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Market Watch Weekly - December 13, 2013

Erik Dekker - Dec 13, 2013
This week we saw something out of the US Government that you rarely see, cooperation.

This week we saw something out of the US Government that you rarely see, cooperation. Although politicians being politicians they did pat themselves on the back for what House speaker John Boehner said in a speech “It’s doing what the American people expect us to do, stick to our principles but find common ground.” Maybe I am being a bit too cynical, but congratulating yourself for just doing your job is a little funny. But you know what; we will take it and chalk it up to the Christmas spirit.

South of the border we continue to see strength from corporate America; today both General Electric and AT&T raised their dividends. We have seen an incredibly high level of share buyback announced by companies during the course of 2013, and we are now starting to also see dividend increases from a broad range of companies. We have been cautious, maybe too cautious, in increasing our economic ownership within the United States, but we have started to see the slight general market pullback that we have been waiting for in order for us to become more comfortable in the valuations.

During our weekly investment committee meeting that takes place every Friday, we were discussing expanding our international holdings via the ETF offerings from Blackrock, specifically the iShares MSCI EAFE for more international ownership, and the iShares Russell 2000 for complimentary US ownership. We will continue to want to own the Microsoft’s, GE’s, JP Morgan’s of the world, with the ETFs providing the added benefits of diversification. As we see the general capital markets speculate on “tapering” we feel the opportunity to increase our international diversification for clients is at hand.

Within Canada we remain focused towards the energy and financial services sectors for clients. Strong global energy prices, along with the International energy Agency earlier this week raising their forecasted demand levels for Oil suggest to us that Canadian energy companies, such as Crescent Point and Suncor are well worth owning.

British Columbia is increasingly becoming mentioned within the global conversation when it comes to the insatiable appetite that Asia has for energy. The Liquefied Natural Gas (LNG) theme continues to gather momentum, and our premier has been an active participant in promoting BC as a potential premier supplier to those markets. The process of moving from development to actual delivery will be long in the making, and we will have competition from both Australia and the United States; however our LNG assets are some of the largest in the world and are closest to Japan for delivery. Thus our confidence in owning BC’s energy sector, specifically those exposed to LNG, will provide our clients with strong long term growth.

While energy companies such as Bellatrix Energy or Petrowest are more obvious energy companies as their names imply, others such as Westernone, Veresen and Temple Hotels provide the much needed infrastructure and hospitality requirements and thus should also see great long term growth. We see particular benefits to both Westernone and Veresen as they are also active within the Australian and US markets. Westernone provides modular housing to the Australian resource sector companies, and Veresen is in development of Oregon’s Jordan Cove LNG export facility. Thus we expect to see our clients benefit as the global demand for Liquefied Natural Gas grows.

With respect to the Financial Services sector, Canada continues to have some of the strongest banks in the world. Over the past two weeks we saw Canada’s banks all report their latest quarterly earnings, which for the most part were as expected. We had previously suggested that clients take slight profits and trim their holdings in the Canadian banks as 2013 was a strong year. We continue to suggest that long term investors hold the Canadian Banks as part of a well-diversified portfolio, and our preferred names remain TD Bank and Bank of Nova Scotia.

With just under two weeks left until Christmas, the malls are getting crazier and the tree lots are getting emptier by the day.

Have a great weekend.

As always, your feedback is welcomed and encouraged.

The Dekker Hewett Group