August 2015 Performance: 2015 Portfolio 1%, 2014 Portfolio 9%

Continued bad news in the markets has caused a significant downturn for both portfolios this month. Economic slowdown in China was the biggest hit to global markets, specifically their surprise yuan devaluation.  While news about Greece's economy has died down, the financial debt problems still continue to be a concern.  At the same time, it was announced that Canada had slipped into a technical recession (two consecutive quarters of negative growth) during the first half of the year.

Here's the portfolio holdings that we created in May of this year.  Last month, it was up over 6% but at the end of August, the May2015 portfolio was only up 1%. It has shed nearly 5% which is reflective of the overall Toronto stock market.  National Bank (NA), the lone financial stock has taken the biggest hit, now down 12%.  Stella Jones (SJ) down 1%, and Telus (T) just breaking even.  The remainder of the stocks appear to be faring ok for now.

Here's the comparison chart of the May2015 holdings versus the broader TSX, since portfolio inception.  The TSX is down almost 8% mostly due to energy and resource holdings weakness.

The May2015 performance chart shows a wild roller coaster during the month of August.

July 2015 performance

Sorry for not posting at the end of  June 2015, but we are back now.  Let's recap what's affected the Toronto stock market this past month.  All bad news, sorry.

Low oil and commodity prices
Canada's economy on the verge of a recession
Greek debt crisis
China stock market sell-off

Above is the one month graph of the TSX.  The overall market continues to decline. Booo.

Here's the sector map of the Toronto markets for the past 30 days.  There are 8 sectors with similar stocks grouped together.  Clockwise - [top left corner - Materials] , [top centre -Energy], [top-right corner -Consumer Discretionary], [right centre - Industrial], bottom right corner - Healthcare, Telecoms and Utilities], [bottom centre - Consumer staples), [bottom left corner - Financials], [centre - Technology].  Find this map here. Each square represents a company. The colour of the square indicates if the stock price is negative or positive.

It's pretty apparent from the map above, that materials and energy continue to drag the TSX down. Financials have been neutral last month, but the remainder of the market sectors are positive.

Here's a look at performance of the new portfolio I started two months ago back in May2015.  It's up over 6%, so averaging 3% per month.  Pretty good considering that the May2014 portfolio was only up 1.5% per month this time last year.

We find that overall the majority of the stocks are doing well with the exception of National Bank (NA) and Stella Jones (SJ).  The two winners of this portfolio at the moment are ATD.B and WPK, both with double digit gains.

This is how the portfolio looks graphically.  It was flat for the month of June, with momentum building a couple of weeks ago.

When comparing the May2015 portfolio versus the overall TSX, here's what the graph looks like for the past month.  The portfolio is outperforming the markets by 10%.

If we look at last year's stock selections, they aren't performing as well as this years.  The May2014 portfolio is presently down about 6% from May2015.  All the stocks are still doing well but EQB is still the laggard. If this was a real portfolio I'd consider removing it from the portfolio.  Of special note, GIL dropped nearly 8% yesterday, but I think this represents a buying opportunity.

Overall the May2014 portfolio is still outperforming the TSX though.  Above is the 16 month comparison chart.  The TSX has been flat for the entire time.   If you bought an index fund or ETF that mirrored the TSX, you'd be pretty much in the same boat ...not making any money.

FYI, I've decided to remove the past momentum stock posts from the blog this month so as to focus on the model portfolio performance.

Ok, so that's our look at the portfolios this month.  Hope you enjoyed the read.  

Time for a new portfolio - may2015

So it's now the end of May 2015 and as promised in the last blog post, I've made a selection of stocks to track for the 2015-2016 year.

This year's portfolio will be a small one with an initial investment of $15,000.  As with the may 2014 portfolio, I will continue to apply the same principles to this year's may 2015 portfolio.  To summarize,

Market Capitalization:  the company must be worth over 1 billion dollars

Beta:  the volatility of the stock must be less than 1 (any number higher than 1 means that the stock is more volatile).

Earnings Per Share (EPS):  A positive EPS means that there is profit allocated to each share.

Return on Equity (ROE):  the company's profitability must have had double digit ROE for the current and previous year.

Diversification of the portfolio:  stocks must be chosen from different market sectors (ie, they must be in different lines of business).

Some caveats:

I will still be avoiding energy and resource stocks, but I do think that stocks should in the financial sector should make some gains over the next year.

I won't duplicate any stocks held in the may2014 portfolio.  (really make things hard for myself!).

