Portfolio Update – Down 0.82% in January 2015

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


Price (C$)

Price Change


AGU.TO $ 135.57



BBD.B $ 2.90



BCE.TO $ 58.36



BMO.TO $ 72.93



CM.TO $ 88.18



CSU.TO $ 352.09



CVE.TO $ 24.07



ENB.TO $ 61.55



FTS $ 41.91



HSE $ 27.35



MFC.TO $ 20.38



NA $ 44.21



POT.TO $ 46.26



POW $ 30.64



RCI.B $ 45.18



RY.TO $ 71.74



SJR.B $ 29.34



SLF.TO $ 38.86



SU.TO $ 37.90



T.TO $ 43.59



TCK.B $ 16.45



SCTY $ 61.69



TRP.TO $ 56.54



XBB $ 32.84



XSP $ 22.98







Overall my portfolio is down 0.82% since last month. There were no cash contributions. For comparison my TI Index is up 0.62%, the DOW is down 3.69% and the TSX is up 0.28%. My investments are down and performed poorly against the TSX.

Winners this month include Agrium (AGU.TO) up 23.25%, BCE (BCE.TO) up 9.53%, Fortis (FTS.TO) up 7.57%, Potash (POT.TO) up 12.64%.

Losers include Bombardier (BBD-B.TO) down 30.12%, CIBC (CM.TO) down 11.68%, Bank of Montreal (BMO.TO) down 11.26%, National Bank (NA.TO) down 10.58%, Royal Bank (RY.TO) down 10.59%, Shaw (SJR-B.TO) down 6.41% and Sun Life (SLF.TO) down 7.30%.

It was a very volatile month with many stocks experiencing big gains and many experiencing big losses.  The banks are all down 10% or more.

Screen Shot 2015-02-01 at 7.40.21 PM


Portfolio Update – Up 2.98% in July 2014

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


Price (C$)

Price Change


AGU.TO $ 99.40



BBD.B $ 3.73



BCE.TO $ 49.38



BMO.TO $ 81.27



BNS.TO $ 74.01



CM.TO $ 101.21



CSU.TO $ 259.00



ENB.TO $ 53.45



FTS $ 33.55



HSE $ 33.17



L.TO $ 53.63



MFC.TO $ 22.28



NA $ 48.80



POT.TO $ 38.71



POW $ 32.08



RCI.B $ 42.58



RY.TO $ 80.47



SJR.B $ 26.72



SLF.TO $ 41.57



SU.TO $ 44.77



T.TO $ 38.06



TCK.B $ 26.13



TD.TO $ 57.02



TRP.TO $ 54.70



XBB $ 30.96







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

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

Core Positions

The first level of my Investment Process is asset allocation.  My current asset allocation is:

  • 25% cash
  • 25% bonds
  • 6% gold
  • 44% stocks

I do not currently have any plans to change this.  The next quarterly asset allocation review is at the end of June 2012.

The second level of my process is the establishment of core positions.  My process requires that we perform a fundamental analysis of the stocks in my portfolio and my watch list.  So, how do we establish a watchlist?

Step 1: I want to begin with biggest stocks on the TSX (those with market cap of more that $5B).  I then remove any stocks that do not meet the basic criteria in my Investment Policy (dividend below 3%, P/E Ratio over 20).  This gives me a list of 24 stocks.

Step 2: Canada does not have a strong technology sector (Nortel and RIM are bankrupt and nearly bankrupt respectively).  So I prepare a list of all US technology stocks with market cap of more than $50B.  This gives me 13 stocks.

This gives me my watchlist:

Ticker Name
GWO Great-West Lifeco Inc
PWF Power Financial Corp
CM Canadian Imperial Bank Of Commerce
HSE Husky Energy Inc
REI.UN RioCan Real Estate Investment Units
BMO Bank Of Montreal
POW Power Corp Of Canada
COS Canadian Oil Sands Ltd
IGM Igm Financial Inc
ERF Enerplus Corp
BPO Brookfield Properties Corp
BNS The Bank Of Nova Scotia
BCE Bce Inc
NA National Bank Of Canada
SJR.B Shaw Communications Inc
RCI.B Rogers Communications Inc
RCI.A Rogers Communications Inc
TD Toronto Dominion Bank
RY Royal Bank Of Canada
CIX CI Financial Corp
IPL.UN Inter Pipe Fund Units
FTS Fortis Inc
AAPL Apple Inc
INTC Intel Corp
CSCO Cisco Systems Inc
TSM Taiwan Semiconductor Manufacturing ADR Representing Five Ord Shs
BA Boeing Co
IBM International Business Machines Corp
MSFT Microsoft Corp
GOOG Google Inc
ORCL Oracle Corp
SAP SAP Aktiengesellschaft ADR Rep 1 Ord Shs

When American Depository Receipts (ADRs) and duplicates (A/B shares) are removed from the list, our watch list contains 32 stocks.

