Notable versus noise
MONTHLY PERSPECTIVES PORTFOLIO ADVICE & INVESTMENT RESEARCH
April 2015
Negative Interest Rates
Oil Supply
Stock Performance
nds
Mutual Fu
Grows
Industry
Apple Jo
ins the D
OW
Energy
Martha Hill, CFA, Portfolio Advice & Investment Research
In this issue
FIXED INCOME
Interest(ing) rate markets�� 2
NORTH AMERICAN EQUITIES
Dow and out�� 3
COMMODITIES
Oil floats�� 4
MANAGED SOLUTIONS
The expanding fund universe�� 5
THE LAST WORD
Going global�� 6
PERFORMANCE MONITOR
Monthly market review�� 7
APPENDIX A
Important information�� 8
We live in a world in which we are constantly bombarded with information
that can range in importance and relevance depending upon the recipient.
The world of investing is no different. Investors are constantly sifting through
news to decipher meaningful information from the noise. In this issue of Monthly
Perspectives, we review some recent events and headlines to distinguish between
what is notable and what is just noise.
Prompted by a headline on a small-business loan in Europe, we revisit the impact
of low (and sometimes negative) interest rates and the important role fixed
income continues to play in a portfolio. The addition of Apple Inc. to the Dow
Jones Industrial Average made headlines, stirring a debate about the composition
of equity indices and their relevance for individual investors. With oil top-of-mind
for many investors, we review the supply side of the oil market and what it means
for the energy sector. Finally, we explore the ever growing universe of investment
funds.
At the end of the (information filled) day, it's important to cut through the clatter
and focus on what matters to your investment plan. We recommend you speak
with your trusted Advisor to determine the investment strategy best aligned with
your long-term objectives and risk tolerance.
This document is for distribution to Canadian clients only. Please refer to
Appendix A of this report for important disclosure information.
2
MONTHLY PERSPECTIVES
April 2015
FIXED INCOME
Interest(ing) rate markets
Sheldon Dong, CFA
“At first, Eva Christiansen barely noticed the number. Her bank
called to say that Ms. Christiansen, a 36-year-old entrepreneur,
had been approved for a small-business loan. She whooped. She
danced. A friend took pictures. “I think I was so happy I got the
loan, I didn’t hear everything he said,” she recalled. And then she
was told again about her interest rate. It was -0.0172 percent—less
than zero. While there would be fees to pay, the bank would also
pay interest to her. It was just a little over $1 a month, but still.”
From the New York Times: In Europe, Bond Yields and Interest Rates
Go Through the Looking Glass, February 27, 2015.
Most Canadians are aware that interest rates are currently very low,
whether they are saving or borrowing. But something strange is
happening in Europe—interest rates on a range of debt have gone
negative. This means that instead of paying to borrow money, some
people are getting paid to take out loans. While such incidences
where consumer loans and mortgages with interest rates that are
outright negative remain uncommon, such financial episodes are
reportedly taking place all across Europe. For savers in this topsyturvy interest rate world, some are now being charged by banks to
hold their money in their bank accounts. The biggest beneficiaries
in a negative interest rate world are the biggest borrowers, namely
governments. Approximately US$1.9 trillion in bonds (88 out of
346 securities) issued by countries in the euro zone are trading
with negative yields, equivalent to more than a quarter of the total
government bonds, according to the Bloomberg Eurozone Sovereign
Bond Index, as of February 28, 2015.
Figure 1: Negative Government Bond Yields
Ireland
France
Sweden
Belgium
Austria
bank accounts are only government-guaranteed up to a certain
extent (most European countries cover 100,000 euros). Governments
are not equally trustworthy. Given that Greece remains dependent
on bailout loans and efforts by the new government to renege on
their original terms, most euro zone investors are willing to take a
loss by lending their money to the German government, rather than
risk lending to the Greek government. PIIGS is an acronym describing
the riskiest government debt during the financial crisis: Portugal,
Ireland, Italy, Greece and Spain. With the exception of Greece, all
those countries have returned to fiscal health after enduring reforms.
