Portfolio Update – Up 3.07% in November 2014

My portfolio balances at close of trading on 28th November were:

Ticker

Price (C$)

Price Change

Percentage

AGU.TO $ 110.38

0.10%

3.9%

BBD.B $ 4.36

17.52%

3.9%

BCE.TO $ 53.34

6.57%

3.7%

BMO.TO $ 83.86

2.61%

4.1%

CM.TO $ 106.49

3.50%

3.7%

CSU.TO $ 331.56

4.43%

3.4%

CVE.TO $ 25.67 n/a

3.1%

ENB.TO $ 52.50

-1.56%

3.5%

FTS $ 40.61

10.59%

4.4%

HSE $ 24.18

-11.14%

2.4%

L.TO $ 61.51

4.75%

0.0%

MFC.TO $ 22.77

6.45%

4.1%

NA $ 53.13

0.85%

4.1%

POT.TO $ 39.31

2.18%

3.4%

POW $ 32.43

9.05%

3.8%

RCI.B $ 45.77

8.00%

3.5%

RY.TO $ 83.16

3.94%

4.1%

SJR.B $ 30.87

6.67%

4.0%

SLF.TO $ 42.43

5.84%

4.1%

SU.TO $ 36.11

-9.77%

3.0%

T.TO $ 43.28

7.16%

3.8%

TCK.B $ 17.64

-0.95%

2.5%

SCTY $ 62.86 n/a

2.2%

TRP.TO $ 54.45

-1.98%

3.8%

XBB $ 31.38

1.23%

7.7%

XSP $ 24.01 n/a

7.4%

Cash

2.5%

Total

100.0%

Overall my portfolio is up 12.49% since last month. Excluding cash contributions the portfolio is up 3.07%. For comparison my TI Index is up 2.24%, the DOW is up 2.52% and the TSX is up 0.90%. My investments are up and performed well against all indexes.

Winners this month include Bombardier (BBD-B.TO) up 17.52%, BCE (BCE.TO) up 6.57%, Constellation Software (CSU.TO) up 4.43%, Fortis (FTS.TO) up 10.59%, Manulife (MFC.TO) up 6.45%, Power Corp (POW.TO) up 9.05%, Rogers (RCI-B.TO) up 8.00%, Shaw (SJR-B.TO) up 6.67%, and Telus (T.TO) up 7.16%.

Losers include Husky (HSE.TO) down 11.14%, and Suncor (SU.TO) down 9.77%. Screen Shot 2014-11-30 at 3.48.08 PM

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Portfolio Update – Up 2.98% in July 2014

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

Ticker

Price (C$)

Price Change

Percentage

AGU.TO $ 99.40

1.69%

3.9%

BBD.B $ 3.73

-1.06%

3.8%

BCE.TO $ 49.38

2.02%

3.9%

BMO.TO $ 81.27

3.42%

4.5%

BNS.TO $ 74.01

4.03%

0.0%

CM.TO $ 101.21

4.23%

4.0%

CSU.TO $ 259.00

-4.77%

3.8%

ENB.TO $ 53.45

5.57%

4.0%

FTS $ 33.55

3.33%

4.1%

HSE $ 33.17

-3.74%

3.7%

L.TO $ 53.63

12.62%

4.7%

MFC.TO $ 22.28

5.04%

4.5%

NA $ 48.80

7.82%

4.2%

POT.TO $ 38.71

-4.61%

3.8%

POW $ 32.08

8.20%

4.3%

RCI.B $ 42.58

-0.84%

3.7%

RY.TO $ 80.47

5.49%

4.5%

SJR.B $ 26.72

-2.34%

3.9%

SLF.TO $ 41.57

5.99%

4.6%

SU.TO $ 44.77

-1.60%

4.3%

T.TO $ 38.06

-4.30%

3.8%

TCK.B $ 26.13

7.27%

4.2%

TD.TO $ 57.02

3.80%

0.0%

TRP.TO $ 54.70

7.40%

4.3%

XBB $ 30.96

0.23%

8.6%

Cash

0.8%

Total

100.0%

Overall my portfolio is up 2.98% since last month. There were no cash contributions. For comparison my TI Index is up 0.13%, the DOW is down 1.56% and the TSX is up 1.22%.

My investments are up and performed very well against all indexes.

Winners this month include Bank of Montreal (BMO.TO) up 3.42%, CIBC (CM.TO) up 4.23%, Enbridge (ENB.TO) up 5.57%, Fortis (FTS.TO) up 3.33%, Loblaws (L.TO) up 12.62%, Manulife (MFC.TO) up 5.04%, National Bank (NA.TO) 7.82%, Power Corp (POW.TO) 8.20%, Royal Bank (RY.TO) up 5.49%, Sun Life (SLF.TO) up 5.99, and TransCanada (TRP.TO) up 7.40%.

