Articles

Are Canadian banks still a buy?

0 Comments

lorne_bnn_jan2015With Canadian bank stocks declining approximately 15 percent as a group over the past 3 months, Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor, TriDelta Investment Counsel, was recently interviewed on BNN regarding his view that now is a good time for long-term investors to add exposure to Canadian bank stocks.  Reasons for Mr. Zeiler’s bullish long-term view include compelling valuations (11.0X EPS 2015 expected earnings), high current dividend rates (4.0%+ for most Canadian banks, but payout ratios remain at approximately 45% of projected earnings), earnings stability and their strong business franchises.

Click here to watch the full interview.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
lorne@tridelta.ca
416-733-3292 x225

2015 Financial Forecast & Review of Solid 2014 Predictions

0 Comments
TriDelta Financial forecasts good but weaker returns in 2015 than 2014
 
Accountability – someone recently told me that this word seemed to be disappearing in society. It made me think how predictions are easy to make, especially if there was no accountability for how they did.
 
At TriDelta Financial – we believe in being accountable to our clients. We are even accountable for our predictions – which will not always be correct.
 
Here is what we said last year:
http://www.tridelta.ca/tag/2014-forecast/
 

  • US Equities over Canadian Equities – both for Total Return and also because of Currency.
  • We preferred Industrials and Technology and mentioned 3 stocks that we liked for 2014:
    • CISCO – Total return in Canadian dollars for 2014 is 41.7%
    • Goodyear Tire – Total return in Canadian dollars for 2014 is 32.0%
    • Magna – Total return in Canadian dollars for 2014 is 48.4%
  • Equities over Bonds – We were correct in not seeing interest rate increases in 2014 and that the Prime Rate would remain unchanged (this was different than most opinions of rising rates). However, we did not see the meaningful declines in long term yields that took place during the year, and it turned out that Bond returns (while not as strong as stocks), were better in 2014 than we thought.
  • Canadian dollar would continue to decline. We correctly predicted that the Canadian dollar would fall from 94 cents, but thought it would end the year at 90 cents. It turned out that the decline would be greater than we predicted.

Overall, our 2014 Financial Forecast was mostly correct. In fact, these beliefs helped us to deliver a return of over 15% in 2014 on our one fund, the TriDelta High Income Balanced Fund.

 
Now for our 2015 Financial Forecast

TriDelta Financial 2015 Year End Predictions
TSX Total Return 5% A little lower than 2014
S&P 500 Total Return (in US$) 8% A little lower than 2014
DEX Canadian Bond Index Total Return 2.25% Lower than 2014
Canadian Bank Prime Rate 3.5% 50bps higher in 2nd half
10 Year Gov’t of Canada Bond Yield 2.25% to 2.50% Moderate increase
Crude Oil (WTI) $70.00 Decent increase
Canadian Dollar vs. US$ at year end $0.84 Small decline

US Equities over Canadian Equities – Again we expect the US equity market to outperform Canada. While we do not expect a repeat of the outsized U.S. returns that have occurred over the last two years, we do expect US equities to produce decent single digit returns (7-9%).  Last year we had thought that returns in the U.S. would be mainly based on earnings growth as earnings multiples seemed to be at a reasonable level. Analysts were expecting 10% growth in earnings and as it turns out earnings grew about 7% despite currency headwinds and continued global strife.   The multiple also expanded a bit to deliver the roughly 13% US$ return. The major concern in Canada revolves around oil. If oil decides to hang around the $50 – $60 level it looks like earnings estimates could come down and the expectation of 16% earnings growth that is currently in the market could easily fall.

Canadian Equities – As noted above we still expect positive returns for the TSX in 2015, but oil and the trickledown effect of its precipitous decline especially in western provinces is the big question mark.   Valuations for many of the dividend payers (especially the banks) continue to remain reasonable especially in a low interest rate environment and could have some multiple growth and earnings growth to pick up the slack from a poor energy market.. 

