| Monthly Mutuals Analysis |
Dateline: 2/23/98
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The number of Power Performers declined from 24 to 19 by the end of January. The lowest number since I started charting them. The number of Canadian Equity funds making the grade fell from 7 to 3, while the number of American funds stayed at twelve. The number of International and Dividend funds remained unchanged but the lone Sector fund from last month didn't make the grade this time around. Most of the Power Performers were gainers for the month, as they were last month. My focus for this week is on the European funds.
Only a week left to make those final RRSP contributions for the 1997 taxation year! With that money burning a hole in your pocket, where shall you park it?
Last week's Report on Mutual Funds in the Globe & Mail featured the European market in two of its stories. European funds did extremely well in 1997, gaining 28 percent. But that's just the beginning. With the move towards a European Economic Community with a single currency and trade barriers falling, the economy can only keep getting better.
Indeed, the listing of the Top 25 Three Months Performers for the period ending Jan. 31, 1998 has nine European funds in it. They're really starting to take off.
The nine European funds making the list of best three months performers are:
| Fund | 3 Month Return |
| Montrusco Select Continental Europe Equity | 20.1 |
| AIM Europa Fund | 17.4 |
| NN Can-Euro Fund | 15.8 |
| Canada Trust Eurogrowth | 14.0 |
| AGF European Growth | 13.4 |
| Maritime Life Europe Fund | 13.2 |
| Scudder Greater Europe Fund | 12.7 |
| Growsafe European 100 Index | 12.7 |
| Green Line Euro Growth | 12.6 |
And that's just counting the ones that call themselves Euro funds. If you add in funds specializing in particular European countries, we also have the Global Manager German Geared Fund, the Global Manager UK Geared Fund and the AGF International Germany Class M Fund. That makes twelve European funds making up the Top 25, almost half.
Now ordinarily you might think that these funds are only eligible for the foreign content portion of your RRSP. That is, in fact, not so. Four of the funds above fully qualify as Canadian content. They are the NN Can-Euro Fund, the Canada Trust Eurogrowth, the Maritime Life Europe Fund and the Growsafe European Index 100 Fund.
How do they do this? I'm not sure about the others, but since my wife owns some of the Canada Trust Eurogrowth, I can explain how they do it. They maintain Canadian content by fully investing in Canadian Treasury Bills and short term notes from Canadian financial institutions. They then use these securities as collateral to buy European Stock Index Futures Contracts. Their Semi-Annual Report to June 30, 1997 showed contracts on the French, German, Italian, Dutch, Spanish, Swedish, Swiss and British indexes.
In fact, all of Canada Trust's Growth Funds, the Amerigrowth, Asiagrowth and Globalgrowth as well as their International Bond Fund and Global Asset Allocation Fund are 100% Canadian content in your RRSP. Using these funds and similar ones, you could be 100% invested in foreign markets in your RRSP.
Here are charts outlining the activity in our three portfolios. Remember these portfolios were established to test a theory and should not be taken as recommendations.
Portfolio # 1 (Buy Strategy - Fund must be in the Top 25 Performers for a Three Month period and the One Month performance should not be negative nor should any gain be excessive compared to the Three Month. Sell on 5% slide.)
Portfolio Value at 2/20/98: $ 26,129.06 - up 4.5% since inception (12/22/97)
| Fund | # of Shares (Start) | Purchase price | Buy/Sell at: | # of Shares (End) | Price (2/20/98) | Value of Investment |
| Friedberg Currency | 226.4 | $21.64 | $20.59 (2/3/98) | 0 | $19.88 | $4661.57 Cash |
| AGF European Growth | 354.3 | $13.83 | n/a | 354.3 | $15.04 | $5328.67 |
| O'Donnell US Mid-Cap | 663.1 | $7.39 | n/a | 663.1 | $7.91 | $5245.12 |
| Standard Life Cdn Dividend | 244.3 | $20.06 | n/a | 244.3 | $21.41 | $5230.46 |
| National Trust Dividend | 270.7 | $18.10 | n/a | 270.7 | $19.11 | $5173.08 |
| Cash | 490.16 | $1.00 | $1.00 (2/20/98) | 151.73 | $1.00 | $151.73 |
| AIM Europa Fund | 0 | n/a | $16.66 (2/20/98) | 300.12 | $16.66 | $5000.00 |
As you can see, the Friedberg Currency Fund slipped 5% from its peak and we sold it. Although it is at the top of our Top 25 Three Month Performers, its current price is below the price at the end of January, so we are not buying back in. This fund is very volatile and we approach it with caution. We used the proceeds of that sale and some of our cash to invest $5000 in the AIM Europa Fund (300.12 shares at $16.66)
Previously we have assessed ourselves a 2% front end load on all purchases whether they are front end load or not. At the Financial Forum in Vancouver last weekend I discovered that you can purchase mutual funds without any front or back end load through E-Trade Canada, as long as you hold them at least 90 days. So we're going to assume E-Trade is our broker and not charge any loads in our model portfolios, but will assess a 2% back-end load if we sell before ninety days.