This is reflected by benchmark 10-year borrowing costs, which have
dropped to record lows in Portugal (1.51%), Ireland (0.68%), Italy
(1.03%) and Spain (1.05%). This compares to Germany at 0.19%
and contrasts Greece at 10.77% (as of March 12, 2015).
What you may want to know
Given what a rational person would do in a very low interest rate
world, the debt burden among Canadians reached a fresh record
high in the fourth quarter of 2014, with the debt-to-income ratio
climbing to 163.3%, according to Statistics Canada. That means
Canadians owe just over $1.63 for every $1 in disposable income
they earn in a year. Debt imbalances are measured chiefly by the ratio
of total household credit-market debt (mortgages, other loans and
credit cards) to disposable income. The persistent historically high
level is an ongoing concern for the Bank of Canada, which has long
flagged it as a source of potential risk to the country’s economic and
financial stability. Despite the record high debt-to-income ratio, the
situation is not as dire as it seems on the surface as the debt-service
ratio (interest payments as a proportion of disposable income)
remains near a record low of 6.8%, reflecting historically low
interest rates on mortgages and other loans. Canadian households
on average are still in a good position to keep up with their debt
payments, but are vulnerable to higher interest rates and economic
shocks, such as the impact of low oil prices in Alberta.
What matters
Denmark
Finland
Netherlands
Germany
Switzerland
0
2
4
6
8
10
12
Out to Number of Years
Source: Bloomberg Finance L.P., As at March 24, 2015.
Why would anyone buy a negative interest bond and not simply hold
cash? The main reason appears to be safety as there are limitations
and risks in holding paper money, especially for wealthy individuals
and large corporations who have large amounts. A bond is backed
by the full faith and credit of the government that issues it; whereas
Interest rates are likely to remain near historically low levels for a
longer period of time—an outlook that continues to favour borrowers
over savers. The Bank of Canada is very sensitive to the high debt
burden of Canadians and the risks in their ability to service that debt,
and to the nation’s economic and financial stability should it raise
interest rate policy too fast or too high. For savers and investors, it
is important to revisit why they own bonds: A well-diversified core
bond strategy serves as an anchor to an investment portfolio. It
has the potential to provide income and capital preservation and
to generally perform well when riskier investments do not. Asset
allocation within the fixed income portion of an investment portfolio
is important to attain the primary and separate goals of liquidity,
capital preservation and income generation.
3
April 2015
MONTHLY PERSPECTIVES
NORTH AMERICAN EQUITIES
Dow and out
Robert Marck, CPA, CMA, CIM
The recent removal of AT&T Inc. (T-N) from the Dow Jones Industrial
Average (the “Dow”) and the addition of Apple Inc. (AAPL-Q) have
created interesting discussions among investors. Questions such as
“which sectors are actually driving equity returns?” and “has there
been a material shift in sector importance over the past ten years?”
have emerged. While we believe the importance of the Dow has
waned in recent years, analyzing the composition of the index may
help us determine if there has been any change at all.
weighted sector in the S&P/TSX remains the financial sector at
35%, which has actually increased a modest 3% over the past
ten years. The energy sector, for all its recent struggles remains
relatively unchanged as a percentage of the index at 21%.
The largest loss of relative weighting was suffered by the materials
sector. The materials sector fell from 17% to 11% over the 10-year
period, largely as a result of the decline in gold and base metal
pricing. The health care sector has experienced the largest increase
Figure 2: Dow Jones Industrial Average by Sector Weight
Figure 3: S&P/TSX Index by Sector Weight
35%
40%
30%
35%
25%
30%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
March 5, 2005
March 15, 2015
March 5, 2005
March 15, 2015
Source: Bloomberg Finance L.P. As at March 15, 2015.
Source: Bloomberg Finance L.P. As at March 15, 2015.
While the industrial sector remains the most heavily represented
sector in the Dow (19% as at March 15, 2015) the weighting has
declined from 29% ten years ago. Consumer staples is another
sector that has declined in relative weighting, falling from 15%
in 2005 to 7% this year. Inversely, the largest gainers during
this time period were information technology and consumer
discretionary sectors. The information technology sector is also a
heavily weighted sector at 19%, an 8% increase over the past ten
years. The consumer discretionary sector has also expanded by an
impressive 8%, now forming 15% of the index.
in relative weight, rising from 1% to 5%, largely due to the strong
performance of Valeant Pharmaceuticals (VRX-T).
