May 2017 - New Portfolio

Hey all,  welcome back to the blog!  It's the month of May and you know what that means, it's time to create another stock portfolio.   But wait, you say, didn't you just create a stock portfolio back in February 2017?   Yeah I did, but like I said back then, it's not a portfolio that I would actually want to hold because it was solely focused on one segment of the stock market, namely food and grocery related stocks, so it doesn't fit into my criteria of having a diversified portfolio.  I'll still continue to track it, just for fun, but again I want to stress don't ever hold a portfolio where the holdings are specific to a single or limited market sector (not even an all bank stock portfolio, for some of my friends, ahem, you know who you are).

I can't believe that this will be my fourth year doing this, and I'm even more surprised at how well the model portfolios have been doing.   This year, I thought about what portfolio theme I would bring to the table.  The portfolio I wanted to do this year was a high flyer one, like holding WCN, CSU, FSV, CIGI, CCL.B, QSR and PBH.  These guys have done extremely well and I have or had some of them in my own portfolio, but they are a bit more volatile and it wouldn't be in everybody's best interest to recommend them.   If you want to set up your own model portfolio with the stocks I just listed, go for it.  If your interest is piqued though and you want to see it tracked on this blog, I can be easily persuaded, just let me know.

So with that being said,  here are the stocks that will comprise the May 2017 portfolio (data gathered from Google Finance):

AYA - Amaya Gaming

Amaya Inc is a gambling company operating online, mobile, and land-based casinos. The company offers real and simulated gambling along with games such as poker through its online platform at its desktop and mobile outlets.

CAS - Cascades

Cascades Inc produces, converts and markets packaging and tissue products composed mainly of recycled fibres. The Company has operating units in North America and Europe.

MAL - Magellan Aerospace

Magellan Aerospace Corp through its subsidiaries engineers and manufactures aeroengine and aerostructure components for aerospace markets, including products for defence and space markets, and complementary specialty products.

MFI - Maple Leaf Foods

Maple Leaf Foods Inc is a producer of food products. Its portfolio includes prepared meats, ready-to-cook and read to serve meals and value-added fresh pork and poultry.

RCH - Richelieu Hardware

Richelieu Hardware Ltd distributes, imports & manufactures specialty hardware & complementary products. Its products include kitchen cabinet, glass hardware, decorative and functional panels, door & window components, and veneer sheets & edge banding.

TCN - Tricon Capital

Tricon Capital Group Inc is an investor and asset manager engaged in the residential real estate industry in North America. It invests through Tricon Housing Partners, Tricon American Homes, Tricon Lifestyle Communities and Tricon Luxury Residences.

UNS - Uni Select

Uni-Select Inc along with its subsidiaries is engaged in the distribution of automotive products including auto parts, tools and equipment; and paint and related products for motor vehicles.

The May 2017 (M2017) portfolio will hold 100 shares of each stock.  Each stock was considered to have been purchased on April 28th, 2017 using it's last closing price.  Commissions of $10 per stock have been factored into the initial portfolio cost.

Here's how the portfolio looks on May 1st, 2017.   The starting (book) value of this portfolio will be $17,327.

My criteria for picking these stocks:

Stock price: more than $10
Market Capitalization:  between 1 Billion and 5 Billion
P/E Ratio:   under 30
Average Volume: over 10,000
Beta: under 1.0 (AYA is the exception)

Diversify across different market sectors.
Avoid the following market sectors: Mining, Resources, Energy due to their volatility.
Other sectors excluded from selection:  Banks and Telecom, because probably everybody already have them in their portfolios (well you should have some exposure to them).

If we had created this portfolio last year, the one year return would have been 35%.  Let's see how this portfolio fares over the coming year.

Oh, before I go, I want to let you know that this will be the final model portfolio to feature Canadian stocks.  In 2018, I will give myself a bigger challenge, because there are no more stocks on the Toronto Stock Exchange that meet my portfolio requirements.  I will still maintain the criteria I have used thus far in stock selection but my focus will be on US stocks.  With the variety of stocks on the US markets, I will probably have to start doing research in the fall of 2017 to have my data ready for 2018.