Sectors to Outperform –Two stocks with some cyclical US exposure we think will do well next year are 3M and Allegion as the US economy continues to gain traction. Health Care stocks could be another solid performer next year as the fears around Obama Care subside, mergers continue and demographics are favourable. Another name that we see both strong earnings growth and dividend growth in 2015 would be Apple.

Oil  – It would be great to say that we see a big rebound this year but we think we are going to stay at reasonably depressed levels for some time. The question is whether approximately $50 oil is a new price driven by supply and demand, or the result of more complicated components of the market. While we don’t see a bounce back to $100 oil, we still believe that the pendulum has swung too hard in one direction, and we will see some bounce back from here. However, the bounce back won’t be as large as many predict. Hopefully we have seen the worst for oil and we will be able to capitalize on a couple of tradable rallies but we don’t think we will have many major long term holdings in the sector this year. We will also be looking at related industries such as Western Canada real estate and some potential impact to bank earnings.

Currency – USD/CAD  – Despite all the positive momentum in the US we think the majority of the move off the bottom has now occurred and we are mostly due for a pause. The U.S. dollar bottomed in late 2011 and has gained 23% adding significant gains to our U.S. equity holdings. The range we are looking at is $0.80 to $0.90. The expectation for further gains in the US dollar will continue as the longer term trend for the US is positive, the improving economy has helped bolster the U.S. government balance sheet and net export numbers continue to improve providing less of a headwind.  This currency trend will put additional pressure on Canadian investments vs. US investments – but we believe this pressure will be pretty small at this stage.

Interest Rates  – Similar to our views in 2014, we do not believe there will be significant moves higher on either the short or long end of the curve, but we do see some small increases later in the year. Global economic growth continues to have its challenges, deflationary concerns abound. Developed nations’ interest rates will remain near historical lows.

Bonds  – Do higher interest rates mean poor bond returns? The reality is that it depends on how you manage bonds. The first issue relates to higher interest rates. How much higher? We believe this will be limited to small increases. With the yield curve, do we focus on the short end (1 year or overnight) or the long end (10 years plus)? Much of the ‘flattening’ has already happened with sizable declines in long term rates in 2014. We see small changes at both ends. What about Government bonds vs. Corporates vs. High Yield? These decisions will shift throughout the year.

At TriDelta, we believe in an active bond strategy in order to take advantage of the shifts within the bond market, as much as the general trend. For 2015, this would likely mean taking advantage of some late 2014 trends. High yield bonds had a weak end of the year with worries in a few corporate sectors. We have taken some gains on Government Bonds of late, and will be looking at some Corporate and High Yield names that will benefit from a robust domestic economy. As for moving to the long end or short end, we have leaned longer and benefited by this for most of 2014. With the 10 year Canadian yield currently at 1.82%, we are taking a small pause as we feel there may be a better entry point for long bonds than we are at today.

Global markets – At TriDelta our focus is firmly on North American markets (US & Canada) and this for good reason as it is where the best risk adjusted returns have been in recent years. We do however monitor global markets and relative opportunity, and it is likely that our portfolios will reflect more of a global flavour as and when opportunities arise.

Global capital markets remain largely unattractive relative to the US & Canada. Most strategists cite the poor global GDP growth, which appears to have been priced into equity markets to a significant degree and this is a pre-requisite for future opportunities, particularly if, as and when growth & stability returns. For now we believe better risk adjusted opportunities exist in North American markets.

The Eurozone for example is fraught with uncertainty as they struggle with a multitude of issues such as high unemployment, Greece potentially exiting the euro and the more recent Russian risks and fallout. As a result these markets trade at a discount and may be headed even lower in the near term.

The emerging markets also remain an area of concern although we did invest a small amount due to its relative valuation in 2014. We do see opportunities particularly in markets that are commodity importers or energy importers.