The initial value of the stocks will be the closing price on Friday May 29th.

If I like a certain stock, I might overlook that it doesn't fulfill all of the characteristics above.

Commissions will not be factored into the portfolio.

Here are the stocks I have selected for the May 2015 portfolio.   There are seven of them:

ATD.B - Alimentation Couche-Tard - A grocery store chain that operates in North America and Europe.  The past one year return (May2014 thru May2015) was 64%.  Dividend yield is inconsequential.

Key stats and ratios

Q1 (Feb '15) 2014

Net profit margin 2.72% 2.14%

Operating margin 4.22% 2.72%

EBITD margin - 4.14%

Return on average assets 8.50% 7.70%

Return on average equity 20.00% 22.60%

Employees 60,000 -

DH - Davis and Henderson - A financial technology provider operating in Canada and the US.  One year return is 24%.   Dividend yield is 3.14%.

Key stats and ratios

Q1 (Mar '15) 2014

Net profit margin 11.52% 9.42%

Operating margin 17.47% 15.66%

EBITD margin - 29.43%

Return on average assets 4.33% 3.59%

Return on average equity 9.41% 8.44%

Employees 4,000 -

EMA - Emera - An energy company operating in North America and the Carribean.  One year return is 21%.   Dividend yield is 3.88%.

Key stats and ratios

Q1 (Mar '15) 2014

Net profit margin 19.34% 15.24%

Operating margin 25.78% 22.45%

EBITD margin - 33.94%

Return on average assets 6.97% 4.84%

Return on average equity 22.64% 17.00%

Employees 3,530

NA - National Bank of Canada - A Canadian financial services provider.  One year return was 4%.  Dividend yield is 4.29%.

Key stats and ratios

Q2 (Apr '15) 2014

Net profit margin 28.43% 28.15%

Operating margin 30.12% 33.55%

EBITD margin - 51.63%

Return on average assets 0.77% 0.78%

Return on average equity 17.18% 17.89%

Employees 20,125

SJ - Stella Jones - A U.S. based manufacturer and marketer of pressure treated wood products.  One year return was 49%.  Dividend yield is inconsequential.

Key stats and ratios

Q1 (Mar '15) 2014

Net profit margin 8.84% 8.31%

Operating margin 13.99% 12.46%

EBITD margin - 13.98%

Return on average assets 8.84% 8.80%

Return on average equity 16.59% 16.43%

Employees 1,560

T- Telus - A Canadian telecommunications provider.  One year return was just under 2%.  Dividend yield is 3.97%.

Key stats and ratios

Q1 (Mar '15) 2014

Net profit margin 13.72% 11.89%

Operating margin 22.45% 19.88%

EBITD margin - 35.48%

Return on average assets 6.86% 6.36%

Return on average equity 22.00% 18.42%

Employees 43,670

WPK - Winpak - A Canadian packaging manufacturer.  One year return was just over 49%.  Dividend yield is inconsequential.

Key stats and ratios

Q1 (Mar '15) 2014

Net profit margin 11.39% 10.12%

Operating margin 16.88% 14.63%

EBITD margin - 19.14%

Return on average assets 12.28% 11.01%

Return on average equity 15.16% 13.50%

Employees 2,157

For this portfolio, I have purchased 50 shares of each company.  Below is the initial cost to buy shares in each of the companies.  The total initial value of the May 2015 portfolio is $15,274.

While there is no guarantee that these stocks will repeat their performance in 2015, it is worth noting that the combined performance of the stocks in the may2015 portfolio in 2014 was 31%, which is even better than the 25% return of the may2014 portfolio.  Hopefully these stocks will continue their performance into the next year.

My next update will be at the end of June.  At that time we will look at the performance of the new may2015 portfolio and also check in on the may2014 portfolio as well.

One Year Performance 25.68%

So this is what we have been waiting for this past year.   I created the portfolio back in May 2014 and this is how it looks today.   Over 25% return!

I wasn't sure how the portfolio components would look like for the one year review because the markets were selling off quite significantly at the end of April and the first week of May.  

If we dissect the individual stocks, we find that every one of them is in positive territory, even the laggards EQB and STN.  They seemed to have revived these last 2 weeks.  The remaining stocks have done really well, all with double-digit gains.   We had two stock splits in the portfolio during the course of the year - GIL and STN.

