Getting out of Apple and Intel, Adding Canadian Dividend Fund

As part of my broader portfolio rationalization it’s time to sell my individual stocks and move to index funds.  One of my larger individual stock holdings is Apple (AAPL).  It’s a little heartbreaking to sell anything at a loss, but it’s better to take a loss than a bigger loss.

Apple is currently trading at $445, which is 37% down from recent highs.  It’s very tempting to imagine that Apple will revert to its high if I hold the stock, but that is a mirage.  The basic question I must ask myself is this:

“Would I buy Apple today at $445?”

Or, put another way:

“Today, would I rather have $445 cash, or one share of Apple?”

The answer is that I would rather have the cash than the stock.  So, it’s time to sell.  Ditto for Intel (INTC).

So, how do I deploy these funds?  These stocks are in the account that I plan to use for my  TSX holdings, which will be 20% of my portfolio.  Rather than buying more of the iShares S&P/TSX 60 Index Fund (XIU.TO), I have decided to buy the iShares Dow Jones Canada Select Dividend Index (XDV.TO).  XDV is a three-star rated ETF with high liquidity that  holds thirty* high dividend Canadian equities (similar to the Beating the TSX portfolio).

  • Sell AAPL @ $445
  • Sell INTC @ $20.25
  • BUY XDV.TO @ $22.33

*The thirty stocks in XDV are:

Ticker Name %age
CM CANADIAN IMPERIAL BANK OF COMMERCE 6.76
BNE BONTERRA ENERGY CORP. 6.19
NA NATIONAL BANK OF CANADA 5.85
TD TORONTO-DOMINION BANK/THE 5.60
BMO BANK OF MONTREAL 5.28
T TELUS CORP. 4.65
RY ROYAL BANK OF CANADA 4.55
BNS BANK OF NOVA SCOTIA 4.25
BCE BCE INC 4.19
IGM IGM FINANCIAL INC. 4.10
AFN AG GROWTH INTERNATIONAL INC. 3.70
LB LAURENTIAN BANK OF CANADA 3.46
TRP TRANSCANADA CORPORATION 3.20
RCI.B ROGERS COMMUNICATIONS INC. CL B 2.99
MBT MANITOBA TELECOM SERVICES INC. 2.89
PWF POWER FINANCIAL CORP. 2.67
SLF SUN LIFE FINANCIAL INC 2.64
COS CANADIAN OIL SANDS LTD. 2.58
RUS RUSSEL METALS INC. 2.55
EMA EMERA INC. 2.52
GWO GREAT-WEST LIFECO INC. 2.47
TA TRANSALTA CORPORATION 2.25
HSE HUSKY ENERGY INC. 2.22
POW POWER CORP. OF CANADA 2.22
AGF.B A.G.F. MANAGEMENT LTD. CL B 2.16
FTS FORTIS INC. (CANADA) 2.16
SJR.B SHAW COMMUNICATIONS INC. CL B 1.87
CJR.B CORUS ENTERTAINMENT INC. CL B 1.77
RET.A REITMANS (CANADA) LTD. CL A 1.34
PGF PENGROWTH ENERGY CORP 0.75

POSTMORTEM

The trades described above are part of a broad portfolio rationalization that includes many trades.  I have performed a single postmortem to cover all of these trades.  The postmortem is here.

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Getting out of Power Corp, Adding to TSX 60 Fund

As part of a larger portfolio rationalization I have decided to sell my Canadian equities and move the funds to one or more Canadian Equity index funds.  Accordingly, today I sold Power Corp (POW.TO) and moved the proceeds to my existing TSX Fund, the iShares S&P/TSX 60 Index Fund (XIU.TO).  XIU is a four-star rated ETF with high liquidity that is indexed to the TSX 60 Index.

  • Sell POW.TO @ $27.10
  • Buy XIU.TO @ $18.40

PORTMORTEM

The two trades described above are part of a broad portfolio rationalization that includes many trades.  This postmortem will cover all of these trades.

