May 2016 - New Portfolio

Welcome.  

It's time to pick some new stocks for our new May 2016 Portfolio.  If you are interested in the most current returns and performance of previous years portfolio selections, see the previous two blog posts.

Last minute chgs: see end of blog post for details.

Stock Criteria

This year I wanted to focus on smaller cap stocks that have a dividend yield of around 4%.  Here are the stocks I have selected that satisfy the criteria.

Current stock prices are between 10 and 20 dollars per share approx.

Market capitalization is between 1 and 4 billion dollars.

Stock Selections

In keeping with our past theme of 7 stocks and as much diversification as possible, here are the picks.
The initial portfolio value is about $35,000, with each stock purchase worth about $5000.  Overall portfolio dividend yield target is above 4%.

AQN div yield: 4.77%, 5 yr return:  96%

CRT.UN div yield: 4.57%, 5 yr return: 47%

ECI div yield: 5.71%, 5 yr return: 114%

ET div yield: 4.24%, 5 yr return: 3%

FCR div yield: 4.11%, 5 yr return: 25%

ITP div yield: 3.42%, 5 yr return: 1165%, yes you read that right.

RNW div yield: 6.87, 5 yr return: 28%

Stock Historical Performance

In April of this year, I started doing my research and modelled this portfolio as if I had bought the stocks in the preceding year.  If I had picked these stocks last year, the portfolio would have a return of over 10%, which is much better than the current stock returns of the May 2015 portfolio.  The dividends alone on this portfolio amounted to $1500 in one year.

Pictured above is the one year performance graph of the May 2016 portfolio, May 2015 thru May 2016.  

May 2016 Portfolio

Ok, so I've reset the portfolio dates to commence on Fri, May 20, 2016, with the stock prices reflecting their end of day values.  Commissions are factored in, assuming $10 per trade.  Initial portfolio value is approx $35K.  Let's see where this one goes, hopefully I can do better with the stock picks than my past two portfolios.  Will revisit this and the other portfolios in 3 months time.

Last minute Update

So I was just checking the 5 year returns of the stocks and noticed that Evertz Technologies hasn't done that well at just 3% overall return.  Hmm.

I think I will swap it out for NWC instead.  It's got a 5 yr return of 45% and it's div yield matches our critera of 4.26%.

So the new portfolio looks like this:

http://www3.nhk.or.jp/nhkworld/en/vod/facetoface/20160522.html

May 2015 Portfolio Update as of May 17, 2016 2.5%

Ok, so we just looked at the poor performance of the May 2014 portfolio with it's one year loss of 16%.   And for the first time, it underperformed the TSX.   Now, let's see if the May 2015 portfolio fared any better.

And we see that the one year return of the May 2015 portfolio is about 2.5%.  That's about 2% more than what the banks will give you on a GIC currently.   This portfolio has not been immune to the stock market woes of late.

We are just a few weeks shy of the one year anniversary for the May 2015 portfolio.  A look at it's performance as compared to the TSX, shows us that the portfolio is doing better by about 15% over the past year.  Good news, that.

We again have a mix of crappy performing stocks and better ones.  So my stock picking skills still need improvement.  Let's look at the stocks.

DH Corp (DH) used to be one of the best performing stocks in this portfolio but it has recently been targeted by short sellers.  It is now down 15%, since portfolio inception.   Motley Fool thinks it's a good buy for patient investors (like us!).

http://www.fool.ca/2015/10/30/down-over-10-this-month-dh-corp-could-be-a-screaming-buy/

National Bank (NA) hasn't done well at all in this portfolio and is now down 14%.  I thought that it would have had a better return than the big banks, but I was wrong.   Really wrong.  The peer comparison graph and one year returns says it all.  However,  Motley Fool says now is a good time to buy NA.

http://www.fool.ca/2016/05/09/national-bank-of-canada-a-contrarian-bet-on-canadas-economic-recovery/

Telus is the other laggard in our May 2015 portfolio.  If it wasn't for it's stellar dividend yield, this stock return would be much lower.  It's down 2.5% on the year.  Motley Fool says Telus or Bell (BCE) are good to have in one's portfolio.