What you may want to know
While this information is interesting to note and can fill the gap
for market commentators on a slow news day, the issue with the
Dow is that it is a thinly formed index consisting of only thirty
companies, weighted by their stock prices. The S&P 500 Index (S&P
500) and the S&P/TSX Composite Index (S&P/TSX) for example, are
market capitalization weighted indices and include a significantly
higher number of companies (500 in the S&P 500 and 250 in the
S&P/TSX). We believe these indices provide a clearer picture of the
relative economic sector importance.
What matters
The S&P/TSX is still a highly concentrated index. While the index
composition has changed over the past ten years, the shifts
have not been as drastic as those of the Dow. The most heavily
The S&P 500 is more diversified that the S&P/TSX but we note that
the weight of the information technology sector has risen from 15%
to 20% of the index over the past 10 years, now representing the
heaviest weighting. Inversely, the financials sector has fallen from
20% to 16% as a number of firms’ valuations remain depressed
post the financial crises.
Figure 4: S&P 500 Index by Sector Weight
25%
20%
15%
10%
5%
0%
March 5, 2005
March 15, 2015
Source: Bloomberg Finance L.P. As at March 15, 2015.
4
MONTHLY PERSPECTIVES
April 2015
COMMODITIES
Oil floats
Yogesh Oza, M.Econ, CFA
Prior to the Great Recession, many economists and strategists were
sounding the alarm on the world's supposedly dwindling supply of
oil. The peak oil camp postulated that after hitting an apex rate,
global oil production would enter terminal decline. However, the
peak oil theorists, like other Malthus-type thinkers, significantly
underestimated the impact of technological innovation in their dire
forecasts.
Today, thanks largely to advances in drilling technology and
techniques, vast shale-oil reserves that not too long ago were
deemed uneconomic have been developed aggressively.
So aggressively, that concerns about running out of oil have been
replaced by worries about insufficient storage capacity for all the oil
being produced.
What you may want to know
North America may be the new global swing producer. Historically,
the Organization of the Petroleum Exporting Countries (OPEC)
would adjust output in order to align global oil supply with
demand. This changed last November when the cartel announced
that it would no longer play the role of the global swing producer
and cut output in order to balance oil markets. The sudden shift
in strategy was primarily underpinned by the oil cartel's desire to
recapture market share lost to the burgeoning North American
shale-oil industry.
As mentioned, new drilling technologies and techniques have
unlocked large shale-oil reserves; as a result, oil production in North
America has surged in the past few years. However, relative to the
conventional oil fields of Saudi Arabia, operating costs for North
America are considerably higher. As such, by choosing to defend
market share rather than cut production to equalize to global
demand, OPEC has put the onus on North American producers to
moderate output.
Producers on both sides of the border have responded aggressively,
with the price of West Texas Intermediate (WTI) sinking 59% since
peaking at US$107.26/barrel last June. The Canadian Association
of Petroleum Producers (CAPP) forecasts that capital investments in
the Western Canadian Sedimentary Basin will fall by 33% in 2015
to $46 billion, while drilling is expected to decline by 30% year-overyear. With capital budgets being reined in and drill rigs idled, CAPP
expects production growth to moderate; nonetheless, as a result
of strong investments in the industry since the Great Recession
and as mega-projects continue to ramp-up, Canadian oil output
is expected to rise 4.5% this year and 5.4% in 2016. The same
is true stateside; despite a dramatic 49% decline in active oil drill
rigs since last October, the U.S. Energy Information Administration
(EIA) forecasts modest production declines will finally begin to be
realized in major fields such as the Eagle Ford, Bakken, and the
Niobrara basin in the coming months. However, at the same time,
production in other large fields, such as the Permian Basin, is actually
forecasted to increase as a result of expected drilling productivity
improvements. Overall, the EIA expects U.S. oil production gains of
8.1% and 1.5% in 2015 and 2016, respectively. Currently, U.S. oil
production stands at 9.4 million barrels per day, the highest level in
over 40 years.