Losers this month include Constellation Software (CSU.TO) down 4.77%, Husky (HSE.TO) down 3.74%, Potash (POT.TO) down 4.61%, and Telus (T.TO) down 4.30%.

Screen Shot 2014-08-10 at 1.04.30 AM

Portfolio Update – Up 1.72% in June 2014

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

Ticker

Price (C$)

Price Change

Percentage

AGU.TO $97.75

0.40%

4.0%

BBD.B $3.77

2.17%

4.0%

BCE.TO $48.40

-2.89%

3.9%

BMO.TO $78.58

3.02%

4.5%

BNS.TO $71.14

2.17%

0.0%

CM.TO $97.10

1.51%

4.0%

CSU.TO $271.96

11.00%

4.1%

ENB.TO $50.63

-1.75%

3.9%

FTS $32.47

-0.22%

4.1%

HSE $34.46

-5.77%

3.9%

L.TO $47.62

4.20%

4.3%

MFC.TO $21.21

6.85%

4.4%

NA $45.26

-0.53%

4.1%

POT.TO $40.58

3.13%

4.1%

POW $29.65

1.61%

4.1%

RCI.B $42.94

-2.01%

3.9%

RY.TO $76.28

2.20%

4.4%

SJR.B $27.36

1.37%

4.1%

SLF.TO $39.22

6.87%

4.5%

SU.TO $45.50

9.03%

4.5%

T.TO $39.77

-2.88%

4.1%

TCK.B $24.36

0.79%

4.1%

TD.TO $54.93

2.18%

0.0%

TRP.TO $50.93

0.89%

4.2%

XBB $30.89

1.05%

8.8%

Cash    

0.3%

Total    

100.0%

Overall my portfolio is up 1.72% since last month. There were no cash contributions.  For comparison my TI Index is up 2.02%, the DOW is up 0.65% and the TSX is down 3.71%.

My investments are up and performed well against the DOW, but poorly against the TSX and the TI Index.

Winners this month include Bank of Montreal (BMO.TO) up 3.02%, Constellation Software (CSU.TO) up 11.00%, Loblaws (L.TO) up 4.20%, Manulife (MFC.TO) up 6.85%, Potash Corp (POT.TO) up 3.13%, Sunlife (SLF.TO) up 6.87%, and Suncor (SU.TO) up 9.03%.

Losers this month include Husky (HSE.TO) down 5.77%.

Screen Shot 2014-06-30 at 3.00.57 PM

Beating the TSX in 2013

Back in March 2012 I performed an analysis of the Beating the TSX portfolio. I thought it might be time to take another look.  Here is the methodology:

  • Begin with the TSX60 stocks.
  • Remove any stocks with a dividend of less than 3%. This minimizes the number of stocks I need to analyze.
  • Remove any stocks that might have an unsustainable dividend. For this I remove any stock with a payout ratio above 1.2 (equivalent to a coverage of less than 83%). I also remove any former trusts.
  • Finally, select the ten stocks with the highest dividends.

The analysis looks like this:

Screen Shot 2013-02-07 at 7.52.59 PM

The resulting list is as follows.

  1. BCE Inc.
  2. Bank of Montreal
  3. Canadian Imperial Bank Of Commerce
  4. Power Corporation of Canada
  5. National Bank of Canada
  6. Shaw Communications Inc.
  7. Bank of Nova Scotia (The)
  8. Husky Energy Inc.
  9. Royal Bank of Canada
  10. TELUS Corporation

Interestingly, four of the companies on the earlier list have fallen off as they no longer have a sustainable payout ratio.  These decliners are:

  • Manulife Financial Corporation
  • Sun Life Financial Inc.
  • TransAlta Corporation
  • Thomson Reuters Corporation

Analysis of the Financial Sector: the Banking and Insurance Industries

The banks are all offering a rate of return (IRR) of 9 or 10%, which is quite good.  Strongest returns (10% or more) are offered by Bank of Montreal (BMO.TO), which I own, National Bank (NA.TO) and CIBC (CM.TO).  Of these three, BMO offers the highest dividend.

Banking is a low growth industry: none of the banks offer a PEG Ratio below 1; and none of the banks has an earnings growth rate of 9% or more.

I’m happy with BMO.

