LSI has great year despite weak December

Leaside Stock Index Dec. 2014A lot of fireworks obscured what was otherwise a mediocre December for the Leaside Stock Index.

The first important piece of news: Burger King successfully merged Tim Hortons into itself creating a new company with $23 billion in systems sales in over 18,000 restaurants around the world. The new company, Restaurant Brands International (QSR) will be headed by Daniel Schwartz, the young but brilliant CEO of Burger King.

The LSI held 210.35 shares in Tim Hortons. In an effort to maintain continuity the index will take the all-share proposition that issues 3.0879 shares of QSR for every one share of Timmy’s. Moving into 2015, the LSI will own 631.05 shares in the combined company. In 2014, the index’s investment in Tim Hortons appreciated 137.4 percent. It’s doubtful 2015 will be nearly as exciting.

The second piece of news is that PetSmart agreed in December to be acquired by U.K. private equity firm BC Partners for $83 per share in cash. The deal, which is expected to close in the first half of 2015, will provide $12,342 in cash to be reinvested in another U.S. stock.

While 2014 was a decent year for the specialty retailer, up 12.7 percent, it will be nice to move on to a better opportunity.

As a finishing month it wasn’t a strong one. Excluding the December gains for Tim Hortons as well as the currency gains for the U.S. dollar, the LSI gained a measly 1.9 percent in the month, and while better than the benchmarks was still much less robust than in the previous three or four months.

If you allow for both of the extraordinary items from above, the LSI gained 5.3 percent in December and 28.2 percent for 2014 in its entirety. Canadian stocks, thanks once more to Timmy’s, delivered the bigger return in 2014, up 43.5 percent compared to 15.5 percent for the American stocks.

Interestingly, U.S. stocks, whether we’re talking about the 10 in the index or the SPDR S&P 500 benchmark, obtained a lion’s share of their performance (approximately 10 percentage points) from currency appreciation.

The top performing stock in the LSI in 2014, excluding Tim Hortons, was Alimentation Couche-Tard (up 83.9 percent) on the Canadian side and Home Depot (up 29.6 percent) on the American. Also delivering returns of 20 percent or more in 2014: Berkshire Hathaway, Loblaws, Dollarama, Empire Company and Canadian Tire.

Overall, the LSI beat its two benchmark ETFs by more than 11 percentage points.

It was a good year in 2014. It’s doubtful 2015 will be nearly as successful.