MONTREAL, Nov. 21, 2013 /CNW Telbec/ - Because it is important to
periodically review investment strategies in view of retirement,
Laurentian Bank Securities is pleased to be offering a summary of
current market conditions, along with some concrete suggestions to
investors.
The prevailing market context is showing a slightly positive trend in
the wake of a period of considerable volatility. While the recovery is
ongoing, it is slow, and there are no inflationary pressures.
Therefore, investors who previously adopted a strategic approach of
diversification to spread out risk should now revise their positions
and the combination of their assets — stocks, bonds and cash alike.
Bonds vs. Stock: A Question of Interest
The bond market is currently characterized by rates that are slightly on
the rise, after having posted historic lows. "The return on bonds
remains purely mathematical," explains Sylvain Ratelle, Vice-President
and Strategist with Laurentian Bank Securities. "It depends directly on
interest rates, which are rising at a very slow pace."
While more or less short-term fixed income securities are
under-performing, stock markets are showing an upward trend. Certain
stocks are breaking away from the pack in particular — those listed on
the S&P/TSX Canadian Dividend Aristocrats Index (CDA) and their
counterpart in the United States. As indicated in a Toronto Stock
Exchange document, "The S&P/TSX Canadian Dividend Aristocrats Index
captures both the sustainable revenue of dividends and the possibility
of increasing the value of capital, which are two key factors in the
investor's total return expectations. The Index also offers
diversification across all sectors, and it features both growth and
value characteristics."
The stocks that are part of this Index must have raised their dividends
each year over a period of five consecutive years. "These Indexes
outperform the general Indexes, as well as the large majority of mutual
funds," underlines Sylvain Ratelle. "In fact, over the past five years,
Aristocrats Index stocks generated a return of 12.24%, as compared to
4.80% for the S&P/TSX and 3.71% for the S&P/TSX 60 in Canada. Over the
same period, their return in the U.S. was 14.10%. These are high
quality stocks that offer regularly increasing dividends. As such, they
represent a choice vehicle with a lot of value."
By adding a fundamental filter to these stocks aimed at identifying
those that offer particular stability and create value for
shareholders, the return is even more substantial at 18.62%.
Geographic and Sectoral Distribution: Secondary Factors
The distribution of assets by geographic markets does not have the same
consonance as it did during the previous decade. Assessments are
reasonable, and there is no particular market that is booming. While
the price-to-earnings ratio is more or less the same in Canada and the
U.S. at X13, it is at X11 in Europe and X8 in China. In addition,
although other markets may represent savings, it is always essential to
take risk factors into account.
For its part, sectoral distribution is no longer as important in and of
itself as it was because of the broad range of diversified products
available on the market. "For example," concludes Sylvain Ratelle, "the
CDA Index is composed of companies operating in all industrial sectors.
Taking the cyclical nature of each into account, every stock must be
evaluated on its own merit."
About Laurentian Bank Securities
Laurentian Bank Securities (LBS), is an integrated full-service
investment dealer, focusing on five lines of business. The well
respected Institutional Fixed Income division has a strong presence in
Government and Corporate underwritings, as well as in secondary
markets. In addition, the Institutional Equity division is solidly
established across the country and focuses on serving clients through
research, trading and investment banking in the small capitalization
sector. The fast-growing Retail division and Discount Brokerage
division currently serve clients through 16 offices in Quebec, Ontario
and Manitoba. Furthermore, LBS' corresponding business provides
complete back office support to a wide range of customers.
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1 Laurentian Bank Securities is a wholly owned subsidiary of Laurentian
Bank of Canada. The opinions expressed in the present document should
not be interpreted as a solicitation of an offer to purchase or sale of
securities herein mentioned. The stocks referred to in this document
are not intended for all investor types. Please consult an investment
advisor before making any decisions. Past results are no guarantee of
future performance. Laurentian Bank Securities and/or its officers,
directors, representatives and associates may hold the securities
mentioned in the present document and may execute purchases/sales of
these securities from time to time on the market or otherwise.
SOURCE Laurentian Bank of Canada