OPEC has made its intentions to recapture lost market share clear
and may not announce a production cut at its June meeting
(even as Iran prepares to bring upwards of a million barrels of oil
to market if sanctions are lifted). The once prolific North Sea field
has been in decline for years and output cannot be adjusted easily.
As such, North American tight-oil producers may be considered the
new global swing producers and will play an increasingly important
role in maintaining equilibrium in the global oil market. However,
continued depletion of major international oil fields together with
further advances in well efficiencies will mean that North American
shale production will become more competitive over time.
What matters
We will not run out of storage capacity. To be sure, there is a lot of
oil inventory in North America. The EIA estimates that current U.S.
oil inventory stands at 459 million barrels, the highest since 1930,
and has been exacerbated by the current term structure of futures
prices for oil. The inventory data includes estimates for pipeline
fill, lease stocks, and crude in transit from Alaska. Subtracting
those volumes removes about 120 million barrels from the larger
definition of crude oil inventories, or almost 30% of the national
total. Meanwhile, U.S. storage capacity is estimated at 521 million
barrels by the EIA. As such, U.S. oil storage tanks are currently
65% full. Although inventories will likely rise further in the coming
months, potentially pressuring oil lower, we do not believe that
storage capacity will be exhausted for a number of reasons.
First, after planned seasonal maintenance, refinery utilization
rates will begin to increase ahead of the summer driving season.
This, in turn, should help to reduce the oil glut as feed stock is
refined into products including gasoline. Second, unlike before,
North America today has significant energy infrastructure in place
to move production around the continent; this reduces the odds of
a specific refining district running out of storage or refining capacity.
Also, shale wells have notoriously high first-year decline rates.
The combination of reduced drilling and natural decline rates will
result in slower production growth. Finally, in a worst case scenario,
the U.S. does have the ability to repeal an old ban on exporting oil.
Investors with a long-term investment horizon may consider
overweighting transportation and storage, and integrated energy
companies within the energy sector. Companies worth considering
are Enbridge Inc. (ENB-T) from the transportation and storage sector
and Husky Energy Inc. (HSE-T) from the integrated energy sector.
5
April 2015
MONTHLY PERSPECTIVES
MANAGED SOLUTIONS
The expanding fund universe
Amit Panchal, CFA, CAIA
Did you know there are almost 7,000 distinct mutual funds,
segregated funds and exchange-traded funds (ETFs) available to
Canadian investors today? And this number keeps growing.
In 2014, 160 new mutual funds were launched, alongside 63 new
segregated funds and 294 new ETFs. In the first three months
of 2015, there have already been 114 new product launches†.
With hundreds of investment options across asset classes and nearly
countless potential permutations for an investor’s portfolio, this
can be quite overwhelming. However, even though the universe is
broad and continues to grow, what really matters is that you have
the right number of funds, you understand the portfolio of funds
that you own and how these funds align to your investment goals.
s Launch
duct
ed
Pro
i
ds
114 New Products
Launched
Q1 2015
ated Funds
reg
eg
1S
2,1
1,7
3
14
20
517
Ne
w
ds
un
F
l
n
3,063
Mu
tu
a
Figure 5: The Fund Universe
77
ed
E xc h
ang e -Trad
n
Fu
may be more appropriate to align the portfolio with an investor’s
risk tolerance and investment goals. But remember, while there is
no “right” number of funds, an upper limit of 8 to 12 funds for a
large portfolio tends to be the norm.
Eight to twelve funds is normally enough to build a
complete portfolio of funds
We suggest limiting the number of funds in a portfolio because
too many funds in a single asset class risks duplicating and/or
negating exposures if the funds have similar investment objectives.
In effect, a portfolio can become over-diversified, which potentially
marginalizes the benefits of the underlying investments. Investors
should also consider the time required to monitor the various funds,
the costs associated with each and the potential tax consequences
when liquidating a fund.
When selecting funds for a portfolio, it is important to focus on
investment goals and risk tolerance, and consider existing portfolio
holdings. We suggest focusing on core fund holdings that provide
broad exposure to a particular asset class as it allows the fund
manager to determine the sector, market capitalization, and where
applicable, the geographic allocations. The Financial Planning
preferred list narrows down the universe of potential funds and your
Financial Planner can work with you to identify what is appropriate
for your investment portfolio. Remember, while diversification is a
good thing, it is possible to have too much.