Writing today, 30th March, the performance of the ETFs that I bought has been as follows:

Ticker Name Buy Price Today’s Price % Gain
XIN.TO iShares MSCI EAFE Index Fund CAD Hedged $18.73 $19.42 3.68%
XEM iSHARES MSCI EMERGING MKTS IDX FD $24.74 $24.45 -1.17%
XDV.TO iShares Dow Jns Cnd Slct Dvdnd Indx Fnd $22.33 $22.30 -0.13%
n/a S&P Fund $129.79 $135.41 4.33%
XIU.TO iShares S&P/TSX 60 Index Fund $18.40 $18.34 -0.33%
Average Increase in assets bought 1.49%

The performance of the stocks and ETF that I sold is:

Ticker Name Sell Price Today’s Price % Gain
AAPL Apple Inc. $445.00 $442.66 -0.53%
INTC Intel Corporation $20.25 $21.83 7.80%
T.TO TELUS Corporation $70.70 $70.16 -0.76%
COS.TO Canadian Oil Sands Ltd $20.52 $20.94 2.05%
POW.TO Power Corporation of Canada $27.10 $27.30 0.74%
n/a EAFE Fund $98.09 $99.79 1.73%
IVV iShares S&P 500 Index (ETF) $150.94 $157.33 4.23%
Average Increase in assets sold 2.06%

So, the ETFs that I bought are up 1.49% in a month, which is good.  But the stocks and ETF that I sold are up 2.06%, which is a missed profit of 0.56%.  How do we assess this set of trades?  Well, the purpose was to stabilize the portfolio and reduce its volatility, which I think we have achived.  The gains in the stocks that I sold were primarily due to only one stock – Intel (INTC).  To stay in those stocks would have been speculation, which is not something I want to do with the main portion of my portfolio.  I will call this a “mixed call”; neither good nor bad.

Portfolio Update – Up 1.86% in January 2013

My portfolio balances at close of trading on 31st January were:

Ticker Price (C$) Price Change Percentage Industry
T.TO $ 67.39 3.52% 4.9% Telecommunications
COS.TO $ 20.99 4.07% 5.6% Energy
PHY-U.TO $ 14.24 1.39% 5.3% Gold
POW.TO $ 26.23 3.35% 4.9% Financials
BMO.TO $ 62.99 3.50% 0.0% Financials
AAPL $ 454.44 -13.40% 5.9% Information Technology
INTC $ 20.99 3.24% 3.6% Information Technology
IVV $ 150.11 6.35% 9.0% US Equity Fund
XIU.TO $ 18.31 2.18% 6.2% Canadian Equity Fund
S&P Fund $ 126.65 5.49% 10.3% US Equity Fund
EAFE Fund $ 98.23 5.58% 11.1% Global Equity Fund
Bond Fund $ 223.00 -0.75% 24.4% Bond Fund
Cash 8.6% Cash
Total 100.0%

Overall my portfolio is up 1.86% since last month.  For comparison my TI Index is up 2.09%, the DOW is up 5.77% and the TSX is up 2.02%.

My investments have performed slightly less well than these indices.  Winners this month include Telus (T.TO) up 3.52%, Canadian Oil Sands (COS.TO) up 4.07%, Power Corp (POW.TO) up 3.35%, Bank of Montreal (BMO.TO) up 3.50%, Intel (INTC) up 3.24%, and my index funds which are up 3-6%.  Losers include Apple (AAPL) down 13.40% and Bonds which are down 0.75%.

My bond holdings are at 24.4%, which is a little lower than my target of 25%. I will rebalance.

Portfolio Update – Up 0.09% in December 2012

My portfolio balances at close of trading on 31st December were:

Ticker Price (C$) Price Change Percentage Industry
T.TO $ 65.10 0.40% 4.8% Telecommunications
COS.TO $ 20.17 0.05% 5.5% Energy
PHY-U.TO $ 14.04 -3.13% 5.4% Gold
POW.TO $ 25.38 1.52% 4.9% Financials
BMO.TO $ 60.86 1.99% 6.5% Financials
AAPL $ 524.77 -9.69% 7.0% Information Technology
INTC $ 20.33 4.65% 3.6% Information Technology
IVV $ 141.15 -0.28% 8.6% US Equity Fund
XIU.TO $ 17.92 1.93% 6.2% Canadian Equity Fund
S&P Fund $ 120.06 1.13% 10.0% US Equity Fund
EAFE Fund $ 93.04 3.43% 10.7% Global Equity Fund
Bond Fund $ 224.69 -0.15% 25.1% Bond Fund
Cash 1.9% Cash
Total 100.0%

Overall my portfolio is up 0.09% since last month. For comparison my TI Index is up 0.25%, the DOW is up 0.6% and the TSX is up 1.59%.

