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Canadian Stocks · Commissions, management fees and expenses all may be associated with an...
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PAGE 1 CONFIDENTIAL Investing in the Best Canadian Stocks March 31 st , 2020
Transcript of Canadian Stocks · Commissions, management fees and expenses all may be associated with an...
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Investing in the Best
Canadian StocksMarch 31st, 2020
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Summary
Inovestor Asset Management
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Results
INOC / NASDAQ3
Why INOC?
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Contact Info
Investing in Canadian Equities1
Process
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1.
Investing In
Canada
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1.1 Challenges of the Canadian UniversePros and Cons Summary
Pros:
▪ Politically stable country;
▪ Well-capitalized companies;
▪ 2nd largest trade partner of the U.S.
Cons:
▪ Sector concentration issues;
▪ Exposure to highly cyclical sectors;
▪ Unattractive risk-adjusted returns.
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1.2 Passive VS Active InvestingToo Much of the Same in Canada?
Active Investing
▪ Tracking error risk.
▪ Many managers own the same stocks.
▪ High turnover.
▪ Style drift risk.
Passive Investing
▪ Product owns so many constituents that it is highly correlated to the benchmark
▪ No value added
?
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1.3 Multi-Factor InvestingThe Right Investment Solution
Multi-Factor Investing
▪ Multi-Factor Investing stands between passive and active management;▪ Based on measurable quantitative factors;▪ No style drift;▪ Controlled turnover;▪ Controlled volatility.
?
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2. Inovestor Asset Management
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2.1 Who We AreINOVESTOR = INNOVATION + INVESTOR
Data
Analytics
Insights
Solutions
1●We empower the
financial community and seize market opportunities as they arise.
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2.2 HistoryOur Journey in the Fintech Industry
Humble Beginnings
Founded in 1999 by
Pascal LeFrançois. The
company started as a
financial software
developer for other
Canadian corporations.
StockGuide Acquisition
Entry in the data
industry. The software
gathers and filters
crucial fundamental
data on public listed
Canadian companies.
StockPointer Acquisition
Entry in the analytics
industry. The software
analyzes companies
based on real
economic profits and
offers portfolio tools.
Asset Management
Creation of IAM, an
affiliated company. The
firm is registered as
Discretionary Portfolio
Manager in the province
of Quebec and Ontario.
1999 2004 2011 2017
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3. INOC
Horizons Inovestor ETFNASDAQ Canadian Equity Index
(NQICA)
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3.1 Nasdaq Inovestor Canada IndexThe genesis of INOC
▪ Inovestor Canadian StockPointer Strategy inception goes back to April 2008
▪ In December 2016, Inovestor teamed-up with NASDAQ to launch NQICA.
▪ In November 2017, Inovestor launched INOC in collaboration with Horizons.
INOC, NQICA and Inovestor Canadian StockPointer Strategy carry the same holdings. However INOC and NQICA are equally weighted.
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3.2 Product SheetHorizons Inovestor Canadian Equity Index ETF (INOC)
Details
▪ ETF Ticker: INOC;
▪ Underlying Index: Nasdaq Inovestor Canada Index (NQICA);
▪ Number of holdings: 25 TSX listed equities;
▪ Management Fee: 0.50%1;
▪ Distribution Frequency: Quarterly;
▪ Eligibility: All registered and non-registered investment accounts.
Objective
Seeks to replicate, to the extent possible, the performance of the Nasdaq Inovestor Canada Index, net of expenses. The Index is a large capitalization equity index of diversified constituents which are selected largely from the Canadian equity universe.
1 Plus applicable sales tax
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4. Process
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4.1 The Investment ProcessNQICA Facts
F 2. Top 100
Top 100 securities by
economic profit are
determined using
data from the latest
financial statements.
1. Universe
Define the investment environment in
which companies are picked. 2000+
companies are part of the universe.
3. Weights
Derive sector weights from Top 100 and
proportionally fill sectors with 25 stocks.
4. Ranking
Stocks are chosen using the StockPointer
score, a composite of Quality At a
Reasonable Price (QARP) factors.
6. Monitoring
Monitor the portfolio, rebalance
quarterly and perform attributions. 1. Universe
2. Top 100
3. Weights
4. Ranking
5. Portfolio
6. Monitoring5. Portfolio
Build the live portfolio by
investing real money in
the defined strategy.
PROCESS
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4.2 Our Selection MethodologyMulti-Factor Investing
Our selection process relies primarily on the EVA approach. It
also accounts for valuation, growth, size and financial leverage.
