October 2015 Update

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GENERATIONS

Generations

Looking through my files of pictures I pulled out photos of my father, me, my son and my grandson all taken at about the same age. Made for interesting viewing.

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October Results

Things are looking up. In October, the US markets posted over 8% in gains and the Canadian market grew1.67% in spite of a complete nosedive in the last couple of days.  My overall portfolio grew by almost 5 1/2 % (excluding the effect of exchange rates) and 4 1/4% after accounting for the strengthening Canadian dollar.

On a year-to-date basis the US market is almost flat:  +1% or -1%, depending on the index you use.  The Canadian market is still down almost 8% for the year.  My portfolio is up over 8% for the year – again mainly due to the effect of exchange rates.

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Change of Strategy – Advisors

I have made no bones about being opposed to using financial advisors for your investments.  However I have used one for several years for my RRSP (US, think IRA) accounts.  These are accounts that accumulate tax free for the purpose of providing a pension income when you retire.

As I lived overseas for many years, it was just easier for me to continue using an advisor in Canada to manage my funds, rather than go through the hassle and inconvenience to try to open and manage self-directed accounts from afar.  The other option was to deregister and move the money overseas, which would have caused me a big tax hit.

I paid the advisor a percentage of my funds (about 1%) for them to manage my accounts on a day to day basis under the general strategy I agreed to.  For many years this worked out fine with long term annual returns averaging between 7.5% and 8%.  This was slightly below how I was performing on my overseas accounts, but I considered it acceptable and well in line compared to the Canadian market.  The advisor followed my general direction but made the day to day buy/sell decisions based on the strategy given.  Most of the security selections were in line with my thinking but there was always the occasional buy that I really questioned.  My general response was that “if you pick something I wouldn’t and it performs, then OK, however if you pick securities that I wouldn’t and they don’t perform, then I’m upset.”

Since returning to retire in Canada, there have been too many of the latter selections and my returns were beating the market on the downside – a  very unacceptable situation.  I can live with market losses, but not when the losses exceed the market.  I regularly requested a change of strategy in several heated exchanges, but the advisor didn’t want to budge.  So I finally pulled the pin. As of October I have moved all of my RRSP accounts into my self-directed portfolio (I use HSBC Investdirect).

I have a bit of clean up to do in getting rid of the undesirable securities and replace them with those more in line with my strategy.

The following securities are in the portfolio that are either currently in my other portfolio or are on my suggested list – I will keep these and monitor as I do all of my stocks:

AGRIUM

BANK OF MONTREAL

BCE INC

ENBRIDGE INC

FORTIS INC

GOLDCORP INC

MANULIFE FINANCIAL CORP

NATIONAL BANK OF CANADA

PEMBINA PIPELINE CORP

POTASH CORP OF SASKATCHEWAN

ROYAL BANK OF CANADA

SHAW COMMUNICATIONS INC

SUN LIFE FINANCIAL INC

SUNCOR ENERGY INC

TORONTO-DOMINION BANK

TRANSCANADA CORPORATION

The following securities are ones that I would never have purchased and have lost considerable principle, but due to the high current yields I will hang on to them for now:

BROOKFIELD INFRASTRUCTURE

ENBRIDGE INC CUMULATIVE preferred shares (I would never consider preferred shares)

RIOCAN REAL ESTATE INVT TR (this is a real estate trust with a high yield, not one of my preferred securities)

TECK RESOURCES LIMITED (this company has done very poorly, but keeps its dividend)

TRANSALTA CORP (has been poorly managed and lost capital, but keeps a high dividend)

CENOVUS ENERGY INC

In addition there is a bond ETF (ISHARES 1-5 YR LADDERED) which was meant to satisfy my fixed income requirement.  I will keep these for now due to high yields.

