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!