The top stock for the year has been Great Canadian Gaming with an impressive return of just over 57%.  I must admit I was a bit wary of this stock which is why I didn't put a significant amount of capital into it.  But the Google Finance stock filter clearly identified this stock as having some potential.  I think that the GC stock has performed consistently well for most of last year.

CGI Consulting (GIB.A) was also a star performer over the past year.  It lost a bit of ground in the last couple of weeks though, but delivering a handsome return of 44%.

The last 3 stocks LNR, GIL and WFT have finished this past year all with 30% gains.  I never imagined that these stocks would be as volatile as they have been.

Here's the one year performance graph of the May 2014 portfolio.  It made just over $9000 with the initial investment of about $35,000.  A small part of the 9K gain was from dividends of $217.  From this we can see that these were not great dividend paying stocks.  This portfolio was more about growth.

A look at our performance graph in comparison to the performance of the Toronto Stock exchange over the same one year period.  The TSX only gained 4%.  We managed to average a gain of over 2% per month.

I've downloaded the transaction data from this portfolio into an OFX file, which you can upload back into google finance if you want to play with it yourself.  Here's the link to the file on my Google Drive:  https://drive.google.com/file/d/0BwUUNjScf336bVZMRjNWbE11TWs/view?usp=sharing

You need to download the OFX file from my google drive to your downloads folder. Then, login into Google Finance and create a new portfolio, and upload the contents of the OFX file.

If you want to review the criteria I used to choose the stocks in the May 2014 portfolio, here's the link to original post:   http://cdnstocks2watch.blogspot.ca/2014/05/a-selection-of-seven-stocks.html

So I'm thinking to myself, should I create a new portfolio for the upcoming year?  Do you think we can repeat the success of the 2014 portfolio if we follow the same rules and use Google Finance to filter the stocks for us?   I'm hoping it will yield some new stocks for us to track and analyse.

Time for me to check Google Finance and see what gems  we can uncover for 2015.  Stay tuned as I intend to put together a new portfolio next week sometime.  Any input would be welcome!

Month Eleven Performance - 20.17%

It is now mid April and markets have been on a tear.  There has been a lot of fear about a looming stock market correction.  Oil is still down, around the $50 per barrel range, but I have noticed an uptick lately with respect to oil and energy stocks.

The model portfolio has recouped it's losses of last month. So now it is showing a 20% return as it did mid February.  My opinion is that the market is buoyed by the performance of the energy sector.

It also seems to me that there is a rotation away from consumer stocks back into oil.

Over the course of two months, WFT has lost almost 20% of it's stock value. Recall it was up 45% in mid-February.  This loss was offset by Great Canadian Gaming (GC) gains, now at 54% return.  Most other stocks gained ground other than the two laggards EQB and STN.

Late March, Gildan (GIL) split their stock so that the original number of stocks doubled from 100 to 200.  The stock price was halved to about $38.  Unfortunately, Google Finance doesn't handle stock splits, although their FAQ and blog says that they do.  I had to manually adjust my number of shares and purchase price in order for it to be properly reflected in the portfolio.  Even having done that, the percentage return graph, I've been using is broken, and I haven't figure out a way of hacking it to show the proper percentage.

Case in point, here's how google finance is showing the default performance graph, as reflected by the split in Gildan's stock price from mid 70s to mid 30s.

Here's how the graph would normally look, except that I had to remove GIL from the portfolio otherwise it would look like the graph below.

Anyways, below is how the YTD vs TSX performance graph looks (without GIL). 

Note that the YTD return of eleven months for the Toronto Stock exchange is only about 5%. The model portfolio average monthly return is about 1.8% per month.

There seems to be a delay or flaw in google finance with respect to dividend reporting as well.  Google finance did not update the March dividend information for the majority of stocks that paid dividends.

Above is the latest dividend info, so it should be showing the March dividends for EQB, STN, WFT and GIL. 

Next month, will be the one year anniversary of this blog and the model portfolio.  I'll review the portfolio for one last time.

Took this  from Centre Island.

Month Ten Performance - 15% approximately

I got lazy mid March and didn't update the blog, sorry.  I did remember checking the portfolio returns and it appeared that February through March, markets pulled back around 5%.  I don't have the holdings chart for that period but I did manage to chart it roughly.    Below is the YTD performance graph and the TSX comparison graph.

With a 15% gain, our average monthly gain is about 1.5%.

Month Nine Performance - 20.5%

Here we are in mid February.  Oil prices have risen slightly since January, but the Canadian dollar has not.  Greece economy is back in the spotlight, since they elected a new government and they want to re-negotiate the terms of their Euro bailout.

