Corp. ( 5.7) Cenovus Energy Inc. ( 5.1) Gildan Activewear Inc. ( 5.0) Element Financial Corp ( 4.0) Bombardier Inc. ( 3.9) 20.0% 10.0% 0.0% 10.0% Energy 7.6% Materials 7.0% Telecom 5.3% Financials 3.4% Cons. Discretionary 3.1% Industrials 2.2% S&P/TSX Index 1.7% Info Tech 1.5% Utilities 1.9% Cons. Staples 2.0% 20.0% 30.0% 40.0% 50.0% October 2015 Monthly S&P/TSX Composite Index Performance by Sector (Price only) Source: Bloomberg Healthcare 45.7%

3 S&P/TSX Index Performance Review October 2015 Sector Monthly price-only return Monthly total return Financials 37.79% of S&P/TSX Composite +3.4% +4.0% Energy 19.59% of S&P/TSX Composite Materials 9.49% of S&P/TSX Composite Industrials 8.32% of S&P/TSX Composite Consumer Discretionary 7.30% of S&P/TSX Composite Telecommunications Services 5.62% of S&P/TSX Composite +7.6% +7.7% +7.0% +7.3% +2.2% +2.2% +3.1% +3.2% +5.3% +5.3% Consumer Staples 4.26% of S&P/TSX Composite 2.0% 1.9% Notable Movement Of the sectors 46 constituents at month end, 35 rose through the month while 10 declined. There was also 1 constituent that was unchanged. Bank of Nova Scotia (BNS, +4.5%) was the sector s largest point contributor for the month of October. Scotiabank outperformed the Canadian bank sector in October as relative valuation narrowed in the month. Element Financial Corp (EFN, 7.2%) was the sectors biggest laggard for the month of October. 39 of the Energy sector s 59 constituents gained through October, while the remaining 20 retreated. Leading and influencing the sector the most was Enbridge Inc. (ENB, +12.8). Husky Energy Inc. (HSE, 15.1%) was the energy sector s biggest laggard since shares fell to the lowest in a decade, after the Canadian oil producer said it would start paying its dividend in stock. After reporting quarterly losses, the company also said that they would be cutting approximately 1400 jobs. The Materials sector saw 33 of its 46 constituents rise through the month of October, while the other 10 lost. There were also 4 constituents that were unchanged. Barrick Gold Corp. (ABX, +18.4%), the world s largest gold producer, was the sector s largest point contributor after reporting third quarter earnings that beat analysts estimates as lower costs and higher production helped to mitigate the impact of weak metals prices. Potash Corp of Saskatchewan Inc. (POT, 3.5%) was the sector s largest detractor after withdrawing its proposal to negotiate a transaction with K+S of Germany amid a decline in global commodity and equity markets. 15 of the Industrial s sector s 22 constituents gained through the October, while the remaining 7 declined. Canadian National Railway Co. (CNR, +5.4%) was easily the largest point contributor in the industrial s sector followed by SNC Lavalin Group Inc. (SNC, +10.4%) Canadian Pacific Railway Ltd. (CPR, 4.1%) was the sector s biggest laggard after considering as many as 500 additional job cuts as part of a plan to boost efficiency that includes using fewer locomotives and running faster trains. The Consumer Discretionary Sector saw 19 of its 26 constituents advance in the month of October, while the remaining 7 fell. Magna International Inc. (MG, +7.7%) was the sector s largest point contributor after announcing on October 2 nd that it has signed an agreement to acquire Stadco Automotive Ltd., an independent Tier 1 Body In White supplier based in the United Kingdom. Gildan Activewear Inc. (GIL, 6.7%) was the sector s largest point detractor after the company was cut to Neutral from Buy at D.A. Davidson & Co. The Telecommunication Services sector saw all 4 of its constituents gain through the month. Rogers Communications Inc. (RCI.B, +13.2%), Canada s largest wireless operator, was the sectors largest point contributor after reporting third quarter earnings that topped analysts estimates as it added more customers than projected. Rogers added 77,000 new contract wireless customers, a second straight quarterly gain as the company vies with BCE Inc. and Telus Corp. for a wave of extra customers looking for new phone plans. Of the sectors 10 constituents at month end, 5 rose through the month while the other 5 declined. Saputo Inc. (SAP, +6.4%), was the sector s largest point contributor after the company announced that it would buy Woolwich Dairy company for C$80m cash. Woolwich generates annual revenues of approximately $70 million. It produces, distributes, markets and sells goat cheese in Canada and the USA. Alimentation Couche Tard Inc. (ATD.B, 8.3%) was easily the sector s biggest laggard after the company said CFO Paré resigned effective Oct. 16 to pursue other interests and to spend more time with his

