Month Seven Performance - 6.5%

Welcome back to the roller coaster that is the Toronto Stock Market.  These past few weeks have been punishing to our test portfolio.   

The big banks have lowered their expectations of growth for 2015, causing them to shed almost 5% of their market value.  Then oil prices collapsed, as OPEC drove prices down on oil to make it less profitable for US companies to bring oil to market.  Here's a good explanation of what's happening right now:

http://www.vox.com/2014/12/16/7401705/oil-prices-falling

So let's see what the impact to the model portfolio is, this month.  Recall that this portfolio does not have any direct exposure to any oil stocks.  We do Equitable Group which is in the finance sector.

The portfolio didn't lose all it's value as it did for a brief moment back in October, but I would say it has lost about 30-40%, but overall it is still up over 6% since portfolio inception.  This month's biggest loser is Stantec, at just under 10%, followed by Equitable group with a mere 2% return.

Here's the YTD graph from May 15th to now.  So now we are just averaging under 1% per month as a return.   But if you want some positive news, here's how the TSX did over the same period.

From the chart above, we see that the TSX is in negative territory and down 5.63% since May 15.

And this is the chart for XIU, the top 60 stocks in the Toronto Stock Exchange, which is down 2.43% since the middle of May.

Month Six Performance - 10.2%

So, here we are at the half year mark of tracking the performance of the test portfolio.  This month is very eye opening. Recall last month, the test portfolio suffered a steep loss, giving back exactly all of it's gains it had made in the previous five months.  However, it wasn't due to poor selection of stocks, the portfolio was simply mirroring the downturns also experienced by the Canadian and US markets at the time.

I'm pleased to report that the model portfolio has not only recouped it's losses but has actually increased in value during this past month.  Check out the YTD return of 10.23%.  Remember, that in month four (Sept 2014), I indicated the projected portfolio increase of 1.6% per month.  If we multiply 1.6% times 6 months, we get 9.6%.  So we are actually ahead of that projection this month.

Here's the YTD performance chart. 

So let's break it down.  This month we have the most number of stocks showing double digit returns since we started monitoring.  EQB 10.11%, GC 42.48%, GIB.A 11.07%, GIL 14.65% and WFT 11.37%.   Only two laggards LNR which is now at least breaking even around 1.6% and STN with a respectable 5.89% return.

STN and WFT produced dividends most recently, with total dividends now at $116.78.  Portfolio gain (including dividends) is $3607.

Thought I would display the portfolio fundamentals to see if any changes.  Here's the way the stocks looked back in May.

I can see that the P/E ratios are getting to be a bit more expensive now.

Two months ago I also compared our model portfolio to the XIU ETF which tracks the top 60 stocks in the Toronto Stock exchange.  Here's the YTD graph of the returns from May 15 through to today.

The Toronto stock exchange did not quite rebound back the same way our portfolio did.  It's now showing a meagre 2.65% return.   I guess this is proof that if you pick stocks with good fundamentals, they will survive the huge drops and rebound nicely.

Well, that's it for this month's review.  See you in December.

Month Five Performance - 0.9%

Yikes!  The financial media had hinted that a correction was overdue and it started a few days after last month's post.  Here you can see the TSX decline over the past month, leading to about a 10% loss.

Our test portfolio went into the red that day, giving back all the gains it had accumulated for the past 5 months.  Here are the returns on the day after the markets fell out.

We saw from the last few months that Linamar (LNR) performance was certainly disappointing, but it dropped to an all time portfolio low of -15%.  Despite the stomach churning drop from the previous day, the test portfolio actually didn't suffer too badly.   

So, on to the details.  Besides Linamar, West Fraser Timber (WFT) lost money, butonly about 1.5% and Equitable Group (EQB) broke even.   The remainder of the stocks didn't seem to be too affected.

Great Canadian Gaming (GC) didn't flinch at all holding at 19%.  Gildan Activewear (GIL) and Stantec (STN) both ok at around 7%.  CGI at a modest 3%.

Here's the YTD chart of the portfolio.  Total dividend payout to date is  $98.  Most of the portfolio gains of $2000 had vanished.   Now we have to wait and see how the test portfolio fares for the rest of the year.

Let's hope there's better news next month.  Check back in around the middle of November.

Month Four Performance - 6.4%

The model portfolio was almost up 8% in the past couple of weeks before shedding almost 2% in the last few days.  Here's a look at how it's doing.