Portfolio # 2 (Buy Strategy - Same as Portfolio # 1 plus the fund must have a better than 15% performance for the One Year, Three Year and Five Year periods. Sell at 5% slide)
Portfolio Value at 2/20/98: $ 25,693.74 - up 2.8% since inception (12/22/97)
| Fund | # of Shares (Start) | Purchase price | Buy/Sell at: | # of Shares (End) | Price (2/20/98) | Value of Investment |
| National Trust Dividend | 270.7 | $18.10 | n/a | 270.7 | $19.11 | $5173.08 |
| Investors US Growth | 111.8 | $43.84 | n/a | 111.8 | $46.25 | $5170.75 |
| Associate Investors | 393.6 | $12.45 | n/a | 393.6 | $13.34 | $5250.62 |
| Atlas American Large Cap Growth | 150.2 | $32.63 | n/a | 150.2 | $33.95 | $5099.29 |
| Cash | 5000 | $1 | $1 (2/20/98) | 0 | $1 | $0 |
| Ethical North American Equity | 0 | n/a | $31.38 (2/20/98) | 159.3 | $31.38 | $5000.00 |
As you can see, we started with four funds and $5000 cash. This month we spent that cash to buy 159.3 shares of the Ethical North American Equity Fund.
Portfolio # 3 (Buy Strategy - Fund must be a Power Performer and it must have positive Three Month and One Month figures. Sell on 5% slide.)
Portfolio Value at 2/20/98: $ 25,444.75 - up 1.8% since inception (12/22/97)
| Fund | # of Shares (Start) | Purchase price | Buy/Sell at: | # of Shares (End) | Price (2/20/98) | Value of Investment |
| Investors US Growth | 114.5 | $42.79 | n/a | 114.5 | $46.25 | $5295.62 |
| AIC Value | 119.0 | $41.16 | n/a | 119.0 | $43.27 | $5149.13 |
| Cash | 15,000 | $1.00 | $1.00 (2/20/98) | 0 | $1.00 | $0 |
| AGF American Growth | 0 | n/a | $23.40 (2/20/98) | 213.7 | $23.40 | $5000.00 |
| Ethical North American Equity | 0 | n/a | $31.38 (2/20/98) | 159.3 | $31.38 | $5000.00 |
| Fidelity European Growth | 0 | n/a | $24.77 (2/20/98) | 201.8 | $24.77 | $5000.00 |
We had only bought two funds originally using Strategy # 3 because the NAVPS for most of the Power Performers that met our criteria dropped between the end of each period and the day we made our purchases. This month we become fully invested as we spend our $15,000 cash position.
Controls: (2 Funds purchased to buy and hold as benchmarks for our portfolios.)
| Fund | # of Shares (Start) | Purchase price | Buy/Sell at: | # of Shares (End) | Price (2/20/98) | Value of Investment |
| Trimark Fund | 910.1 | $26.92 | n/a | 1137.5 | $22.82 | $25,957.75 |
| AIC Value | 3093.4 | $7.92 | n/a | 3093.4 | $8.24 | $25,489.62 |
The three portfolios can be characterized as aggressive, conservatively aggressive and conservative. So far the aggressive portfolio is in the lead followed by the Trimark Fund as a benchmark, the conservatively aggressive Portfolio # 2, the AIC 2 benchmark and finally the conservative Portfolio # 3. The aggressive Portfolio # 1 was fully invested from the start and has been trading monthly. It remains to be seen how they will fare over time. Will the conservative portfolio weather downturns better? Or will the aggressive portfolio do better? Stay tuned!
Europe Beckons as Trade Walls Fall from the Globe & Mail's Report on Mutual Funds
European Funds Top Winners' List from the Globe & Mail's Report on Mutual Funds
Marco's Power Performers to Jan. 31, 1998
Top 25 Three Month Performers to Jan. 31, 1998
Funds Performing Better Than 15% Annual Compounded Rate Over 15 Years
Funds Performing Better Than 15% Annual Compounded Rate Over 10 Years
Marco's Power Performers Index Page
Disclaimer: As with all my columns here, I should re-iterate a precaution. I am not a professional financial advisor. I am a financial journalist and editorialist. The views in these columns are my personal opinions.
American Readers: Looking for a broker who can sell you Canadian stocks? One of my brokers is licensed to sell securities to Americans in 26 states. She works for Canaccord Capital which is an excellent company with a superb research department. They are particularly knowledgeable on resource issues. Send me a note if you want to get in touch with her.
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