Figure 6: Growth of Fund Industry
Number of Funds
Source: Morningstar.
†
5000
4000
3000
2000
1000
Year
Source: Bloomberg Finance L.P. As at March 13, 2015.
2014
2012
2010
2008
2006
2004
2002
2000
1998
0
1996
For larger investment accounts, a broader number of funds that
provide exposure to a variety of asset classes and investment styles
6000
1994
For some investors, one fund may be enough, especially for a
smaller investment account, such as the initial days of a Registered
Educational Savings Plan (RESP). In general, mutual funds and ETFs
are already well diversified. Consider the Vanguard Total World
Stock Index ETF: it has 6,973 stocks invested across the globe.
It provides exposure to both the developed and developing world
as well as the market capitalization spectrum. Funds can provide
diversified exposure to a single asset class such as equities or in the
case of a balanced fund, additional diversification by investing in a
variety of asset classes and geographies.
7000
1992
How many are enough and how do you select the right ones?
8000
1990
Source: Morningstar®. As at March 9, 2015. Figures reflect funds available to Canadian
investors. New products include mutual funds, segregated funds and ETFs.
6
April 2015
MONTHLY PERSPECTIVES
THE LAST WORD
Going global
Chris Blake, CFA
The monetary stimulus gloves are off around the world and
as between the United States and Japan, the clear winner since
November 1, 2014 is Japan. “Abenomics” appears to be gaining
traction. The yen has sagged nearly 16% against the greenback
since September 1, and the market views that as an aid to Japanese
exporters, making them more competitive in global markets and
particularly in the United States. The United States remains the
strongest major economy in the world (hard to believe that roughly
2.4% wins the race), and that stronger economy is driving a
stronger dollar, threatening to slow the prospects for U.S. exporters
and providing a headwind for the S&P 500 Index.
Figure 7: U.S. and Japan Equity Performance
130
120
110
100
90
80
31-Oct-14
30-Nov-14
31-Dec-14
US - S&P 500 Index
31-Jan-15
28-Feb-15
Japan - Nikkei 225
Source: Bloomberg Finance L.P. As at March 23, 2015.
As it became clear in the late fall of 2014 that Mario Draghi and
the European Central Bank were being pushed to take the next
step in “whatever it takes to preserve the euro” and move to full
quantitative easing, European stocks began to perform a little
better. However, euro weakness engendered by the move stands
to benefit the economies that are the strongest exporters and are
in the best shape, so we are seeing equity markets divide into three
speeds. At the top of the list, Germany wins with its strong export
oriented manufacturing base. Next up are European countries,
which arguably need greater labour and market reforms but do
have some manufacturing base for export—Italy and France.
At the bottom of the pack are the more peripheral countries such
as Spain, which continues to suffer a hangover from the Global
Financial Crisis of 2009.
Figure 8: European Equity Performance
140
130
120
110
100
90
80
31-Oct-14
30-Nov-14
31-Dec-14
31-Jan-15
28-Feb-15
Germany - DAX
France - CAC 40
Italy - MIB
Spain - IBEX
Source: Bloomberg Finance L.P. As at March 23, 2015.
In the emerging markets we see a big divergence in performance.
China has massively outperformed its counterparts since the
beginning of November on the back of stimulative moves in fiscal
and monetary policy, while Brazil has significantly underperformed
as the depth of the country’s difficulties return to haunt (iron ore
glut and Petrobras scandal) and new problems emerge (a glut of
sugar). India has traded sideways, digesting the gains from earlier in
2014 when the market ran on the back of the election of Narendra
Modi. Russia was perhaps the surprise here; it rallied through the
first part of 2015 and then began to give that back in late February.
Figure 9: Emerging Market Equity Performance
160
150
140
130
120
110
100
90
80
31-Oct-14
30-Nov-14
31-Dec-14
31-Jan-15
28-Feb-15
China - Shanghai Composite Index
Russia - Micex Composite Index
India - Sensex
Brazil - Bovespa
Source: Bloomberg Finance L.P. As at March 23, 2015.
