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    Why the deep freeze is good for your portfolio

    car in the snow21 150x150 Why the deep freeze is good for your portfolioApart from the Olympics, the most popular shared experience these days is talk about the weather. To be specific, the bitter cold that has hit most of Canada – and given rise to the new and now popular term, ‘polar vortex.’ However, there is a silver lining to these snow-filled clouds – and not just for those who enjoy winter sports.

    Demand for natural gas has risen appreciably with the decline in temperatures. And that’s good for investors like ourselves who took a contrary view back in 2011 when the commodity was deeply out of favour. At the time, in North America, natural gas was trading at approximately $1.80 per one million British Thermal Units (BTUs) and producers’ stock prices were depressed.

    But for investors who took a longer-term view, a different picture was emerging. One that held the potential for significant profit.

    That’s because natural gas enjoys attractive qualities as a clean, abundant and (relative to alternatives) cheap form of energy. In recent years, technological advancements and readiness of supply have increased its application for power generation, industrial use, transportation, drilling rigs, etc. In fact in 2013 and 2014 there are more than 350 projects completed or underway in North America that will create demand for more than 1 trillion cubic feet of supply per year.

    The wide and cheap availability of natural gas in North America has led to a mini-manufacturing boom or ‘re-shoring’ of manufacturing facilities back to the U.S. That’s because, unlike oil which is subject to global pricing, natural gas prices have regional differences. In Europe, for example, natural gas trades at approximately $11 per one million BTUs, and $16 in Asia.

    Not surprisingly, industry is moving to fill this void. In 2015, the U.S. will begin exporting LNG (liquefied natural gas) to Asia and Canada will have its program underway by 2017. The LNG export projects approved amount to 25% of annual supply in North America. It’s logical to expect increased demand and reduced supply will have a positive effect on pricing.

    It’s already being played out – with prices having moved up to their current level of $5 in North America. Many in the gas industry claim that to recover all the costs of buying land, drilling, building production facilities, etc. the industry needs a $5+ gas price. Clearly with gas in the $3 to $4 range over the past two years the number of rigs drilling for gas in the U.S. has remained depressed (down 60% from the peak). Industry has not yet allocated additional capital to drill more wells. We will see if the now $5 gas price leads to increased drilling in the year to come.

    Our approach since 2011 has been to overweight natural gas investments in our Newport North American Equity Fund, with our largest holding being Tourmaline (TSX:TOU), also the subject of previous blogs. Tourmaline has grown its gas production 50% a year for six straight years. Its share price has risen over this time reflecting this growth. To date, our thesis has played out as we had hoped and we believe there are a number of years of strong growth to come – albeit with likely some volatility along the way and we manage for that with a diversified portfolio of stable investments.

     

    NextWave – A Young Adult’s Guide to Investing

    Finances101 NextWave 150x136 NextWave   A Young Adults Guide to InvestingWe hosted our 3rd NextWave event last week in our King West offices where over 30 young adults gathered to learn about and discuss financial issues specifically relevant to the younger age demographic. This NextWave event is part of a larger program to help young adults develop healthy money management habits and ultimately gain the experience needed to steward wealth responsibly.

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    10 tax saving tips to do before year end!

    clock 150x150 10 tax saving tips to do before year end!With the arrival of December, our attention often turns to holiday preparations — but it’s not too late to save money on your taxes if you act soon.

    Here are ten tax planning ideas to consider before year end:

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    What the smart money knows….and how you can benefit

    SmartMoney CoverImage outline 231x300 What the smart money knows….and how you can benefitWhat are the super-rich doing with their money?

    I know it’s a question that many investors wonder from time to time. In our recently released whitepaper, “What the Smart Money Knows…5 ways to learn from institutional and billionaire investors” we examine the question.

    We look at five factors that set institutional and billionaire investors apart from ordinary investors – it’s not just the money – and we offer up our own solution packaging many of these advantages into turnkey investments for high net worth individuals who want a comparable calibre of expertise applied to their own wealth.

    You can download our whitepaper here.

    Floating Rate Notes – a timely idea for fixed income investors

    Our first order of business is always to protect capital. (If you’re a client or a reader of this blog you likely know that’s been a constant theme in everything we do.)

    In anticipation of a potential rise in interest rates, one of the risks investors should be concerned about is a decline in bond values – what many investors typically think of as “the safe stuff.” If that sounds like a dichotomy it really isn’t. Generally speaking, when interest rates go up, the value of a bond declines. The longer the maturity of the bond the more it falls. (Read our earlier posts Convexity and bonds and Is it time for bond holders to rethink their strategy?)

    To protect our clients’ fixed income investments against rising interest rates — which are inevitable at some point — we’ve been shortening the duration of our bond holdings (now 3 years on average). In addition to that strategy there’s another idea we’ve implemented in recent weeks: Floating Rate Notes (FRNs). [read more >>]

    Is it time for bondholders to rethink their strategy?

    At this time last year, two key issues were front and centre for us.  We were concerned about more fallout from the economic uncertainty in Europe and the U.S.  There did not seem to be any clear plan in place to resolve the debt and deficit issues. We were also concerned that interest rates would finally hit bottom and start to climb.  Both issues caused us to be cautious with our clients’ capital in 2012.

    The threat of rising rates has been hanging over the heads of all investors for some time now.  Quite surprisingly, rates did not rise in 2012. In fact, they fell – about 0.60% in Canada. Why? Because more stimulus like the Federal Reserve’s bond buying programs was needed to re-ignite the economy.

    In anticipation of rising rates last year, we accelerated our plan to diversify our sources of yield for our clients.  We added more income-producing real estate, residential and commercial mortgages, corporate bonds and dividend-paying stocks.  With rates falling, these investments performed well in 2012. [read more >>]

    Finding investment opportunities when the economy isn’t handing them out

    iStock 000014863867Medium priv eq banner 300x94 Finding investment opportunities when the economy isnt handing them outLast week, we organized a lunchtime panel with four outstanding financial minds that are part of the pool of talent we have to draw on for the management of client investment portfolios:

    • Maureen Farrow, (economist), President, Economap
    • Tye Bousada, (global equities), President & Co-CEO, Edgepoint Investment Group Inc.
    • Rick Grafton, (energy), CEO, Grafton Asset Management
    • Corrado Russo, (real estate), Managing Director, Global Securities and Investments, Timbercreek Asset Management Inc.

    It was a lengthy and meaty conversation about the state of the global economy, how Canada is faring and what it all means for clients of Newport Private Wealth. This summary won’t fully do justice to the depth and scope of the presentations, but we will try to boil a 90 minute discussion down to a readable blog post for you.
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