http://www.fool.ca/2016/05/11/should-you-buy-bce-inc-or-telus-corporation-today/

Stella Jones (SJ) has done alright in 2016.  It's up 5% over the past year.  What's confusing to me is why this stock is doing so much better than West Fraser Timber (WFT) during the same timeframe.  Both stocks are in the Forestry sector, so the poor US lumber prices that impacted WFT should also have affected SJ?  I guess I have to do some more research on these two companies and find out what's different about them.  Motley Fool says SJ is more influenced by the oil industry than being a wood producer, and thinks it's time has come and gone.

http://www.fool.ca/2016/01/15/stella-jones-inc-shares-have-returned-1000-over-10-years-can-the-run-continue/

We have way more winners than losers in the May 2015 portfolio vs. May 2014 portfolio.  Emera (EMA ) is one of the winners with a 12% return during the past year.  Dividend yield is good too.

Motley Fool says that either EMA or FTS should be in your portfolio.

http://www.fool.ca/2016/05/16/is-fortis-inc-or-emera-inc-the-better-buy-today/

ATD.B has given us a 15% return in the past year, but in the last couple of months it has lost steam.  Not sure if it's good performance will continue into the coming year.  Motley Fool says it's a good buy between $45-$52 dollars per share.

http://www.fool.ca/2016/04/20/can-alimentation-couche-tard-inc-rise-another-800/

The best one year return of this portfolio belongs to Winpak (WPK) at 18%.  Chart shows that it continues to look strong.  Here's what Motley Fool says:

http://www.fool.ca/2016/03/08/winpak-ltd-the-steady-consistent-performer/


Will check back in, around the end of August.

May 2014 Portfolio Update as of May 17, 2016, 3.6%

It's been two years since I created the May 2014 portfolio and this year has been a challenging one. Here's how it looks before market open this morning.

The current performance shows an overall return of just over 3.5%.  Given that this portfolio is two years old, that gives us an average return of 1.7% per year.  Meh.

In the past month alone, the portfolio has lost 5%.  The TSX did much better this month at over 4%, so our relative performance by comparison is down 9%.

The above graph shows us how bad it is.  The portfolio lost 16% over the past year.  Compared to the TSX, the May 2014 underperformed for the first time by 8%.  So bad.

The two major contributors to the poor portfolio performance are West Fraser Timber (WFT) and Linamar (LNR).  Both stocks are down 37% since last year.  Last July, Motley Fool warned against buying WFT due to a sharp decline in U.S. lumber prices.

http://www.fool.ca/2015/07/23/should-you-buy-or-avoid-west-fraser-timber-co-ltd-today/

However, Motley Fool sees an upside to Linamar's value with their latest analysis last month.

http://www.fool.ca/2016/04/18/should-you-buy-magna-international-inc-or-linamar-corporation/

Guess we won't see any upside on WFT for awhile, so let's hope there's a rebound for LNR at least.

The remaining stocks in the portfolio haven't fared much better, sorry to say.

Our double digit returns from Great Canadian Gaming (GC) have also been hampered this year, down 23% since last May.  Motley Fool think the valuations on this company are reasonable.

http://www.fool.ca/2016/04/27/are-these-3-gaming-stocks-a-good-gamble-for-your-portfolio/

Equitable Group (EQB) continues to underperform the TSX as well, down 12% since last year.
Motley Fool doesn't think there's anything fundamentally wrong with EQB.

http://www.fool.ca/2016/05/17/3-top-financial-stocks-for-fundamental-investors/

Stantec's (STN) return is negative 9% for one year.  Pretty consistent performance since the inception I think.  Motley Fool thinks there's potential upside to STN for 2016.

http://www.fool.ca/2015/12/18/3-top-engineering-stocks-for-2016-and-beyond/

Gildan (GIL) was not spared either, despite doing well initially.  Down 4% in the past year.  Motley Fool thinks GIL is a solid long term investment.

http://www.fool.ca/2016/05/06/gildan-activewear-inc-s-adjusted-q1-eps-jumps-16-7-is-now-the-time-to-buy/

And finally a silver lining amidst all the dark clouds.  CGI Group (GIB.A) is the only stock in the portfolio that had a positive performance in the last year with almost a 10% return.  It continues to be the best performing stock overall in the May 2014 portfolio.  Motley Fool says it's a good long term investment.

http://www.fool.ca/2016/04/27/cgi-group-inc-s-q2-eps-rises-10-3-should-you-buy/

We will check the portfolio again in August 2016.