The portfolio is currently showing a gain of  just over 6% with all stocks in the green except Linamar.  It definitely looks like LNR has run out of steam over the past 4 months, now down 3%.  STN  is up another 5% from last month since the announcement of a stock split coming in the next few months.  WFT has also jumped 14% in the past month, going from a loss of 6% to a nice gain of 8% this month.  CGI has gone from flat to 6% this month.  The remaining stocks have given back about 1 to 2% since August.

Another $20 of dividends were received this past month from LNR and EQB with a total portfolio gain of $2252.  If we average out the YTD return of 6.4% over 4 months we get an average of 1.6% per month.

I should point out that only 5 of the 7 stocks in this portfolio pay any kind of dividend, and none more than 1% yield, so it relies a lot more on growth than income.

Here's the portfolio returns and graph for the past 4 months:

Sep: 6.4%, $2252

Aug: 4%, $1419

Jul: 3%, $1027

Jun: 0.5%, $186

The rounded top of the graph looks like the top of a roller coaster.  Looks like markets will be heading downwards in the next weeks or months.   As a side note I sold off LNR in my wife's portfolio last month, seeing as how it hasn't done much in the last 4 months.

Incidentally, I wanted to see how the test portfolio performance compares with the broader TSX, so I charted the graph between the middle of May until now.

What a surprise that the 7 stocks in the model portfolio mirrors the TSX in performance gains of 6%  and also in the shape of the graph!   And here's the same YTD graph for the TSX ETF called XIU.

XIU is an index fund which is a mutual fund that trades like a stock.  This fund is comprised of the TSX 60 largest companies.  See the description from Google Finance for more info.
https://www.google.ca/finance?q=TSE%3AXIU&ei=Ag0YVPC5JpLV8QbsgoGIAg

If you only could buy one stock and wanted to replicate the returns of the overall TSX, this would be it.  It's 4 month return is 6.76% doing just a bit better than the model portfolio.  It even has a 2.25% dividend yield, which I'm guessing is why it's outperforming the model portfolio by a couple of percentage points (6.7% vs 6.4%).  You also would save on the transaction fees, $10 vs. $70.

I will continue to track the model portfolio vs. XIU and the TSX in the coming months to see how we are doing.

Month Three Performance - 4%

Despite the market gyrations on July 31st and during the first week of August, the test portfolio has held up ok.  Here's this month's results.

And here is the 3 month performance graph.

Gainers this month:  Great Canadian Gaming (GC) up a handsome 28% since portfolio inception.  Equitable Group (EQ) up a respectable 8%, Stantec (STN) up 7% and Gildan (GIL) up 6%.

Losers this month:  West Fraser Timber (WFT) continues it's decline with a loss of over 6%, CGI (GIB.A) and Linamar (LNR) both flat since portfolio inception.

Total dividends paid out to date are $34, latest from Gildan on Aug 12, and portfolio growth is now $1419.

Here's the portfolio returns for the past 3 months:

Aug: 4%, $1419

Jul: 3%, $1027

Jun: 0.5%, $186

Market pundits anticipate a mostly sideways market until October/November, so I expect September to be a less than interesting month on the markets.

Month Two Performance - 2.9%

We're on the second month of monitoring the test portfolio.  The graph below shows an upward trend but not without periodic dips.  Forward two steps and back one, it seems.  Let's hope the upward trend continues.

Here's a look at how the components of the portfolio are doing.  It's up almost 3% in two months, so the average would be about 1.5% per month.  Contrast that with the current GIC rate.  Also about 1.5% but that's what you get ~ IF ~ you hold it for 3 years.  Portfolio gain is just over $1000.

The good thing is that there's some equalization of the stocks, so the portfolio is balancing itself out.   Since last month, we see that Great Canadian Gaming (GC)  has given back most of it's gains, and West Fraser Timber (WFT) has reduced it's losses.   Gildan Activewear (GIL) is showing a decent return of almost 10% this month.  CGI Group (GIB.A)is also up a respectable 4%.  It's participation in the development of Obamacare's website seems to be paying off.  Equitable Group (EQB) and Stantec (STN)  continue to make minor contributions to the portfolio growth.

Linamar, the golden stock of 2013 is one of the poorer performers now and is continuing to be eclipsed by Magna, it's nearest competitor.  Magna is up 9% since May 16.

Another $17 has been generated in dividends this month, bringing the portfolio dividend total to $27.  Portfolio growth is now $1027.

Well, that's it for this month.  This portfolio is getting to be as bountiful as these daisies.  See you in August.