The following holdings I inherited and don’t like.  Most are in a big loss position and have poor yields.   I dumped some of them when I got control and  will have to assess the others on whether there will be a near term come back:

ENCANA CORP (this is a poorly run company that I have regularly rejected)

CANADIAN OIL SANDS LIMITED (I dumped this one after a big gain on a hostile takeover bid by Suncor)

ATCO LTD-CL I NON-VTG

BANK OF NOVA SCOTIA preferred shares (I would never buy preferred shares)

CANADIAN NATIONAL RAILWAY (good company but low yield)

ISHARES CORE S&P 500 INDEX (ETFs are good, but this is low yield and I have it covered in my other holdings with better yielding US stocks – SOLD in October)

MAGNA INTERNATIONAL INC (SOLD in October)

I will keep you posted on any further transactions and provide a complete portfolio listing by the end of the year.

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Valeant

Refer back to my earlier post on Valeant and another earlier this year.  This continues to be an example of people jumping on a bandwagon just before it breaks through the ice. This may end up being another in the long list of stocks in the graveyard – think Nortel, BreX, Enron.  40% drop in one day – go figure.  WARNING – always watch out for the latest darling in the markets.

http://www.cbc.ca/news/business/valeant-drug-citron-1.3281757

You will find many other articles exposing the practices of this company.

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McDonald’s

MCD had shown nice growth over the year, in spite of the general market decline. Then one day it jumped 8% on unexpected good news for sales and growth.  Some analysts are saying that MCD is overvalued.  You can never believe what analysts are saying, but there is an old saying “buy on fact; sell on rumour”.  So I took a tidy profit and sold my MCD.  It is still a great stock to own and may in fact grow more in the upcoming weeks. I will probably buy back in at a later date, once the dust settles – but a bird in the hand…

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Mutual Funds

Most of you know that I am not a fan of mutual funds.  They take but don’t give.  In my book “Simple and Successful Investing” (chapter 7, p 41) I discuss mutual funds and my aversion to them.  HERE is another article that re-emphasises why you don’t want mutual funds:

http://huff.to/1H0W59u

 

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Suggested stocks

US

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3M Company MMM A++ 2.75 7.5 18.53
Abbott Labs. ABT A++ 2.29 1.5 19.21
AT&T Inc. T A++ 5.7 4 12.5
Automatic Data Proc. ADP A++ 2.45 13.5 26.87
Boeing BA A++ 2.78 11.5 16.69
Bristol-Myers Squibb BMY A++ 2.33 2.5 55.81
Chevron Corp. CVX A++ 4.72 10.5 21.97
Coca-Cola KO A++ 3.34 9.5 20.25
Colgate-Palmolive CL A++ 2.37 12 23.69
Deere & Co. DE A++ 3.15 15.5 15.16
Dover Corp. DOV A++ 2.81 9.5 15.41
Du Pont DD A++ 2.75 2.5 17.13
Emerson Electric EMR A++ 4.02 7.5 14.41
Exxon Mobil Corp. XOM A++ 3.58 9.5 20.47
Grainger (W.W.) GWW A++ 2.11 17 17.73
Home Depot HD A++ 2.01 19 22.52
Honeywell Int’l HON A++ 2.1 8.5 15.79
Illinois Tool Works ITW A++ 2.57 12 16.48
Infosys Ltd. ADR INFY A++ 2.29 27.5 17.81
Int’l Business Mach. IBM A++ 3.47 19.5 10.67
Intel Corp. INTC A++ 2.93 23.5 14.56
Johnson & Johnson JNJ A++ 3.09 10.5 15.75
Kimberly-Clark KMB A++ 3.03 8.5 37.1
Lockheed Martin LMT A++ 3.16 22.5 17.79
McDonald’s Corp. MCD A++ 3.43 23 21.42
Medtronic plc MDT A++ 2.1 15 15.46
Merck & Co. MRK A++ 3.55 1.5 14.29
Microsoft Corp. MSFT A++ 3.06 19 18.15
Novartis AG ADR NVS A++ 2.83 14.5 22.3
Occidental Petroleum OXY A++ 4.1 17 41.74
PepsiCo, Inc. PEP A++ 2.94 12.5 21.32
Pfizer, Inc. PFE A++ 3.29 5 23.18
Procter & Gamble PG A++ 3.57 10 18.8
Public Serv. Enterprise PEG A++ 3.69 3 14.69
Qualcomm Inc. QCOM A++ 3.24 29.5 14.42
Raytheon Co. RTN A++ 2.39 10.5 16.66
Royal Dutch Shell ‘B’ RDSB A++ 6.62 6.5 13.14
Schlumberger Ltd. SLB A++ 2.63 13.5 22.8
Smucker (J.M.) SJM A++ 2.26 9.5 20.8
Texas Instruments TXN A++ 2.9 28 17.54
Total ADR TOT A++ 5.21 8 11.95
Travelers Cos. TRV A++ 2.33 6 11.05
Unilever PLC ADR UL A++ 2.91 8 22.48
Union Pacific UNP A++ 2.33 20.5 16.39
United Technologies UTX A++ 2.75 14 15.35
Verizon Communic. VZ A++ 5.06 3 11.2
Wal-Mart Stores WMT A++ 3.3 16.5 12.26