Alternative Investments  –  Our view is that new investment asset classes are always worth reviewing. If we find something that we are comfortable with, we will incorporate it into our overall recommendations. If regulatory changes come about in Ontario in 2015, we will be able to offer some of these solutions to non-accredited investors as well. These strategies can include real estate, mortgages, business lending, factoring, and many others that emerge over time. With professional due diligence, there is an ability to find alternative income strategies that fit an investor’s goals, and that are not closely correlated to other investment markets.

We expect 2015 to be a positive year overall for clients, but with lower returns than most clients enjoyed in 2014. While these are predictions for the year, as information changes we will adjust our approach to take advantage on behalf of our clients. The key is to provide an investment portfolio that is open to all investment options available – and not limited to a small subsection of opportunities. In tandem, we need to be consistent with each client’s profile, what their goals are, and what their risks are. This investment discipline will serve clients well in sunny and stormy conditions. We are quite certain that 2015 will see some of both!

This report was written by the TriDelta Investment Counsel – Investment Management Committee.

TriDelta Investment Management Committee

Cameron Winser

VP, Equities

Edward Jong

VP, Fixed Income

Ted Rechtshaffen

President and CEO

Anton Tucker

Executive VP

Lorne Zeiler

VP, Wealth Advisor

For more information – please contact Ted Rechtshaffen, President and CEO, TriDelta Financial at 416-733-3292 x221 or tedr@tridelta.ca

How long will I live?

0 Comments

liveWe thought you would enjoy this very quick and easy life span calculator, which if nothing else will shift your focus and make you aware of the approximate number of years you have to live:
Click here.

Any which way you look at it, life is too short and we must learn to love life, each and every day as if it was the last. We help our clients find perspective and balance by having them complete our ‘Creation of true wealth’ questionnaire, which will hopefully get you thinking about how you’re living and if any changes should be made.

Click here to take the TriDelta True Wealth Questionaire

Here is an excerpt from the TriDelta questionnaire:

We all seek it, but very few of us are fortunate enough to grasp the sense of ‘true wealth’. We are not referring so much to the amount of money you have, but to the achievement of true contentment with your life.

A major stumbling block to achieving this is that our lives are very complex. For this reason we need to divide it into manageable sections, which make it possible for us to decide how we wish to live and what it is that we wish to accomplish in our lives.

We believe that to be happy you must have dreams. Success, however, generally requires a plan. It is with this in mind that we partner with you to develop, implement and monitor a plan to ensure your dreams become reality….

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CSA, FCSI
Executive VP
anton@tridelta.ca
(905) 330-7448

Why TriDelta has been mostly out of Oil Stocks – but that could change

0 Comments

oilThe biggest investment story of the fourth quarter has been the rapid decline in the price of oil.

On September 26th the price of West Texas Intermediate (WTI) crude oil was $95.55.

As I write this in mid-December it is $57.42. In less than 3 months, oil has dropped 40%!!

Over the same period, a decent sized Canadian energy name like Canadian Oil Sands stock is down 57%.

Fortunately, at TriDelta we have been significantly underweight energy during the past few months – not to say that we avoided energy completely.

Currently the only energy names we own are large, diversified names like ExxonMobil and ConocoPhillips. Exxon is down about 10% over the same period, and Conoco is down about 20%.

For our more conservative clients, we are always underweight energy as compared to the Toronto Stock index. This is simply because there is too much volatility in the sector for a conservative client to have a 25% weighting in energy (this is generally the TSX weighting in energy stocks). We find that there are too many other sectors that better fit the consistent dividend growth goal for this type of client.

For our more growth oriented clients, we simply found that there were better growth opportunities elsewhere at this stage of the market, and we don’t feel a need to be particularly exposed to every industry. We did have a couple of smaller energy investments in the past few months that didn’t do well, but we were out of them before the most significant drop.

Having said this, there will definitely be times when we are heavier into energy than we are today. This could happen shortly as we do feel that the oil price decline is clearly overdone at this point, and when the bounce happens, there will be some very quick gains. Once again, we will likely see more exposure to energy for growth clients than conservative clients.