One month performance - 0.5%

Well after one month, the performance of this test portfolio has been pretty lack luster.  It's up about half on one percent (before commissions).  Two weeks ago, the portfolio had reached almost 2%, but has since given back those gains.  The $10 cash in the last table row indicates the dividend received from Linamar (LNR) and Equitable Group (EQB) during the past month. Click on any of the images to expand them.

The drag on the portfolio is attributed to West Fraser Timber (WFT) which is down almost 7% since portfolio inception.  Otherwise, the portfolio would be making a return of about 2-3% as you can see from the average returns of most of the stocks in this basket.  I would have expected West Fraser to have benefited from the continued housing gains in the U.S. meh.

Portfolio profit is $108.

It looks like the steam has run out for Linamar.  I mean 3% for the last month is nothing to sneeze at but it pales in comparison to the returns that Linamar was getting in 2013. The chart below shows a one month comparison of Linamar vs. Magna (MG).  As you can see Linamar is pretty much flat.  Magna which is up almost 8% on the month, is the another auto parts manufacturer.  Both Linamar and Magna did well during 2013 as the U.S. auto industry continues it's recovery.

The best performing stock in the portfolio is Great Canadian Gaming (GC), up over 9%, but I think this is attributable to the recent purchase of Poker Stars by Amaya Gaming group (AYA) for 4.9 billion dollars, yes billions.  The one month return on Amaya's stock is 173%.

Check back in next month to see if the portfolio has gained any footing, but I expect that the markets will go sideways over the summer months, unless something spectacular happens. Have a great day.

A selection of seven stocks

I anticipated that manufacturing would be a growth sector for 2013 as evidenced by stocks such as CN Rail, CP Rail and Magna, all which have done tremendously well over the past year.  I decided to buy LNR Linamar  for my wife's portfolio last year.  At that time, the stock was about $35.  The price today is 62.58, with a return of about 81%.  It is the best performing stock in her portfolio.  On a YTD basis, since Jan 2 2014, the stock is up 41%.

LNR - Linamar Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 7.42% 6.39% Operating margin 9.16% 8.90% EBITD margin 15.03% Return on average assets 10.48% 9.12% Return on average equity 21.26% 19.13%

Anyways, google finance has a stock screening feature that looks at stocks with similar attributes.  It selected 30 stocks and I picked 6 of them.   They all have a PE ratio of between 10 and 20 and double digit ROE. The companies are what you might consider mid-cap type stocks.  

Here is a list of the stocks I have chosen to watch.
GIB.A - CGI Group - Technology
GIL - Gildan Activewear - Consumer Discretionary
STN - Stantec - Industrial
EQB - Equitable Group - Financial Services
WFT - West Fraser Timber - Industrial
GC - Great Canadian Gaming - Consumer Discretionary

All of the info below I pulled from google finance, this morning.

GC - Great Canadian Gaming Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 7.09% 15.49% Operating margin 16.63% 29.00% EBITD margin 34.40% Return on average assets 3.18% 7.10% Return on average equity 9.37% 21.47%	GIB.A - CGI Group Key stats and ratios Q1 (Mar '14) 2013 Net profit margin 8.54% 4.52% Operating margin 10.74% 6.22% EBITD margin 14.86% Return on average assets 7.93% 4.23% Return on average equity 20.61% 12.19%
EQB - Equitable Group Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 51.86% 49.51% Operating margin 68.57% 65.99% EBITD margin 160.44% Return on average assets 0.90% 0.80% Return on average equity 19.42% 18.11%	GIL - Gildan Activewear Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 9.24% 14.66% Operating margin 9.82% 15.69% EBITD margin 20.45% Return on average assets 8.02% 16.25% Return on average equity 9.66% 20.36%
STN - Stantec Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 7.90% 7.98% Operating margin 10.43% 10.86% EBITD margin 14.13% Return on average assets 8.68% 9.32% Return on average equity 16.49% 18.05%	WFT - West Fraser Timber Key stats and ratios Q4 (Dec '13) 2013 Net profit margin 14.17% 10.05% Operating margin 3.60% 9.93% EBITD margin 15.98% Return on average assets 15.70% 12.17% Return on average equity 25.48% 20.30%

And here are the portfolio details.  In this hypothetical portfolio, I bought 100 shares of each company for a total outlay of about $35,262.  I built this portfolio pre-market Friday morning and have not factored in any commissions at this time.  As you can see the portfolio is down about 1% from yesterdays prices.

I will take screen shots in mid June to see how the portfolio progresses.  You can use google finance and create this same portfolio if you want to monitor the status on a more frequent basis or play around with the stock picks and amounts.