7
April 2015
MONTHLY PERSPECTIVES
PERFORMANCE MONITOR
Monthly market review
Canadian Indices ($CA) Return
S&P/TSX Composite (TR)
S&P/TSX Composite (PR)
S&P/TSX 60 (TR)
S&P/TSX SmallCap (TR)
Index Level
45,743
14,902
2,155
837
(%)
1 Month
-1.88
-2.18
-2.08
-3.82
(%)
3 Month
2.58
1.85
2.42
-0.25
(%)
YTD
2.58
1.85
2.42
-0.25
(%)
1 Year
6.93
3.96
8.97
-9.75
(%)
3 Year
9.58
6.34
10.41
-1.11
(%)
5 Year
7.41
4.36
7.27
1.98
(%)
10 Year
7.41
4.48
7.77
2.22
(%)
20 Year
8.81
6.39
9.39
-
U.S. Indices ($US) Return
S&P 500 (TR)
S&P 500 (PR)
Dow Jones Industrial (PR)
NASDAQ Composite (PR)
Russell 2000 (TR)
Index Level
3,805
2,068
17,776
4,901
5,928
1 Month
-1.58
-1.74
-1.97
-1.26
1.74
3 Month
0.95
0.44
-0.26
3.48
4.32
YTD
0.95
0.44
-0.26
3.48
4.32
1 Year
12.73
10.44
8.01
16.72
8.21
3 Year
16.11
13.66
10.40
16.60
16.27
5 Year
14.47
12.08
10.36
15.37
14.57
10 Year
8.01
5.77
5.40
9.38
8.82
20 Year
9.39
7.35
7.53
9.37
9.62
U.S. Indices ($CA) Return
S&P 500 (TR)
S&P 500 (PR)
Dow Jones Industrial (PR)
NASDAQ Composite (PR)
Russell 2000 (TR)
Index Level
4,826
2,623
22,544
6,215
7,518
1 Month
-0.21
-0.37
-0.60
0.12
3.16
3 Month
10.36
9.80
9.03
13.13
14.04
YTD
10.36
9.80
9.03
13.13
14.04
1 Year
29.34
26.72
23.93
33.92
24.16
3 Year
25.72
23.06
19.53
26.25
25.89
5 Year
19.66
17.17
15.38
20.61
19.77
10 Year
8.52
6.27
5.90
9.90
9.33
20 Year
8.86
6.82
7.01
8.83
9.08
MSCI Indices ($US) Total Return
World
EAFE (Europe, Australasia, Far East)
EM (Emerging Markets)
Index Level
6,538
6,724
1,964
1 Month
-1.50
-1.43
-1.40
3 Month
2.45
5.00
2.28
YTD
2.45
5.00
2.28
1 Year
6.60
-0.48
0.79
3 Year
12.82
9.52
0.66
5 Year
10.62
6.64
2.08
10 Year
6.98
5.43
8.82
20 Year
7.44
5.58
6.83
MSCI Indices ($CA) Total Return
World
EAFE (Europe, Australasia, Far East)
EM (Emerging Markets)
Index Level
8,291
8,528
2,491
1 Month
-0.13
-0.05
-0.03
3 Month
12.00
14.78
11.81
YTD
12.00
14.78
11.81
1 Year
22.31
14.19
15.64
3 Year
22.16
18.58
8.99
5 Year
15.64
11.49
6.72
10 Year
7.48
5.93
9.33
20 Year
6.92
5.06
6.31
Level
78.85
1 Month
-1.38
3 Month
-8.53
YTD
-8.53
1 Year
-12.84
3 Year
-7.64
5 Year
-4.34
10 Year
-0.47
20 Year
0.49
Index Level
6,773
24,901
19,207
1 Month
-2.50
0.31
2.18
3 Month
3.15
5.49
10.06
YTD
3.15
5.49
10.06
1 Year
2.65
12.41
29.53
3 Year
5.50
6.60
23.96
5 Year
3.58
3.23
11.61
10 Year
3.30
6.30
5.11
20 Year
3.92
5.47
0.87
Currency
Canadian Dollar ($US/$CA)
Regional Indices (Native Currency) Price Return
London FTSE 100 (UK)
Hang Seng (Hong Kong)
Nikkei 225 (Japan)
Bond Yields
Government of Canada Yields
US Treasury Yields
Canadian Bond Indices ($CA) Total Return
FTSE TMX Canada Universe Bond Index
FTSE TMX Canadian Short Term Bond Index (1-5 Years)
FTSE TMX Canadian Mid Term Bond Index (5-10)
FTSE TMX Long Term Bond Index (10+ Years)
3 Month
0.55
0.02
Index Level
1000.94
684.63
1085.67
1603.34
1 Month
-2.26
-0.03
-0.29
-0.68
As at 3/31/2015
Sources: TD Securities Inc., Bloomberg Finance L.P. TR: total return, PR: price return.
