Equity markets remained strong in February, while money continued to pour out of the fixed income market. Our top performers in February were Apple, Goodyear Tire, Cooper Tire, and Seagate Technology.
An overview of the performance of our actively-managed products is as follows:
As of February 28, 2017. All figures are net of fees and other expenses. Past performance is not indicative of future results. Refer to https://www.afinacapital.com/legal/ for full details and disclosures.
(1) The benchmark represents a 50% weighting of the S&P 500 Total Return Index in Canadian dollars and a 50% weighting of the S&P/TSX Composite Total Return Index in Canadian dollars.
The cash levels in our portfolios remained at 50% in the Affinity and 24% in the Optima10 as valuations continued to move above historical levels (see below). We look forward to putting the cash to work in the coming months when valuations move to more favourable levels.
Goodyear and Cooper Tire were recent portfolio purchases in mid-January. Both companies have a consistent track-record of returns on equity, combined with solid free-cash-flow and dividend growth. Furthermore, valuation was attractive at below 8x earnings amidst global light vehicle sales regaining strength in Central/East Europe and South Asia (refer to the IHS forecast below). Finally, tire makers globally are increasing prices between 4-8% to offset higher raw material costs (largely from crude oil prices), but we expect these companies to pick up more margin as demand and pricing improve together.