A wild ride

It’s been a wild couple of months for the major indices.  The TSX (^GSPTSE) fell 4.26% in September and a further 2.32% in October.  The Dow (^DJI) fell 0.32% in September but then recovered 2.04% in October.  This is a pretty significant divergence and a lot of volatility.

Oil prices have fallen to around $80 and gold to $1,170, which has impacted the resources-heavy TSX,.

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Portfolio Update – Up 1.00% in May 2013

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

Ticker Price (C$) Price Change Percentage Industry
POW.TO $ 29.10 7.26% 6.8% Finance, Specialty
FTT.TO $ 22.66 n/a 6.7% Industrial Services and Supplies
TCK-B.TO $ 27.69 3.32% 6.5% Basic Materials
DII-B.TO $ 41.25 n/a 6.4% Consumer Cyclical
IFC.TO $ 61.35 n/a 7.1% Finance, Insurance
LB.TO $ 44.15 n/a 6.6% Finance, Diversified
XRX $ 9.11 n/a 6.9% Technology
S&P Fund $ 143.64 5.14% 12.9% US Equities
Bond Fund $ 225.35 -1.48% 33.3% Bonds
Cash 6.9% Cash
Total 100.0%

Overall my portfolio is up 1.00% since last month.  There were no cash contributions.  For comparison my TI Index is up 0.48%, the DOW is up 1.86% and the TSX is up 1.56%.

My investments have performed well against the TI Index, which was dragged down by gold and bond prices, but not so well against the pure equities indexes: the TSX and Dow. This is to be expected: it was a good month for equities but not for bonds.

The two value stocks that I bought last month did very well: Teck Resources (TCK-B.TO) is up 7.26% and Power Corp (POW.TO) is up 3.32%.  My S&P Fund is up 5.14%.  My bonds are down 1.48%.

The table above does not show the performance of stocks that were bought during the month (it only shows month-on-month performance).  I bought quite a few stocks this month so I am including an additional table to analyze their performance, as follows.

Ticker Cost basis Price today Gain (Loss)
TCK.B $27.03 $27.69 2.44%
POW.TO $26.20 $29.10 11.07%
IFC.TO $58.60 $61.35 4.69%
LB.TO $44.30 $44.15 -0.34%
FTT.TO $22.89 $22.66 -1.00%
XRX $8.90 $8.79 -1.24%
DII.B $41.01 $41.25 0.59%
Average 2.32%

In summary, my value stocks have gained 2.32% since buying them.  Performance would have been much better were it not for a sudden downturn in the two hours of trading today, during which the TSX fell 0.5% and the Dow fell 1%.  I bought Xerox (XRX) and Laurential Bank (LB.TO) today, and both are down materially!

My bond holdings are at 33.3%, which is very close to my target of 33.5%.  I have 6.9% cash which I can use to add another new position if prices fall.

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Reducing Exposure to Canada

Screen Shot 2013-04-11 at 12.35.53 PMCanadian stocks have not fared well recently.  The TSX is down 2.5% in the last month.  US markets are doing much better by comparison.  I’m concerned about the Canadian banking sector.  Also, oil prices (especially oil sands prices) are under pressure.  I think it’s time to reduce my exposure to the TSX, and increase exposure to the roaring US market.

  • Sell XIU.TO @ $17.92
  • Buy XSP.TO @ $18.28

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.

Back into Equities, using ETFs

At the end of March I decided to sell some of my equities and raise cash, also referred to as sell in May and go away.  Summer is over and I think it’s time to buy equities again.  But what to buy?

In May I assessed the performance of my investments during the prior 12 months.  The (rather unsatisfactory) conclusion was that my portfolio had under-performed a simple portfolio of four ETFs: US equities; Canadian equities; bonds and gold.  Accordingly, as I get back into equities I have decided to augment my existing stocks with two iShares ETFs: iShares Core S&P 500 ETF (IVV) and iShares S&P/TSX 60 Index Fund (XIU.TO).

  • BUY IVV @ $147.10
  • BUY XIU.TO @ $17.95

Let’s see if they outperform my equities, which remain:

  • Apple
  • Intel
  • BMO
  • Power Corp
  • Canadian Oil Sands
  • Telus

POSTMORTEM

Writing today, 21st October, this trade looks like a bad call.  IVV is $143.86 (down 2.2%) and XIU.TO is at $17.82 (down 0.7%).

As can be seen in the chart (below) it has been a very volatile month for these ETFs.

Nasty Start to June

The TSX (^GSPTSE) closed at 11,513 at the end of May.  Since then it has fallen 2.7% in one and a half days of trading to 11,212.

The causes are reported as:

  • Weak May 2012 jobs report; and
  • Continued debt issues in Europe (the focus is moving from Greece to Spain).

Oil prices have slumped, gold is up, and stocks are down around the world.  This Summer is starting to feel like 2012.  Again, selling in May is looking good.

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Sell in May and Run Away!

The first half of this month has been terrible: sell in May and run away!  The Dow (^DJI) is down 5% and the TSX (^GSPTSE) is down a whopping 8% in only 13 days of trading.

My portfolio has fared quite well.  It is down only 1.4% at this point.  I owe my capital preservation to my bonds (up 1%) and my well chosen stocks.

I sold Apple (AAPL) and Enerplus (ERF.TO) last month.  They are down 12% and 22% respectively since I sold them.  Those might be the best two trades I have made yet, netting me an avoided loss of an average of 17% in just a month!  I will do a more detailed analysis of winners and losers at the end of the month.

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