▪ 11 factors model.
▪ A specific weight is allocated to each factor.
▪ Every S&P-TSX stock is ranked using these 11 weighted factors.
▪ A sector exposure is constructed using the top 100 scoring stocks.
▪ Portfolio’s 25 constituents are selected based on sectors and
ranks.
▪ The portfolio and constituents are reviewed on a quarterly basis.
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4.3 Factor RankingStockPointer (SP) Scores
* Factors in BLUE are EVA related
Performance Factors Risk Factors
Performance Index Price / Intrinsic Value
Free Cash Flow / Capital Price / Average Intrinsic Value
Growth of Economic Profit Future Growth Value
Business Stability Business Stability
Long-Term Dividend Growth Financial Leverage
Long-Term EPS Growth Revenues
▪ Two categories: 50% Performance and 50% Risk Related Factors
▪ 25 companies with highest SP Scores are included in the portfolio
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4.4 Sectorial WeightsSector Relative weight (As of March 31st, 2020)
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4.5 Our four Pillars
1. QARP (Quality At Reasonable Price)
We use the EVA approach to quantify quality and price.
2. Concentration
Our goal is to beat the market over the long run. We believe the best
way to do it is to create a portfolio that looks very different from it.
3. Undexing
We are striving to achieve a balance between diversifying to remove
specific risk and not too much to avoid ending up mimicking the index.
4. Low Turnover
Excessive portfolio churning increases trading costs for an investor.
It also means a lack of confidence, decisiveness and tax awareness.
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5. Results
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5.1 NQICA Statistics100$ invested in 2008 was worth 228$ (As of March 31st, 2020)
Since Inception (April 1st, 2008)
Annualized Return (%)(S&P/TSX TR = 3.00)
7.10
Standard Deviation (%)(S&P/TSX TR = 13.7)
14.2
Sharpe Ratio(S&P/TSX TR = 0.21) 0.49
Index Correlation 0.88
Key Statistics
Annualized Alpha (%) 4.10
50
100
150
200
250
300
350
08 09 10 11 12 13 14 15 16 17 18 19
NQICAT S&P/TSX TR
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5.2 NQICA StatisticsPerformance (As of March 31st, 2020)
Trailing Performance Total Return
Annual Performance Total Return
Annualized Returns YTD 1M 3M 6M 1Y 3Y 5Y 10Y SI
NQICAT -24.9 -19.4 -24.9 -23.0 -16.3 -2.8 1.1 10.0 7.1
S&P/TSX TR -20.9 -17.4 -20.9 -18.4 -14.2 -1.9 0.9 4.1 3.0
Difference -4.0 -2.0 -4.0 -4.6 -2.1 -0.9 0.2 5.9 4.1
Calendar Returns 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
NQICAT 40.6 26.4 4.2 14.4 32.3 25.4 1.2 11.9 14.2 -9.8 24.1
S&P/TSX TR 35.1 17.6 -8.7 7.2 13.0 10.6 -8.3 21.1 9.1 -8.9 22.9
Difference 5.5 8.8 12.9 7.2 19.3 14.8 9.5 -9.1 5.1 -0.9 1.3
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5.3 NQICA StatisticsReturn & Risk Measurements (As of March 31st, 2020)
Trailing 3 Year Inovestor Benchmark Since Inception Inovestor Benchmark
Annualized Return (%) -2.8 -1.9 Annualized Return (%) 7.10 3.00
Standard Deviation (%) 16.0 14.1 Standard Deviation (%) 14.2 13.7
Max Drawdown (%) -39.5 -37.2 Max Drawdown (%) -51.3 -48.5
Sharpe Ratio -0.1 -0.1 Sharpe Ratio 0.49 0.21
Sortino Ratio -0.1 -0.1 Sortino Ratio 0.58 0.27
Index Correlation 1.0 1.0 Index Correlation 0.88 1.00
R-Squared 0.9 1.0 R-Squared 0.77 1.00
Beta 1.1 1.0 Beta 0.91 1.00
Alpha (%) (Annualized) -0.9 0.0 Alpha (%) (Annualized) 4.10 0.00
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5.4 NQICA StatisticsOutperformance in Different Market Conditions (As of March 31st, 2020)
0.1 0.10.1
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-0.1
-0.4
0.00.0
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down <-10 down -5/-10 down 0/-5 up 0-5 up 5-10 up >10 all periods all up all down
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S&P/TSX TR Monthly Returns (%)
Value Added
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79
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down <-10 down -5/-10
down 0/-5 up 0-5 up 5-10 up >10 all periods all up all down
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S&P/TSX TR Monthly Returns (%)
# Occurences
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5.5 NQICA CharacteristicsTop 10 Holdings & Fundamentals (As of March 31st, 2020)