Step 3: Using a spreadsheet I analyze the fundamentals to identify stocks with the best IRR using the method outlined in my Fundamental Analysis page.

Finally, for diversification I attempt to find the one or two best stocks in each major sector.  The resulting core positions are:

  • Bank of Montreal (BMO.TO)
  • Power Financial (POW.TO)
  • Canadian Oil Sands (COS.TO)
  • Intel (INTC)
  • Microsoft (MSFT)
  • Apple (AAPL) if it’s price falls a little
  • Telus (T.TO) (IRR is a little low but Gordon Return is high so I’ll accept it for diversification)
  • TransAlta (TA.TO) (IRR is a little low but Gordon Return is high so I’ll accept it for diversification)

I own all of these except Intel, Microsoft, Apple, and BMO.  I own Shaw but it is not a core position.  I will consider trading Shaw for BMO and might buy the others once I have more cash (e.g. when I change my asset allocation).

Raising Cash – Sell in May and Go Away

In the past two years the market has performed well in the first three months of the year, and poorly in the summer. This is referred to as sell in May and go away. I discussed this in May 2011, but did not act upon it. In the first 3 months of 2012 we have seen the TSX rise by 3.8% and the DOW by 7.6%. These are heathy gains.

In both 2010 and 2011 the market turned down in mid to late April. I want to reduce my exposure now by selling stocks and raising cash. So, which stocks should I sell?

I began my assessment with two basic principles (based upon my investment policy):

  • Fundamentals: I assessed earnings and earning growth (based upon analyst estimates for 2012-2014), dividend yield and coverage, PE Ratio, PEG Ratio and the Gordon Return.
  • Diversification: I don’t want to hold too many stocks in one sector, e.g. Finance (Banking and Insurance), Energy (Oil and Pipeline), Telco, etc.


Assessment of Energy Stocks:

  • Enerplus looks good. Dividend yield is strong at 9.6% (with coverage of 141%). HOLD
  • Canadian Oil Sands looks OK, but earnings growth is quite low (less than 6%) and the dividend is smaller than Enerplus’ dividend. HOLD
  • TransCanada has marginal earnings growth of around 7%, a high PE Ratio of 18.2, and a high PEG Ratio of 2.6. It looks overpriced. SELL

Assessment of Financial Stocks:

  • PowerCorp has great growth of around 12%, a decent dividend of 4.4% and a PEG under 0.9. It looks good. HOLD
  • Sun Life has low earnings growth of 5%, and a PEG of 1.8. Power is better in every measure. SELL
  • Royal Bank has a low dividend (under 4%, but with excellent coverage over 200% – needs to pay out more), marginal growth around 7%, and a high PEG of 1.6. SELL

Assessment of Telcos:

  • Telus has decent growth of over 9% and the other fundamentals are good (PEG is a bit high). HOLD
  • BCE has low growth of under 4% and a PEG of 3.3, which is highest in the portfolio. SELL

Other Stocks:

  • Shaw is another low growth (5%) and high PEG (2.38) stock, like BCE. It will lose revenue as people switch from cable TV to internet TV (e.g., Netflix, AppleTV, other internet TV services) but should compensate with its cable-based high-speed internet services and telephone. HOLD
  • TransAlta is the only stock with a dividend coverage of under 100% (it’s 95%) but it has decent earnings growth of 9%. Price is down recently, making it good value at this point. HOLD
  • Apple is scary due to high price increase, but fundamentals are good: 14% growth, PEG under 1, and a dividend announced. HOLD but watch for price to fall back into long-term channel.

Other assets:

  • Gold is around 5.7% of the portfolio. This is fine. HOLD

After discussion with my financial advisor I decided to sell TransCanada Pipeline, Royal Bank, Sun Life and BCE.