5 Year
0.77
1.37
3 Month
7.33
1.89
4.30
7.13
YTD
7.33
1.89
4.30
7.13
10 Year
1.36
1.93
1 Year
14.47
3.92
10.30
19.72
3 Year
3.72
2.90
5.78
7.81
30 Year
1.99
2.54
5 Year
7.17
3.29
6.84
9.99
10 Year
6.31
3.98
6.25
7.94
8
April 2015
MONTHLY PERSPECTIVES
APPENDIX A
Important information
The information has been drawn from sources believed to be reliable. Where such statements
are based in whole or in part on information provided by third parties, they are not guaranteed
to be accurate or complete. Graphs and charts are used for illustrative purposes only and
do not reflect future values or future performance of any investment. The information does
not provide financial, legal, tax or investment advice. Particular investment, trading, or tax
strategies should be evaluated relative to each individual’s objectives and risk tolerance. TD
Wealth, The Toronto-Dominion Bank and its affiliates and related entities are not liable for any
errors or omissions in the information or for any loss or damage suffered.
Certain statements in this document may contain forward-looking statements (“FLS”) that
are predictive in nature and may include words such as “expects”, “anticipates”, “intends”,
“believes”, “estimates” and similar forward-looking expressions or negative versions thereof.
FLS are based on current expectations and projections about future general economic, political
and relevant market factors, such as interest and foreign exchange rates, equity and capital
markets, the general business environment, assuming no changes to tax or other laws or
government regulation or catastrophic events. Expectations and projections about future
events are inherently subject to risks and uncertainties, which may be unforeseeable. Such
expectations and projections may be incorrect in the future. FLS are not guarantees of future
performance. Actual events could differ materially from those expressed or implied in any FLS.
A number of important factors including those factors set out above can contribute to these
digressions. You should avoid placing any reliance on FLS.
Full disclosures for all companies covered by TD Securities Inc. can be viewed at https://www.
tdsresearch.com/equities/welcome.important.disclosure.action
Research Ratings
Distribution of Research Ratings
REDUCE
3%
BUY
57%
80%
Percentage of subject companies under
70%
62%
each rating category—BUY (covering
60%
Action List BUY, BUY and Spec. BUY
50%
ratings), HOLD and REDUCE (covering
40%
TENDER and REDUCE30%
ratings).
As at April 1, 2015. 20%
10%
HOLD
40%
0%
Investment Banking Services Provided
80%
70%
60%
62%
50%
35%
40%
30%
20%
10%
0%
3%
BUY
HOLD
Analyst Certification:The Portfolio Advice and Investment Research analyst(s) responsible for
this report hereby certify that (i) the recommendations and technical opinions expressed in the
research report accurately reflect the personal views of the analyst(s) about any and all of the
securities or issuers discussed herein, and (ii) no part of the research analyst’s compensation
was, is, or will be, directly or indirectly, related to the provision of specific recommendations
or views expressed by the research analyst in the research report.
Conflicts of Interest: The Portfolio Advice & Investment Research analyst(s) responsible for
this report may own securities of the issuer(s) discussed in this report. As with most other
employees, the analyst(s) who prepared this report are compensated based upon (among other
factors) the overall profitability of TD Waterhouse Canada Inc. and its affiliates, which includes
the overall profitability of investment banking services, however TD Waterhouse Canada Inc.
does not compensate its analysts based on specific investment banking transactions.
