May 2014 Investment Update

May 2014

china cover

Twelve years ago we began our international journey with a move to China. Read about how we edged into this lifestyle that is now coming to a close.

 

May Performance

The Canadian market showed a small loss for the month, while the Dow Jones rose almost 1% and the S&P rose a remarkable 2% setting new records.  My overall portfolio, which is heavily weighted with Canadian securities due to my RRSP component, barely broke above zero, mainly due to a stronger Canadian dollar.  However my off-shore portfolio split the difference between the DJIA and S&P with a 1.25% gain, excluding any exchange rate considerations.  Expressed in US dollars, I had a good gain.

On a YTD basis I am up almost 7%.

Here is a detailed schedule of my portfolio compared to the three indexes:

 

May, 2014 2014 YTD
My Portfolio
RRSP – Canadian -0.31% 6.05%
Off shore – no FX 1.25% 6.13%
Off shore in CDN$ 0.48% 7.60%
Total portfolio in CDN$ 0.04% 6.74%
TSX -0.33% 7.21%
DJIA 0.82% 0.85%
S&P 2.10% 4.07%

***

Sold in May

MMM – purchased June 20, 2005 for $77.50.  Sold May 15, 2014 for 142.35.  Total gain = 82.47% or 9.26% per year plus dividends of about 2.4% per year.  Note this was purchased well before the 2008/09 crash and still generated over 11% per year in returns.

ITW – purchased November 8, 2010 for $48.08.  Sold May 15, 2014 for 77.10%.  Total gain = 77.10% or 21.92% per year plus dividends of 1.9% per year or almost 24% per year.

 

Reasons:

I feel the market is at a high and it is not a good time to buy.  I like to do my buying in the fall when the markets are typically lower, so I wanted to generate some cash to sit on until my fall buying cycle.

From the model I recently sent out, MMM and ITY, although both good stocks to own, were at the bottom of my list for purchase timing, which made me feel that they were the best ones to cull off my list.  Also I am looking to buy higher dividend yields for my retirement income.

I was able to sell both almost at the peak of their 52 week highs.

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 Long Term Returns

In a previous post I detailed the long term returns on my “managed” portfolio which fared quite favourably compared to market.  I have now completed a thorough long term analysis of my off shore funds in which I apply my current (as evolved) strategy with rigor.  The table below shows my returns compared to the TSX (Toronto Stock Exchange), and XIU which is an ETF supposed to mirror the TSX, Dow Jones average and DIA (a Dow Jones ETF), S&P 500 and its corresponding ETF, SPY, and DVY a dividend ETF.  As you see, they all track fairly closely with the 8 year average returns being almost identical.  This leans in favour of Warren’ Buffet’s comments about just buying an ETF and forgetting it.  The differences are minor and need to be evaluated against your needs.  My strategy shows far less volatility and is better protected on the downside.   The mix of returns between capital gains and dividends is the other major difference.  More of my returns come in the form of dividends.  These two points satisfy my objectives of capital preservation and dividend income.  You will notice that my strategy outperforms DVY both on capital gains and on dividends.

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ETF

 

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An Article on Dividend Stocks

http://www.theglobeandmail.com/globe-investor/investment-ideas/dividend-stocks-help-seniors-beat-inflation/article18593525/?utm_medium=Newsletter&utm_source=Personal%20Finance%20Reader&utm_type=text&utm_content=PersonalFinanceReader&utm_campaign=116531235

 

***

Suggested Stocks

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3M Company MMM A++ 2.44 6.5 18.83
Abbott Labs. ABT A++ 2.22 8.5 18.02
AT&T Inc. T A++ 5.23 4.5 13.1
Automatic Data Proc. ADP A++ 2.61 13.5 23.66
Baxter Int’l Inc. BAX A++ 2.79 10 14.62
Boeing BA A++ 2.27 10 20.13
Bristol-Myers Squibb BMY A++ 2.95 2 23.81
Cardinal Health CAH A++ 2.07 25 18.22
Chevron Corp. CVX A++ 3.46 9.5 10.57
Coca-Cola KO A++ 3.08 10 19.32
Colgate-Palmolive CL A++ 2.22 12.5 18.25
ConocoPhillips COP A++ 3.52 13.5 12
Deere & Co. DE A++ 2.27 15 10.71
Du Pont DD A++ 2.79 2 15.77
Emerson Electric EMR A++ 2.6 7 17.45
Exxon Mobil Corp. XOM A++ 2.72 8.5 12.69
Gen’l Dynamics GD A++ 2.16 13 16.5
Home Depot HD A++ 2.39 19.5 17.7
Int’l Business Mach. IBM A++ 2.37 19 11.05
Intel Corp. INTC A++ 3.44 26.5 14.06
Johnson & Johnson JNJ A++ 2.77 11.5 17.11
Kimberly-Clark KMB A++ 3.05 9.5 18.99
Lockheed Martin LMT A++ 3.44 23.5 15.56
McDonald’s Corp. MCD A++ 3.16 25.5 17.82
Medtronic, Inc. MDT A++ 2.01 16 14.76
Merck & Co. MRK A++ 3.12 1.5 16.23
Northrop Grumman NOC A++ 2.36 10.5 12.57
Novartis AG ADR NVS A++ 3.07 16 21.37
Occidental Petroleum OXY A++ 2.99 15.5 13.52
PepsiCo, Inc. PEP A++ 3.06 13.5 18.6
Pfizer, Inc. PFE A++ 3.51 6 17.45
Procter & Gamble PG A++ 3.19 11 18.54
Public Serv. Enterprise PEG A++ 3.96 2.5 15.68
Raytheon Co. RTN A++ 2.52 9.5 14.33
Royal Dutch Shell ‘A’ RDS/A A++ 4.73 7.5 10.97
Smucker (J.M.) SJM A++ 2.41 10.5 17.39
Texas Instruments TXN A++ 2.6 25 22.62
Total ADR TOT A++ 4.65 15.5 10.93
Travelers Cos. TRV A++ 2.37 4.5 10.22
Unilever PLC ADR UL A++ 3.52 9 19.12
United Technologies UTX A++ 2.05 15 16.79
Verizon Communic. VZ A++ 4.29 2.5 14.17
Wal-Mart Stores WMT A++ 2.55 18 14.23
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About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
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