The last few months is a good example of how TriDelta Financial tries to manage money for its clients. We are not index huggers – trying to match the TSX. We’re disciplined about the types of companies that align well with the investment objectives of our clients. In volatile times, we will be more focused on capital protection – especially for our more conservative clients. If we are able to avoid an investment collapse or two every few years, this will obviously do a great deal to help keep your peace of mind, and also provide strong investment returns over the long term.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

Be healthy – take an Omega 3 supplement

0 Comments

omega3Omega 3 fatty acids are polyunsaturated fatty acids that are essential nutrients for health. An essential fatty acid, means it cannot be manufactured by our own body and therefore must be obtained through our diet alone.

It is highly recommended by many doctors, psychologists, cardiologists and rheumatologists because of the strong scientific evidence and its many benefits. Here is a list taken directly from MedlinePlus, which is health information from the US National Library of Medicine:

  • lowers blood triglyceride levels
  • reduces the risk of heart attack
  • reduces the risk of dangerous abnormal heart rhythms
  • reduces the risk of strokes
  • slows the build-up of atherosclerotic plaques
  • lowers blood pressure
  • reduces stiffness and joint tenderness associated with Rheumatoid arthritis

Omega-3 fish oil supplements may also help improve or prevent the following:

  • Alzheimer’s disease and dementia
  • depression
  • heart disease
  • cancer
  • arthritis
  • diabetes
  • hyperactivity
  • ADHD

What’s particularly fascinating about omega 3 fatty acids is that both conventional and alternative medicine agree on its many health benefits.

The ideal ratio of Omega-3 to Omega-6 is 1:1. Our North American diets are however very deficient in Omega-3 fatty acids, yet have excessive amounts of Omega-6. This has resulted in us having a ratio of about 1:20. This relative omega-3 deficiency is what is believed to be the cause of numerous health problems and strongly supports the continual supplementation of Omega-3 in our diet.

Foods containing Omega 3: Foods containing Omega 6:
Flaxseed Sunflower oil
Walnuts Brazil nuts
Soybeans Sunflower seeds
Navy beans Pumpkin seeds
Kidney beans Peanuts
Tofu Whole grain bread
Fish
Winter Squash
Olive oil

When buying Omega-3 supplements look for purity, potency and freshness. The brand name you choose should be able to provide you with detailed biochemical and toxicological analysis on the bottle. The potency should be measured in milligrams, with a ratio of 2:1 EPA:DHA.

A more recent development in this health sector is a new oil product known as Krill Oil, which is regarded by some as the best source of Omega 3.

For years, research has demonstrated that omega-3 fatty acids help lower an individual’s risk for heart attack, stroke, certain cancers, depression and overall inflammation. The type of omega-3s to take, however, has not always been clear. Omega-3s are broken down into three main components; ALA, EPA and DHA. EPA and DHA are found in marine sources and are the best-absorbed forms of omega-3 fatty acids. ALA is found in plant-based foods such as walnuts, algae and soybeans. It’s a great source, especially for vegetarians, but may not be as well-absorbed as their marine counterparts. The Dr Oz Show blog features this interesting and balanced opinion in a blog on the merits of Krill Oil, see http://www.doctoroz.com/blog/kristin-kirkpatrick-ms-rd-ld/new-omega-3-krill-oil

A Canadian company that originated as a biotechnology company Neptune Technologies and Bioressources Inc. There driving goal was to discover and innovate a new form of Omega-3 phospholipids. Today, they provide that superior Omega-3, and remain committed to science for ongoing research to support our health claims. Here is an interesting blog from their website, see http://neptunekrilloil.com/choosing-best-source-omega-3/

The evidence appears overwhelming in support of supplementing our diets to remain healthy.

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CSA, FCSI
Executive VP
anton@tridelta.ca
(905) 330-7448
↓