Mutual Fund Disclosure: Commissions, trailing commissions, performance fees, management
fees and expenses all may be associated with mutual fund investments. Please read
the prospectus, which contains detailed investment information, before investing.
The indicated rates of return (other than for each money market fund) are the historical
annual compounded total returns for the period indicated including changes in unit value and
reinvestment of distributions. The indicated rate of return for each money market fund is an
annualized historical yield based on the seven-day period ended as indicated and annualized
in the case of effective yield by compounding the seven day return and does not represent
an actual one year return. The indicated rates of return do not take into account sales,
redemption, distribution or optional charges or income taxes payable by any unitholder that
would have reduced returns. Mutual funds are not covered by the Canada Deposit Insurance
Corporation or by any other government deposit insurer and are not guaranteed or insured.
Their values change frequently. There can be no assurances that a money market fund will be
able to maintain its net asset value per unit at a constant amount or that the full amount of
your investment will be returned to you. Past performance may not be repeated.
Corporate Disclosure: TD Wealth represents the products and services offered by
TD 35%
Waterhouse Canada Inc. (Member – Canadian Investor Protection Fund), TD
Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by
The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust
Company).
3%
BUY
Percentage of subject companies
within each of the three categories
(BUY, HOLD and REDUCE) for which
TD Securities Inc. has provided
investment banking services within the
last 12 months.
As at April 1, 2015.
REDUCE
Action List BUY: The stock’s total return is expected to exceed a minimum of 15%, on a risk-adjusted
basis, over the next 12 months and it is a top pick in the Analyst’s sector. BUY: The stock’s total
return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months.
SPECULATIVE BUY: The stock’s total return is expected to exceed 30% over the next 12
months; however, there is material event risk associated with the investment that could result
in significant loss. HOLD: The stock’s total return is expected to be between 0% and 15%,
on a risk-adjusted basis, over the next 12 months. TENDER: Investors are advised to tender
their shares to a specific offer for the company’s securities. REDUCE: The stock’s total return
is expected to be negative over the next 12 months.
Research Report Dissemination Policy: TD Waterhouse Canada Inc. makes its research
products available in electronic format. These research products are posted to our proprietary
websites for all eligible clients to access by password and we distribute the information to
our sales personnel who then may distribute it to their retail clients under the appropriate
circumstances either by e-mail, fax or regular mail. No recipient may pass on to any other
person, or reproduce by any means, the information contained in this report without our prior
written consent.
The Portfolio Advice and Investment Research team is part of TD Waterhouse Canada Inc., a
HOLD of The REDUCE
subsidiary
Toronto-Dominion Bank.
Trade-mark Disclosures: FTSE TMX Global Debt Capital Markets Inc. (“FTDCM”), FTSE
International Limited (“FTSE”), the London Stock Exchange Group companies (the
“Exchange”) or TSX INC. (“TSX” and together with FTDCM, FTSE and the Exchange, the
“Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever,
expressly or impliedly, either as to the results to be obtained from the use of the index/indices
(“the Index/Indices”) and/or the figure at which the said Index/Indices stand at any particular
time on any particular day or otherwise. The Index/Indices are compiled and calculated by
FTDCM and all copyright in the Index/Indices values and constituent lists vests in FTDCM. The
Licensor Parties shall not be liable (whether in negligence or otherwise) to any person for any
error in the Index/Indices and the Licensor Parties shall not be under any obligation to advise
any person of any error therein.
“TMX” is a trade mark of TSX Inc. and is used under licence. “FTSE®” is a trade mark of the
London Stock Exchange Group companies and is used by FTDCM under licence.
Bloomberg and Bloomberg.com are trademarks and service marks of Bloomberg Finance L.P.,
a Delaware limited partnership, or its subsidiaries. All rights reserved.
TD Securities is a trade-mark of The Toronto-Dominion Bank representing TD Securities Inc.,
TD Securities (USA) LLC, TD Securities Limited and certain corporate and investment banking
activities of The Toronto-Dominion Bank.
Morningstar is a registered mark of Morningstar Research Inc. All rights reserved.
All trademarks are the property of their respective owners.
®©2015
®The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.