You might think that all this doom and gloom would continue to weigh heavily on the model portfolio.   On the contrary, the portfolio holdings have bounced back from their January lows and are now making new highs.  Our nine month return on the portfolio is now 20.45%.  With the exception of EQB and STN, all of the other stocks in the portfolio are experiencing double digit gains.  

The clear winner so far is WFT at 45.75%.  Certainly West Fraser Timber must be indicative of the rebound of the US housing market.  Not far behind is GIB.A at 41.95%.  CGI shows that tech is still alive and well and mirrors the performance of some other canadian tech companies I have been watching, such as CSU, OTC and ESL to name a few.  GC, GIL and LNR are all in the high 20s percentage returns also.  As I predicted LNR did make a come back since last month.  

Here's the performance graph this month.  Portfolio gain is just over $7200 making the model portfolio worth $42,624.  No dividends were paid out during January.

The comparison graph above shows the returns of the model portfolio vs the TSX for the last nine months.  Oil, resources and financials have dragged the TSX down of late.  Those just happen to be the top three pillars of the TSX.  Our average return per month is now 2.2%.

Finally, this is the model portfolio performance graph for only 2015.  I compared the portfolio return vs the TSX .  Almost 8%  vs about 3.5%

You've probably noticed that I haven't updated the momentum stock postings in quite awhile.  I was sick for a spell and then the bathroom reno started so I took my focus off the weekly posts.  I'll try to get back into the swing of things soon.

See you in March.

Month Eight Performance - 7.2%

We are now two weeks into 2015.   It has not been a good time for the markets, as they have experienced a significant decline due to falling oil prices.  We saw six straight days of sell-off last week.  It has sent the model portfolio back to mid December levels.

Stantec has been the loser of the stocks in previous months but now Equitable Group has also lost ground.  The portfolio is still up over 7% but it looks like this is the third time, the markets have bottomed on exactly the 15th of the month.  Oct 15, Dec 15, now Jan 15.  If this pattern continues, we should see a rebound in the markets towards the end of January.

The model portfolio is still out-performing the TSX.  The TSX is down 1.4% from mid May of last year.

CGI, GIL and WFT seem to be the strongest stocks.  LNR has retreated about 8% and it might be a good time to pick up this stock.

Model Portfolio End of 2014 - 12.7%

Happy New Year to One and All!   Hope you had a healthy and happy 2014.  Just thought I'd check in our model portfolio and take one more peek at it to see how it fared for the past seven and a half months.

Recall that we built this model portfolio back in May 2014 with a hypothetical amount of about $35,000.  We took that amount and bought seven stocks with it, with diversification in different industries.   There was a deliberate avoidance of those sectors that make up the majority of the TSX, namely:  Oil, and Materials.  We did have some exposure to the financial sector via the stock Equitable Group. 

As of January 1st, 2015, the portfolio has increased in value by 12.75% just shy of 8 months.  This works out to an increase of approximately 1.7% per month.

It weathered two significant drops, one occurring in mid October and the most recent sell-off in oil and banking in mid December.  Despite the stomach churning falls, the model portfolio rebounded even stronger as can be seen in the performance graph above.

In the comparison graph of model portfolio vs. TSX, the TSX never fully recovered after the first sell-off and the subsequent exposure to banking and oil sector losses ended up not making any money.   The model portfolio made a handsome $4500 in the same time frame.

The majority of the stocks made double digit gains with the exception of Equitable Group and Stantec.   I think the stocks that we picked benefited from the US recovery, such as Linamar, CGI and West Fraser Timber, but they were not without their scary moments.  Linamar lost a lot of it's value not long after we started the model portfolio, and then CGI got a lot of bad publicity due the the Obamacare wesbite which they worked on.  Great Canadian Gaming took off but it's gains can be attributed to it's competitor Amaya Gaming through it's purchase of Poker Stars.Net.

It will be interesting to see how this portfolio does going into 2015.  I suspect it may not repeat it's performance, as investor money will flow back into the Oil and Banking sectors.  Historically stocks seem to sell-off in January, so I am anticipating a drop in portfolio value when we return to our regular review period during the middle of the month, two weeks from now.

Down forget to read the interesting articles I've listed in the Musings section.

If you are one of my friends and have a basket of stocks you want me to monitor, let me know and I'll create a new portfolio.

Thanks for looking and see you mid January.