My investments have fared poorly compared with most indices. Winners this month include Intel Corp (INTC) up 4.65% after a terrible recent decline and my EAFE fund up 3.43%. Losers include Gold (PHY-U.TO) down 3.13% and Apple (AAPL) down 9.69%.

My bond holdings are at 25.1%, which is acceptably close to my target of 25%. No rebalancing is required this month.

Portfolio Update – Down 0.28% in November 2012

My portfolio balances at close of trading on 30th November were:

Ticker Price (C$) Price Change Percentage Industry
T.TO $ 64.84 0.00% 4.8% Telecommunications
COS.TO $ 20.16 -4.91% 5.5% Energy
PHY-U.TO $ 14.50 -1.73% 5.5% Gold
POW.TO $ 25.00 3.18% 4.8% Financials
BMO.TO $ 59.67 1.10% 6.3% Financials
AAPL $ 581.10 -2.40% 7.7% Information Technology
INTC $ 19.43 -10.18% 3.4% Information Technology
IVV $ 141.55 0.04% 8.7% US Equity Fund
XIU.TO $ 17.58 -1.68% 6.1% Canadian Equity Fund
S&P Fund $ 118.72 -0.06% 9.9% US Equity Fund
EAFE Fund $ 89.96 1.76% 10.3% Global Equity Fund
Bond Fund $ 225.03 0.61% 25.1% Bond Fund
Cash 1.8% Cash
Total 100.0%

Overall my portfolio is up 1.23% since last month.  Without cash contributions the portfolio would have been down 0.28%. For comparison my TI Index is down 0.37%, the DOW is down 0.54% and the TSX is down 1.48%.

My investments have done well compared with most indices. Winners this month include Power Corp (POW.TO) up 3.18% and my EAFE fund up 1.76%. Losers include Canadian Oil Sands (COS.TO) down a whopping 4.91% and Intel (INTC) down 10.18%.

My bond holdings are at 25.1%, which is acceptably close to my target of 25%. No rebalancing is required this month.

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!

 

Portfolio Update – Up 0.17% in October 2012

My portfolio balances at close of trading on 31st October were:

Ticker Price (C$) Price Change Percentage Industry
T.TO $ 64.84 4.56% 4.9% Telecommunications
COS.TO $ 21.20 0.71% 4.2% Energy
PHY-U.TO $ 14.75 -1.13% 5.7% Gold
POW.TO $ 24.23 1.38% 6.1% Financials
BMO.TO $ 59.02 1.58% 6.4% Financials
AAPL $ 595.38 -9.25% 3.8% Information Technology
INTC $ 21.63 -2.93% 6.4% Information Technology
IVV $ 141.49 -0.37% 8.8% US Equity Fund
XIU.TO $ 17.88 1.53% 6.3% Canadian Equity Fund
S&P Fund $ 118.79 -0.31% 10.0% US Equity Fund
EAFE Fund $ 88.40 2.41% 10.3% Global Equity Fund
Bond Fund $ 223.66 -0.22% 25.3% Bond Fund
Cash 2.0% Cash
Total 100.0%

Overall my portfolio is up 0.17% since last month. There we no cash contributions this month. For comparison my TI Index is down 0.53%, the DOW is down 2.54% and the TSX is up 0.86%.

My investments have done well compared with most indices. Winners this month include Telus (T.TO) up 4.56% and my EAFE fund up 2.41%. Losers include Apple (AAPL) down a whopping 9.25% and Intel (INTC) down 2.93%.  Apple’s decline looks like a simple mean reversion and presents an opportunity to top up.  Intel’s decline over the past few months is deeper but also presents a buying opportunity in my opinion.

My bond holdings are at 25.3%, which is acceptably close to my target of 25%. No rebalancing is required this month.

I put most of my cash to work last month so my cash is 2.0%, which is fine.