Mid-Month Pep Talk

Winter Escape

Intercon

Panama City – Intercontinental Hotel

 

Our holiday destination in February

***

Mid-Month Pep Talk

With January providing negative returns so far, it is easy to get down about market activity.  The poor state of the market is driven partly by the dropping oil prices.  The Canadian market is very susceptible to commodity prices.

At times like this I find it useful to look back and see what has happened in the past.  First I looked at 2014 which was a good year and then I looked at the past ten years to see how this long-term strategy fares over time.  Pretty good as it turns out.

 

Current Holdings:  Here is a list of my current holdings and my 2014 returns on each

Name Symbol 2014 return
Russel Metals Inc RUS -20.05
Total SA (ADR) TOT -14.90
Philip Morris International Inc. PM -6.71
Verizon Communications Inc. VZ -5.29
Royal Dutch Shell plc (ADR) RDS.A -5.19
AT&T Inc. T -4.47
McDonald’s Corporation MCD -3.43
ConocoPhillips COP -2.25
Bank of Nova Scotia BNS -2.05
Husky Energy Inc. HSE -1.77
Unilever plc (ADR) UL -0.81
Power Financial Corp PWF 0.50
The Coca-Cola Co KO 2.20
Great-West Lifeco Inc. GWO 2.56
Pfizer Inc. PFE 3.96
Public Service Enterprise Group Inc. PEG 4.91
Kimberly Clark Corp KMB 7.47
Canadian Imperial Bank of Commerce CM 10.05
Toronto-Dominion Bank TD 11.02
National Bank of Canada NA 11.86
Procter & Gamble Co PG 11.89
Merck & Co., Inc. MRK 13.47
Cisco Systems, Inc. CSCO 13.47
E I Du Pont De Nemours And Co DD 13.81
Royal Bank of Canada RY 13.96
PepsiCo, Inc. PEP 14.01
Johnson & Johnson JNJ 14.17
TELUS Corporation T 14.58
Novartis AG (ADR) NVS 15.28
BCE Inc. BCE 15.83
Bank of Montreal BMO 16.06
Thomson Reuters Corporation TRI 16.68
TransCanada Corporation TRP 18.59
Fortis Inc FTS 27.95
Altria Group Inc MO 28.34
Enbridge Inc ENB 28.72
Lockheed Martin Corporation LMT 29.54
Intel Corporation INTC 39.79
 Weighted average 9.29

 

My average return on all stocks was 9.29% without consideration of currency exchange.  This is before any dividends which averaged over 3%.  In addition I got almost a 10% advantage on my US stocks due to the strength of the U.S. Dollar.  Therefore, my overall return expressed in Canadian dollars was over 19%.  This compares to the TSX at 7.42% and the S&P at 11.39%.

As you can see, I had some losers during the year.  My analysis of RUS and associated timing proved to be poor.  It still has a good dividend, and hopefully some big upside potential.  Fortunately I only bought a small position therefore it had little effect on my overall returns.  I was in a similar position with FTS at this time last year, sitting in a loss position.  I have been more than rewarded for my patience with that stock.

TOT continues to disappoint, in spite of all the indicators being positive.  Of course, oil prices were a big factor, as was the strong U.S. dollar which both had a negative impact on this French company.  It has a big dividend, so I still get my income.

Any other losers were within the range of the dividend yield, therefore making them breakeven at worst.

At the other end, there were some huge gainers which more than offset the few losers.  INTC was one I was worried about last year, as it hadn’t seen much gain and they hadn’t raised there dividend in a long time.  Then the stock took off and the dividend increased.

The portfolio again shows the value of diversification.  Low oil prices hurt the whole market, but devastated oil stocks. Still my portfolio grows.

 

Long Term Analysis

I now have ten years of solid measurable results.  How long is long term?  I think ten years is a pretty representative period, especially given that this period saw the biggest market crash in modern history.

Here are my results mapped against Canadian and US benchmarks.  Return calculations can vary depending on how you treat new money entering the pot.  I have provided two separate calculations – one assuming that all new money comes in at the end of the year (return 1), while the other one shows new money coming in at the beginning of the year (return 2).  Neither one gives an absolutely true measure, but does provide the upper and lower limits of the results.  The real number would be closer to the mid-point.  Again exchange rates become a factor, but over this period of time, the average exchange rate change was near zero.  I have received advantageous return calculations in recent years, while getting the opposite effect in previous years due to exchange rate changes (see 2007).  Remember when the Canadian dollar was worth $1.10 US.  I was also fortunate to accidentally have a considerable amount of uninvested cash during part of the crash which mitigated my losses during that time.

You will note the column “registered”.  This is my Canadian retirement account that is managed by an investment advisor with whom I have been quite happy.  He is restricted by the conservative strategy I provide him and by Canadian RRSP laws, but he is still meeting the market.

 

  Return 1 Return 2 TSX S&P Registered
2014 19.23% 19.23% 7.42% 11.39% 7.46%
2013 29.03% 26.45% 9.56% 29.60% 10.86%
2012 13.60% 13.00% 4.00% 13.41% 6.67%
2011 8.06% 6.13% -11.07% 0.00% -1.33%
2010 6.63% 6.18% 14.45% 12.78% 8.69%
2009 -2.07% -2.07% 30.69% 23.45% 22.49%
2008 2.16% 1.98% -35.03% -38.49% -17.08%
2007 -9.26% -8.72% 7.16% 3.53% 4.57%
2006 19.88% 15.26% 14.51% 13.62% 12.41%
2005 16.98% 14.31% 21.91% 3.00% 13.15%
Average 10.42% 9.18% 6.36% 7.23% 6.89%

 

***

Here’s to an improved market for the remainder of 2015.  But regardless we know that the strategy works in the long run.  Happy investing.

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About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
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One Response to Mid-Month Pep Talk

  1. Pingback: March 2017 Update | Brian Borgford – Investing

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