With so much information in this blog post, I'll document the results of the prior year portfolios towards the end of May.  See you in a few weeks!

News: Uncertainty at Home Capital Group Affects Equitable Bank

Alternative mortgage lending is a risky but profitable business.   Fraud that first occurred at Home Capital Group (HCG) back in June 2015 is now pummelling shares of this alternative mortgage lender.   Other alternativve residential mortgage lenders such as Equitable Bank (EQB) and Genworth Financial also saw their share values free fall, even though there hasn't been any negative news about these other companies.

Read all about it here:
http://business.financialpost.com/news/fp-street/what-exactly-is-home-capital-and-why-is-it-so-important-to-the-mortgage-industry

HCG share price as of April 27, 2017

HCG share price is down 60% since April 25th, 2017.

EQB Share price as of April 27, 2017

EQB share price is down over 23% since April 25th, 2017.

Since our May 2015 (M2014) portfolio is holding EQB, I'll revisit it's share price in May 2017 when I do my next portfolio status check.  It's share price was approx $70 back in February 2017 and hit an all-time low of $36.54 yesterday.  It will be interesting to see whether the share price rebounds or not.

Update as of May 1:

http://business.financialpost.com/news/fp-street/equitable-group-rushes-to-contain-contagion-risk-from-home-capital-maelstrom

New 2017 Portfolio - March 1

As promised in my previous post, today I will give you the details about this new model portfolio I have setup for 2017.  Normally I create my portfolios around the May timeframe but with all the uncertainty around Donald Trump's presidency, I decided to create this new one around the time of his inauguration. So I created this portfolio during the first days of February 2017.

I have also strayed from my approach of portfolio sector diversification in this portfolio, so I would not recommend that you seriously consider using this Food and Grocery centric portfolio as something to invest in.  We are purely looking at this from an academic standpoint.

Ok so here is the Feb 2017 portfolio, F2017 for future reference.  It consists of seven stocks as always, because I think seven is a nice manageable number of stocks in a portfolio. The stocks in this portfolio are all grocery or food companies.

It has been a month since I created this portfolio and is now returning about 2.5%.


The stocks in this portfolio are:  AW.UN (A&W Revenue), MRU (Metro), PZA (Pizza Pizza Royalty), SAP (Saputo), BPF.UN (Boston Pizza Royalties), MTY (MTY Food Group) and L (Loblaws).

The above Google Finance chart shows the stocks data such as Market Cap, EPS, P/E ratio and Beta.  We have a mix of smaller companies and larger ones in this portfolio.  The smaller ones are income trusts, much like mutual funds, but can be bought and sold on the TSX.

For our model portfolio, I bought 100 shares of each company.   Below is more data about each stock with a corresponding 1 year return graph.  Again, you can find all of this information on Google Finance by searching for the stock name.

AW.UN has had an excellent year to date and a 42% return. It has a dividend yield of 4%.

MRU is down 10% over 1 year and a dividend yield of 1.67%.  

PZA is up 39% in the past year and has a dividend yield of 4.83%.

SAP one year return is 16% with a dividend yield of 1.31%.

BPF.UN had a return of over 23% in the past year and it's dividend yield is a whopping 6%.

MTY had an amazing one year return of 70% with a small dividend yield of .87%.

L is at about the same price as it was last year, so no gains and the dividend yield is 1.5%.

Clearly, we have a mix of winners and losers in this group of stocks.

If we examine the first chart again, we see that MTY is stand out stock of the portfolio after one month.  L and AW.UN are tracking at the portfolio average and the remainder of the stocks are just average.

The F2017 model portfolio has already given some dividends and that is reflected in the graph above. The blue line is the performance of this portfolio and the red line is the performance of the TSX during the same one month.   It says our return is 3.22% so we have a 0.7% dividend yield at this point in time.  I always like to see that the portfolios I create outperform the TSX, so we are off to a good start.

Full disclosure: I don't have any of these stocks in my own portfolio right now.

We will revisit this and all the other portfolios performance in May 2017.   See you then.