CANADA

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Agrium, Inc. AGU A 3.7 35 12.97
Bank of Montreal BMO.TO B++ 4.52 8 11.91
Bank of Nova Scotia BNS.TO A 4.69 10.5 10.2
BCE Inc. BCE B++ 4.49 9.5 15.49
CAE Inc. CAE.TO B+ 2.06 6.5 17.17
Cameco Corp. CCO.TO B+ 2.18 15.5 15.07
Can. Imperial Bank CM.TO A+ 4.55 7.5 10.73
Can. Natural Res. CNQ.TO A 3.07 23.5 41.99
Enbridge Inc. ENB.TO B++ 3.3 11.5 23.72
Encana Corp. ECA B+ 3.18 14
Fortis Inc. FTS.TO B+ 3.92 9 19.52
Husky Energy HSE.TO B+ 5.4 19.5 46.33
Jean Coutu Group PJC/A.TO B++ 2.2 10.5 15.97
Manitoba Telecom Svcs. MBT.TO B+ 4.45 3.5 26.82
Manulife Fin’l MFC B++ 3.17 5.5 9.07
Methanex Corp. MEOH B+ 2.61 23 11.48
Nat’l Bank of Canada NA.TO B++ 5.33 11.5 8.66
Pembina Pipeline Corp. PPL.TO B++ 5.17 4.5 38.1
Potash Corp. POT A+ 6.88 34.5 12.56
Royal Bank of Canada RY.TO A 4.43 11.5 11.12
Russel Metals RUS.TO B++ 7.47 16 15.66
Shaw Commun. ‘B’ SJRB.TO B+ 4.56 41.5 15.29
SNC-Lavalin Group SNC.TO B++ 2.44 20 22.61
Suncor Energy SU.TO A 3.16 22.5 21.12
TELUS Corporation T.TO B++ 4.25 15.5 17.09
Thomson Reuters TRI.TO B++ 2.5 6 25.38
Toronto-Dominion TD.TO B++ 4.08 10.5 11.42
TransCanada Corp. TRP A 5.95 8 16.27

EUROPE

Company Ticker Domicile Code Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Novartis AG ADR NVS CH A++ 2.83 14.5 22.3
Daimler AG DDAIF DE B++ 3.18 6 9
Siemens AG (ADS) SIEGY DE A 4.1 13.5 10.42
Total ADR TOT FR A++ 5.21 8 11.95
AstraZeneca PLC (ADS) AZN GB B++ 4.34 13.5 27.32
BP PLC ADR BP GB B+ 6.73 3
Brit. Amer Tobac. ADR BTI GB B++ 3.85 14.5 17.89
BT Group ADR BT GB B++ 2.98 2.5 13.58
GlaxoSmithKline ADR GSK GB A+ 5.68 7 27.15
Rio Tinto plc RIO GB A 5.74 10.5 12.25
Vodafone Group ADR VOD GB B++ 5.5 14 33.72
Willis Group Hldgs. PLC WSH GB B++ 2.95 10 15.41
WPP PLC ADR WPPGY GB A 2.91 17.5 21.99
Tenaris S.A. ADS TS LU B+ 3.14 16.5 32.93
Philips Electronics NV PHG NL B+ 3.72 10 25.26
Unilever PLC ADR UL NL A++ 2.91 8 22.48

 

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Happy Investing!!!

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About borgford

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