4 S&P/TSX Index Performance Review October 2015 Information Technology 2.82% of S&P/TSX Composite Healthcare 2.61% of S&P/TSX Composite Utilities 2.22% of S&P/TSX Composite +1.5% +1.5% 45.7% 45.7% 1.9% 1.7% family. The company also bought assets of Texas Star with no terms. The Information Technology sector saw 9 of its 12 constituents gain while the remaining 3 constituents fell. DH Corp (DH, 9.9%) was the sector s biggest laggard despite reporting third quarter earnings that beat analysts estimates. The company. The stock fell sharply on October 26 th after hedge fund Lawton Park Capital Management accused DH (formerly Davis + Henderson Corp.) of masking weakening performance. BlackBerry Ltd. (BB, +2.6%) was the sector s largest point contributor for the month of October. 3 of the Healthcare constituents gained in the month of October, while the other 2 retreated. Valeant Pharmaceuticals International Inc. (VRX, 48.8%) was by far the biggest laggard in the healthcare sector after a stock commentary site run by a short seller accused the company of an Enron like strategy of recording fake sales by using phony customers. Citron Research said Valeant is using a specialty pharmacy called Philidor RX Services to store inventory and record those transactions as sales. ProMetic Life Sciences Inc. (PLI, +45.6%) was the sector s biggest point contributor. 9 of the Utilities 12 constituents declined for a second month in a row, while the remaining 2 advanced. Brookfield Renewable Energy Partners (BEP.UN, 6.1%) was the sector s largest point detractor in the month of October. Just Energy Group Inc. (JE, +16.9%) was the sector s largest point contributor in the Utilities sector for the month of October.

5 S&P 500 Index Performance Review October 2015 ScotiaMcLeod Monthly S&P 500 Index Performance Review October 2015 Strong October Ends the Sell in May Cycle The S&P 500 index gained 8.3% through the month of October on a price only basis. With 505 stocks in the index at month end, 421 rose and 85 declined. The NASDAQ composite and Dow Jones Industrial Average indices outperformed the S&P 500, while the Russell 2000 underperformed the S&P 500. All ten sectors in the S&P 50 rose through the month of October, with the Materials sector leading the gains at 13.4% Index Returns (price only) October YTD S&P % +0.99% Dow Jones Industrial Average +8.47% 0.90% NASDAQ Composite +9.38% +6.71% Russell % 3.56% Top 10 Point Contributors Microsoft Corp. (+7.6) Apple Inc. (+6.0) Amazon.com Inc. (+5.0) General Electric Corp. (+4.2) Exxon Mobil Corp. (+4.0) Alphabet Inc. (GOOG, +3.4) / Alphabet Inc. (GOOGL, +3.3) Facebook Inc. (+3.1) Chevron Corp. (+2.6) Johnson & Johnson (+2.4) Walt Disney (+2.0) Top 10 Point Detractors Walmart Stores Inc. ( 1.4) International Business Machines Corp. ( 0.5) Yum! Brands Inc. ( 0.4) Western Digital ( 0.3) HCA Holdings Inc. ( 0.3) Chipotle Mexican Grill Inc. ( 0.3) Eli Lilly & Co. ( 0.2) Seagate Technology ( 0.2) Endo International ( 0.2) Exelon Corp. ( 0.2) 16.0% 14.0% Materials 13.4% October 2015 Monthly S&P 500 Index Performance by Sector (Price Only) Source: Bloomberg 12.0% 10.0% 8.0% Energy 11.3% Info Tech 10.7% Industrials 9.1% Cons. Discretionary 9.0% S&P % Healthcare 7.7% 6.0% Financials 6.1% Telecom 5.8% Cons. Staples 5.6% 4.0% 2.0% Utilities 1.1% 0.0%