Ticker Company Name Weight Sector
MRU Metro 5.80% Staples
CSU Constellation Software 5.26% Info Tech
CNR Canadian National Railways 4.87% Industrials
T Telus Corporation 4.82% Telecom
DOL Dollarama 4.74% Discretionary
RY Royal Bank Canada 4.55% Financials
TD Toronto-Dominion 4.48% Financials
OTEX Open Text Corporation 4.46% Info Tech
SJ Stella Jones 4.45% Materials
BAM.A Brookfield Asset Management4.26% Financials
Median Inovestor
Market Cap ( in billions) $13.41
Price / Earnings 12.5
Price / Book 1.7
Price / Sales 1.4
Return on Equity 16.81%
Dividend Yield 3.44%
Debt / Equity 0.7
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5.6 NQICA Allocation
Weights NQICAT Benchmark Deviations
Discretionary 16.1% 3.4% 12.7%
Staples 10.0% 4.6% 5.4%
Info Tech 9.7% 6.9% 2.8%
Materials 12.6% 12.4% 0.2%
Utilities 4.1% 5.6% -1.5%
Telecom 4.8% 6.5% -1.7%
Health Care 0.0% 1.0% -1.0%
Industrials 12.7% 11.9% 0.8%
Financials 24.4% 34.7% -10.3%
Energy 5.7% 13.0% -7.3%
Sector Weights & Benchmark Deviations (As of March 31st, 2020)
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6. WHY
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6.1 Why You Should Consider INOC?An Attractive Selling Proposition
▪ Economic Value Added (EVA): INOC is primarily based on the EVA approach a recognized rigorous methodology not widely replicated;
▪ Diversification: The NQICA should avoid permanent sector concentration issues associated with the Canadian market.
▪ Remove the Emotion: Stay objective and remain rigorous by using a quantitative approach;
▪ Performance: The NQICA has historically generated excellent risk-adjusted returns
▪ MER: A Canadian Equity product with competitive pricing;▪ Transparent and Compliance Friendly: Trade rationale and value-added
explained monthly;
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7. Contact
Please do not hesitate to reach us if you have
any questions, comments or suggestions:
Thank You for Your Interest
Christian GodinSenior Portfolio [email protected]
Fares [email protected]
Anthony [email protected]
Investor Relations (IR):
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DisclosuresDisclaimer and Trademarks Notice
Commissions, management fees and expenses all may be associated with an investment in the Horizons Inovestor Canadian Equity
Index ETF (“INOC”) managed by Horizons ETFs Management (“ETF”). The ETF is not guaranteed, its value change frequently and past
performance may not be repeated. The prospectus contains important information about the ETF. Please read it before investing.
Nasdaq® is a registered trademark of Nasdaq, Inc. and/or its affiliates and is licensed for use by Inovestor Asset Management (IAM).
Inovestor™ and StockPointer® are registered or unregistered trademarks of Inovestor Inc., and are licensed for use by IAM. Nasdaq, Inc.
(or any of its affiliates) and Inovestor Inc. have not passed on the legality or suitability of any IAM products, which are not issued,
endorsed, sold, or promoted by Nasdaq, Inc. (or any its affiliates) nor by Inovestor Inc. NASDAQ, INC. (OR ANY OF ITS AFFILIATES) AND
INOVESTOR INC. MAKE NO REPRESENTATION OR WARRANTY AND BEAR NO LIABILITY WITH RESPECT TO THE SAID PRODUCTS.
Information provided by IAM or included in this presentation should not be used as the sole basis for making investment decisions. GPI
cannot guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the information processed by IAM including,
but not limited to information originated by IAM or gathered by IAM from external providers or publicly available sources. There may
be delays, omissions, or inaccuracies in the information.
IAM does not make any representations, implicit nor explicit, about the suitability of the ETF, nor the information contained in this
presentation or provided by any of the foregoing. All such information is provided “as is” without any implied warranty of any kind.
© IAM 2018. All rights reserved. Reproduction in whole or in part is strictly prohibited without authorization. Names and logos are
trademarks of IAM. The affiliated company is registered as Discretionary Portfolio Manager in Quebec and in Ontario.
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