As discussed in my recent post, my stocks have failed to outperform the TSX. I think I can do better. The basic pricinples of Benjamin Graham are sound, but I have not been able to apply them to build a diversified portfolio. I want to use those principles – sound dividend and earnings growth – but apply them to build a broader portfolio.
||Bank of Montreal
||The Bank of Nova Scotia
||Canadian Imperial Bank of Commerce
||Constellation Software Inc.
||Husky Energy Inc.
||Loblaw Companies Limited
||Manulife Financial Corp.
||National Bank of Canada
||Potash Corp./Saskatchewan Inc.
||Power Corporation of Canada
||Rogers Communications Inc.
||Royal Bank of Canada
||Shaw Communications Inc
||Sun Life Financial Inc.
||Suncor Energy Inc.
||Teck Resources Ltd
The basic method is:
- Start with the TSX 60
- Remove former trusts
- Remove any stock with dividend coverage below 125%
- Take the top 23 stocks
- I then deselected two of the banks to prevent over-concentration
Power Corp (POW.TO) has declined since I sold it for $32.10 back in December 2013. The price is attractive once more.
Cogeco Cable (CCA.TO) has been a good investment since I purchased it back in December 2013 for $48.25. Today it is over $60. That’s an advance of 25% in 4 months. Not bad. Even better, the stock has paid two dividends of $0.30, for a further 1.2% gain.
Berkshire Hathaway (BRK.B) has been a great investment. I purchased it back in August 2013 for US$112.48 and it has advanced to over $128 today. That at 14% gain. But it gets better: the USDCAD foreign exchange rate has moved from 1.04 to around 1.10 today, for a further 6% gain. That’s 20% in 8 months.
JP Morgan Chase (JPM.TO) meets my screening criteria.
JPMorgan is a global financial services firm and a banking institution in the United States, with global operations. The Company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity.
I analyzed the stock using my usual procedures. The results are as follows.
- The P/E Ratio is 13.21, which is a little higher than the average historical P/E of 10.25, and the Graham Number is $72.96
- The Dividend Yield is only 2.61%, which is low, but the coverage is 290% which supports a future dividend raise
- Forecast Growth Rate is good at 8.93%, compared with 35.33% historically
- The Gordon Return (Dividend + Growth) is 11.54%, which is quite high
The Margin of Safety at current prices is -9.35%. This is low but I think the price is fair given the growth prospects. I believe that the stock is fairly priced here.
Intact Financial (IFC.TO) is another stock that no longer meets my screening criteria. As with Power Corp, which I am also selling, Intact’s price has risen so much that it is no longer good value. This is good.
I originally bought Intact for $58.60 back on 13th May 2013. During my period of ownership the stock paid three dividends each 44c. The total gain was therefore $11.72 per share. This is a gain of 20.0% in 8 months. A good call.
Power Corporation (POW.TO) is another stock that no longer meets my screening criteria. This is because it’s price has risen so much that it is no longer good value. This is good – I made a big profit!
I originally bought Power Corp for $26.20 back on 25th April 2013. During my period of ownership the stock paid three dividends each 29c. The total gain was therefore $6.77 per share. This is a gain of 25.8% in 8 months. A good call.