6 S&P 500 Index Performance Review October 2015 Sector Information Technology 20.84% of S&P 500 Index Financials 16.19% of S&P 500 Index Healthcare 14.58% of S&P 500 Index Consumer Discretionary 13.15% of S&P 500 Index Industrials 10.19% of S&P 500 Index Consumer Staples 9.69% of S&P 500 Index Monthly price-only return Monthly total return +10.7% +10.8% +6.1% +6.2% +7.7% +7.8% +9.0% +9.1% +9.1% +9.2% +5.6% +5.8% Notable Movement Of the sector s 69 constituents at month end, 57 rose through the month while 12 declined. Microsoft (MSFT, +18.9%) was the sector s largest point contributor after the company reported fiscal first quarter profit that exceeded analysts estimates, buoyed by demand for Internet based programs that handle business tasks and host companies applications. International Business Machines Corp. (IBM, 3.4%) was the sector s biggest laggard since the stock dropped to an almost five year low on October 20th after the company cut its profit forecast, underscoring the difficulty of trying to reinvent itself as a powerhouse in cloud computing and data analytics. 77 of the Financials sector s 88 constituents rose through the month of October, while the remaining 11 declined. Wells Fargo & Co. (WFC, +5.4%) was the sector s largest point contributor after the company agreed to buy about $32 billion in assets from General Electric Co. and take on about 3,000 employees. Welltower Inc. (HCN, 4.2%) was the financial sector s biggest laggard in the month of October. The REIT saw a downgrade at Mizuho and a lower target price from Jefferies on concerns that there is an oversupply in senior housing and that the rising construction in the market could create downside risk at Healthcare REITs. The Healthcare sector saw 45 of its 55 constituents gain through the month, while the remaining 10 retreated. Johnson & Johnson (JNJ, +8.2%) was the sector s largest point contributor in the month of October as the company beat analysts estimates for thirdquarter profit as a lower tax rate helped the world s biggest maker of health care products overcome slightly weaker than projected sales for key drugs such as Remicade. HCA Holdings (HCA, 11.1%) was the healthcare sector s biggest laggard as after the biggest U.S. hospital chain reported preliminary third quarter earnings that missed analysts estimates, raising concerns across the industry of an increase in uninsured patients who can t pay their bills. 66 of the Consumer Discretionary sector s constituents rose through the month of October while the other 22 retreated. Amazon.com Inc (AMZN, +22.3%) was easily the largest point contributor in October. The stock soared after third quarter sales topped analysts estimates thanks to the company s fast growing cloud computing division, a boost from its July Prime Day promotion and a watchful eye on spending. Yum! Brands Inc. (YUM, 11.3%) was the sector s largest point detractor after weak sales in China caused it to miss third quarter profit estimates. Yum, which gets more than half its revenue from China, has been trying to recover from an avian flu outbreak and a food supplier investigation. Of the sector s 67 constituents at month end, 60 rose while the other 7 declined. General Electric Co. (GE, +9.5%) was the sector s largest point contributor after news that Nelson Peltz s Trian Fund Management bought a $2.5 billion stake in the company, making it one of Trian s largest investments. Stericycle Inc. (SRCL, 12.9%) was the industrials sector s biggest laggard after the stock fell the most in 19 years on October 23rd as third quarter revenue and profit at the medical waste company fell short of analysts estimates. The Consumer Stapes sector saw 32 of its 37 constituents gain through the month of October, while the remaining 5 declined. Philip Morris International Inc. (PM, +11.4%) was the sector s largest point contributor as the world s largest publicly traded tobacco company topped quarterly profit estimates and raised the low end of its forecast, helped by higher prices and an improving economy. Wal Mart Stores Inc. (WMT, 11.7%) was the sector s largest point detractor after the company suffered its worst stock decline in more than 15 years on October 14th after predicting a drop in annual profit, underscoring the giant retailer s struggles to reignite growth.

7 S&P 500 Index Performance Review October 2015 Energy 7.11% of S&P 500 Index Utilities 2.93% of S&P 500 Index Materials 2.95% of S&P 500 Index Telecommunications Services 2.36% of S&P 500 Index +11.3% +11.4% +1.1% +1.1% +13.5% +13.5% +5.8% +7.1% 33 of the Energy sector s constituents rose through the month of October while only 7 constituents ended the month in negative territory. Exxon Mobil Corp. (XOM, +11.3%) was the sector s largest point contributor after the company posted higher than expected profit as soaring margins on processing oil into fuels blunted the impact of collapsing crude markets. CONSOL Energy (CNX) was the biggest point detractor in October. The stock fell with declining natural gas and coal prices, and investor fears of financial distress among U.S. coal producers. The company also reported disappointing Q3 results towards the end of the month. Of the sector s 29 constituents at month end, 19 rose through the month while 10 declined. After declining in September, NextEra Energy Inc. (NEE, +5.2%) was the utilities largest point contributor in the month of October. Exelon Corp. (EXC, 6.0%) was quite volatile in October, and closed out as the sector s biggest laggard. EXC announced in early October that it reached an agreement with Washington s mayor on its $6.8 billion proposal to buy utility Pepco Holdings Inc. The Materials sector saw 27 of its 28 constituents advance through the month of October, while the only other constituent retreated. Alcoa Inc. (AA, 7.6%) was the only constituent to retreat in the materials sector in the month of October due to suffering under the weight of a global aluminum glut and reporting earnings that missed analysts estimates after the price of the metal fell for a fourth straight quarter. DuPont Co. (DD, +31.5%) was the sector s largest contributor in the month. The chemical maker whose chief executive officer abruptly resigned earlier in October, reported third quarter earnings that beat analysts estimates after the company made cost cuts. All 5 constituents in the Telecommunications Services advanced in the month of October. Verizon Communications Inc. (VZ, +7.8%) the largest U.S. wireless carrier, was the sector s largest point contributor and influencer since posting third quarter profit that exceeded analysts estimates after sales promotions and tablet deals helped lure more subscribers amid price cuts by smaller rivals.

8 Important Disclosures This report has been prepared by members of the ScotiaMcLeod. ScotiaMcLeod is the full service retail division of Scotia Capital Inc General Disclosures The ScotiaMcLeod prepares this report by aggregating information obtained from various sources as a resource for ScotiaMcLeod Wealth Advisors and their clients. Information may be obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor s, Valueline, Morningstar CPMS, Bank Credit Analyst and Bloomberg. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the ScotiaMcLeod Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is provided to you for informational purposes only. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. Copyright 2012 Scotia GBM Inc. All rights reserved Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund. November 5, 2014