Reducing Bond Exposure

Screen Shot 2013-08-21 at 10.58.09 PMBond performance has significantly lagged behind North American equities over the last 12 months.  Bonds are down 5% in the past 12 months, while the S&P500 is up 25%.  This is a 30% divergence.

I believe that my bond investments might represent dead money.  Accordingly, I am selling my bonds and moving those funds to my S&P fund.

  • Buy S&P Fund @ $150.6674
  • Sell Bond Fund @ $220.0189

This is a deviation from my Asset Allocation policy and my core Investment Policy.  It’s worth noting that I failed the last time I tried actively manage my equity to bond ratio, back in the Summer of 2011.  I wonder if I will learn the same painful lesson again!

POSTMORTEM

A month after making this trade it seems to be a bad call.  The S&P Fund that I bought is down 1.75% while the Bond Fund that I sold is down only 0.56%.  That’s a loss of 1.19% on the trade.  Given that the bond component of my portfolio had previously been 32.8%, this loss equates to 0.39% of my entire portfolio.  Another expensive lesson.  I will rebalance my portfolio back to include my customary bond component.

01-Aug-13 03-Sep-13 Change
S&P Fund $150.67 $148.04 -1.75%
Bond Fund $220.02 $218.78 -0.56%

Taking a position in Barrick Gold

Gold is down 4% today and the Gold Miners down even more.  The sell-off was initiated by stories out of Europe that Cyprus would be forrced to sell 40t of gold to fund its bailout, and that other European countries might follow suit.  Barrick Gold (ABX.TO) is down 7.6% today.  I am betting on a reversal and think that this is a good entry point.

  • BUY ABX.TO @ $23.10

POSTMORTEM

Writing today, 15th April, this has been a terrible trade.  ABX.TO has been down up to 12% this morning.  Normally I would sell a speculative stock if it fell by 5% since purchase but there was no such opportunity here as ABX.TO opened down 7%.  I sold at an 11% loss.

  • SELL ABX.TO @ $20.57

UPDATE

Writing a month later, on 17th May, selling this stock was a good move.  The stock closed at %18.58 today.

Getting into Cascades

chartimageCascades (CAD.TO) is showing a bullish techical indicator – a hammer.  Previously this indicator has heralded rallies in this stock.  I want to make a speculative investment.

  • Buy CAS.TO @ $4.57

POSTMORTEM

Writing today, 15th April, the hoped for rally has not emerged and the stock is essentially flat.  My thesis is no longer valid so I sold.

  • Sell CAS.TO @ $4.54

I lost a couple of pennies on this trade so we’ll call it a bad call.

Reducing risk on Intel, increasing risk on Apple

Both of my US tech stocks – Apple (AAPL) and Intel (INTC) – are down significantly in the past two months (see chart).

Image

I wrote last week that Apple seems to be bottoming after its fall.  The stock continues to find support in the mid-$530s.  I also wrote last week in a different post that Apple seems to be setting up for a head and shoulders top that should see it climb to $630 in 2-3 months (a 17% advance from here).  I think this is a good time to buy.

Intel on the other hand looks like it will just continue to grind lower until it flatlines.  However, the stock has a good dividend (4.5%) and I think it is undervalued in the longer-term.

So, I’m going to sell around half of my Intel holdings and use the cash to fund an additional Apple buy.

  • SELL INTC @ 20.12
  • BUY AAPL @ $537.93

POSTMORTEM

Writing today, 14th December, this pair of trades look like a bad call.  Apple (which I bought) is down 5%, and Intel (which I sold) is up 3%.  However, during the intervening month, those results were reversed: Apple was up 9% at one point and Intel was down 3%.  Apple’s stock has become even more volatile than usual.

Screen Shot 2012-12-18 at 1.13.51 PM

UPDATE

Today, 18th December, Apple rose almost 3% to $534 (only 0.7% below the purchase price). As I wrote above, Apple is volatile!