  • Sell SLF.TO @ $23.78
  • Sell RY.TO @ $58.13
  • Sell BCE.TO @ $40.00
  • Sell TRP.TO @ $43.00

Note: Three of these four sell orders were processed on 29th March. The TRP order did not process until 2nd April (it was a limit order). So, TRP appears in the March month-end holdings.

I also decided to increase my holdings of TransAlta. The business is very stable and the dividend yield is over 6%, making this a better place to park my cash than in cash. This purchase also happened after the month end.

  • Buy TA.TO @ $18.45

The net result of these trades is that my asset allocation will be:

  • 25% cash
  • 30% bonds
  • 6% gold
  • 39% stocks


Writing one month later, on 27th April 2012, this trade has seen mixed results. Since selling on 29th March the TSX (^GSPTSE) has gone down 1.5%, so my call was good.

But the stocks I sold are up 0.2% on average, so my call was bad?  Let’s wait to see how things go over the summer before we make a final judgement.

Ticker Sell price Current price Change
TRP.TO $43 $43.19 0.44%
SLF.TO $23.78 $24.36 2.44%
BCE.TO $40 $39.93 -0.18%
RY.TO $58.13 $57.03 -1.89%
Average 0.20%

I also bought more TransAlta (TA.TO) stock, which is down 12% during the month. This was a bad call!  Very candidly, I did not want to buy more TransAlta but was persuaded to do so by my financial adviser.  I need to listen to my intuition more, and push back.


Writing today, 28th May, the decision to raise cash is looking better and better.  North American markets continue lower on European Debt worries.  The stocks I sold are now down an average of 6.34%, led by financials.

Ticker Sell price Current price Change
TRP.TO $43 42.01 -2.30%
SLF.TO $23.78 21.15 -11.06%
BCE.TO $40 40.5 1.25%
RY.TO $58.13 50.43 -13.25%
Average -6.34%


Writing today, 10th July, this decision is still looking good.  The stocks are still down an average of 2.22% and I think there could be more trouble ahead (August was horrible last year).

Ticker Sell price Current price Change
TRP.TO $43 43.34 0.79%
SLF.TO $23.78 22.14 -6.90%
BCE.TO $40 42.64 6.60%
RY.TO $58.13 52.69 -9.36%

Going for Growth (or is it speculation?)

It’s RRSP time again. I picked up Telus (T.TO) and BCE (BCE.TO) last month and now I have a little more cash to contribute before the deadline.

My Beating the TSX portfolio is now well rounded out after the recent Telus and BCE purchases, but I am not comfortable with Bank of Montreal (BMO.TO). After speaking with my financial adviser I have decided to swap it out for Royal Bank (RY.TO).

  • SELL BMO.TO @ $58.10
  • BUY RY.TO @ $53.41

So, what to do with the new cash? I have for a long time wanted to hold a more speculative or growth-oriented stock. Apple (AAPL) is the darling of the markets and might be over-bought, but fundamental analysis shows that its value is as good if not better than conservative names like IBM.

There are two upcoming catalysts that could move the stock a lot higher: 1) new products such as the iPad3, the iPhone5 and a new generation of the Apple TV product; and 2) a possible dividend or an acquisition that would put Apple’s $100B in cash to work. To be clear, this stock is does not conform to my investment policy, which requires that all holdings pay a dividend. Given its fundamentals, Apple is not a speculative stock. However, given it’s high growth rate in the past few years we must wonder if it offers good capital protection and we must confess that it is more speculative than our other holdings. Our mentor Benjamin Graham had this to say about speculation:

“If you want to try your luck at it, put aside a portion – the smaller the better – of you capital in a separate fund for this purpose.” – Benjamin Graham

So, with Benjamin’s cautious blessing, we proceed.

  • BUY AAPL @ US$521.05

Apple now makes up 4.5% of my portfolio, which breaks down like this:

  • Beating the TSX Stocks 47.9% (ten high-dividend Canadian stocks)
  • Bonds Fund 28.5%
  • US Equities Fund 12.6%
  • Gold 6.0%
  • Speculative Stock 4.5%
  • Cash 0.4%

This looks like a good and balanced portfolio.


One month after these trades they both look good. Royal Bank has advanced over 8% in a month, while BMO has advanced only 1%: a 7% advantage in only a month.


Apple closed today, 14th March 2012, at US$589.58: an advance of 13% in a month.  Nice!  This level of improvement calls for caution as analysts feel that Apple’s stock is advancing parabolically.