The U.S. dollar was the star of the Leaside Stock Index in January for the second consecutive month. The LSI’s overall portfolio of 20 stocks achieved a total return of 3.7 percent, barely squeaking out a 43-point victory over its two ETF benchmarks.
In the first month of 2015 the 10 American stocks in the portfolio achieved a total return including currency of 5.3 percent, 330 basis points higher than the 10 Canadian stocks. Excluding currency, the Canadian stocks actually did 5.1 percent better than their American counterparts.
To put this in perspective, the U.S. dollar accounted for 160 percent of the U.S. stocks’ performance in January.
That’s great until you have to convert the U.S. dollars back into Canadian currency. Any rebound by the Canadian dollar over the next few months will eliminate most if not all the positive momentum from December and January.
This is exactly why home-country bias (the natural tendency to want to invest in stocks in your own country) sometimes isn’t the worst thing in the world. Long-term this view will hurt you but in the short run it’s actually a good problem to have.
The top performing stock, Canadian or American, in the month of January was Riocan, up 11.4 percent on the month. Perhaps it gained so much on the news of its two-condo development proposal for Sunnybrook Plaza or its purchase of the 50 percent it didn’t already own of the Leaside Centre, where Canadian Tire and PetSmart are located.
Restaurant Brands International, the successor company to Tim Hortons and Burger King, got off to a good start to the year, up 8.2 percent in January, the second-best performing stock behind only Riocan. Hopefully, you took the stock and not the cash.
In terms of American stocks, Dunkin Brands had a much better month than Starbucks, up slightly less than 11 percent, compared to 6.3 percent for its cross-country rival. Together the two stocks accounted for almost all of the real performance (non-currency) of the 10 American stocks.
With 10 out of 20 stocks in the LSI delivering negative total returns in January it’s safe to say the month was a dud.
Perhaps February will show the index a little more love.