Image

In contrast to the banks, the insurers mostly seem to offer an IRR of 11% or more.  The lowest is Power Corp (POW.TO) at 9.99%, which is the one insurer that I own!

From a PE Ratio perspective, Indus Alliance (IAG.TO) and Manulife (MFC.TO) offer the best value.  Manulife also has a PEG Ratio below 1, as do Power Financial (PWF.TO) and Power Corp.  Manulife also has a decent dividend, although second lowest amongst the six insurers analyzed.

Power Corp, which I own, has PE Ratio of 11.1 (a high price for this group) but, due to strong growth estimates, it has a has a PEG Ratio below 1 (the growth justifies the price).  It has a decent dividend but, like Manulife, not best in class.  Dividend coverage is not as strong as Manulife’s.

Overall, I’d say that Manulife is a better value stock than Power Corp, but I don’t feel strongly enough about this to trade at this point.  I’ll stick with Power Corp.

Image

Can I Beat the TSX?

Back in August I wrote about the Beating the TSX system of stock picking. The system works like this:

  • Start with the list of all companies in the TSX60
  • Discard any that do not have a long history of paying a consistent dividend (e.g. former income trusts)
  • Select the ten stocks with the highest dividend
  • Repeat annually

The originator, David Stanley, claims a 24 year record of consistently beating the TSX. His current list is as follows.

Image

I am concerned by the volatility in my portfolio. Stocks like SuperValue (SVU) and BHP (BHP) have declined sharply. I believe that the Beating the TSX stocks will provide the same level of dividend yeild with less volatility.

I differ with David Stanley in one area. I think that the former income trusts provide good value (and very strong dividends). So I will modify his system to include two former income trusts, Enerplus (ERF.TO) and Canadian Oil Sands (COS.TO).

So I SELL the following stocks:

  • SuperValue
  • BHP
  • Intel
  • TD Bank
  • Manulife
  • Kinder Morgan

This gave me the funds to BUY six of the Beating the TSX stocks:

  • Bank of Montreal (BMO.TO)
  • Sun Life (SLF.TO)
  • Power Corp (POW.TO)
  • Shaw (SJR-B.TO)
  • TransAlta (TA.TO)
  • TransCanada (TRP.TO)

I will pick up the remaining four stocks when I have cash to do so.

POSTMORTEM

A month after these trades, on 7th November 2011, the results are as follows.

  • Stocks that I sold are up 5.3%.
  • Stocks that I bought are down 3.86%

That’s a 9% difference, which makes this a bad call in the short term (i.e., my timing was bad). This was a long term, or strategic, set of trades to move from a higher risk portfolio to a lower risk portfolio, so I am not too concerned.

Portfolio Update – Down 3.00% in August 2011

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

Ticker Price (C$) Price Change Percentage Industry
BHP $ 83.39 -4.67% 7.2% Materials
COS.TO $ 23.41 -10.34% 6.7% Energy
ERF.TO $ 28.67 -3.76% 6.8% Energy
GS $ 113.80 -11.77% 0.0% Financial
INTC $ 19.71 -7.63% 6.5% Technology
MFC.TO $ 13.39 -11.79% 4.0% Financial
PHY-U.TO $ 15.59 16.19% 8.1% Gold
SVU $ 7.80 -5.04% 4.9% Services
TD.TO $ 77.47 1.28% 6.7% Financial
IBM $ 168.32 -3.13% 0.5% Technology
KMP $ 68.70 n/a 4.9% Energy
S&P Fund $ 97.99 -3.07% 14.8% US Equity Fund
Bond Fund $ 209.04 1.14% 28.6% Bond Fund
Cash     0.3% Cash
Total     100.0%  

Overall my portfolio is down 1.96% since last month, despite additional cash contributions. Without these cash contributions the portfolio would be down 3.00%.

For comparison the index is down only 0.13%, the DOW is down 4.36% and the TSX is down 1.37%.

The major factor this month was a large and unexpected retreat on all major stock markets caused by US and European debt troubles, and the surprise downgrade of US debt. The S&P500 (^GSPC) was down 13% at one point during the month, and the TSX (^GSPTSE) was down 8%. Indices rallied before the end of the month and, without this rally, my losses would have been far worse.

In mitigation, gold has performed very well: my gold fund is up over 13%. My bond fund performed well too, and is up 1.14%.

Key stocks that performed especially poorly are:

  • Canadian Oil Sands (COS.TO), down 10%
  • Goldman Sachs (GS), down 12%
  • Manulife (MFC.TO), down 12%

Key statistics:

  • CAD$ = 1.0213 US$
  • Thoughtful Investor Index = 96.97