January 2016 update

 

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For History Buffs

BookCoverPreview

A new look at an old Prime Minister. The only personal viewpoint available in understanding William Lyon Mackenzie King.

I found an old unpublished manuscript written by my uncle about his seven years as principle secretary to Canadian Prime Minister, Mackenzie King during WWII.  I published a “family version” of the book, but I also got the Historical Society of Alberta  to publish a fully annotated version, researched by several excited historians.  The annotated version will be available later this year, in time for Canada’s 150th birthday celebrations in 2017.  The family version is available here:

https://www.createspace.com/5928887

 

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January Results

What a ride!!

The Canadian market finished the month down just under 1.5% – not a good start to the year.  However at one point it was down almost 9% and was saved by a strong recovery in the last week of the month.  The TSX is now down almost 18% from its peak in August 2014 and at one point in January was down almost 25% from its peak.  That not only qualifies as a correction, but also can be considered a bear market (meaning down 20%)

The US market (S&P 500) is down almost 7% for January but was down over 9% at one point, again saved by a late rally.  It is down almost 11% from its peak in July 2015, making it a full correction.  At its low, the S&P was down almost 13% from its peak in 2015.

The collapsing oil prices due to continued oversupply is the main culprit, but the slowing Chinese economy and the crashing Chinese markets also were major contributors.  Having lived in China for a year (see my book “Living in China“), I can attest to the fact that systemic corruption at all levels make for an uncertain financial situation in that country.

My results:

I was not immune from the market downturn, but my conservative strategy continues to protect my portfolio.  My portfolio dropped by 0.46%, much less than either the US or Canadian markets.  Given that my portfolio has a 31% weighting in US stocks, I benefited again from the small drop in the Canadian dollar relative to the US dollar.  My US portfolio was only down by less than one percent.

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My plan in bad times

My stomach churns, just like yours, when the markets experience turmoil as has happened in the last few months.   I always remain confident that the long term markets are always positive, so I just suppress my negative thoughts during hard times.  During the financial crisis of 2007-2009 I just chose to close my eyes and hope for the best and it worked out.  Some financial pundits during that time advocated selling all of your holdings and hide your money.  Jim Cramer was one of those pundits.  Financial pundits, just like political pundits, are usually completely wrong.  Anyone who followed Jim Cramer’s advice missed out on one of the biggest recoveries in history.  I was fully recovered within two years of the bottom.

During the recent turmoil, I just made sure I had enough cash on hand to last me one to two years, in the unlikely event that the market downturn lasted a long time.  With my dividend growth strategy,  I am always spinning off extra cash that I can chose to reinvest or keep as cash.

My thoughts are that this year will still turn positive (I have no hard evidence to back that up), but if not, I’m sure next year will be better.  History tells us.  I have enough cash on hand and coming in to make sure that I don’t’ have to dip into my holdings to live.

So my plan is to just ride out any downturn.  As you can see, my portfolio keeps me shielded from the worst.

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Investing in Bad Markets

The following article gives a good assessment on what to do in the time of market volatility or downturns.

Click HERE to view the article.

The message is that regardless of up or down markets you need to be in the market to get any returns.

 

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Portfolio Weightings

 

Greg (formerly of Doha) asked me if I could provide him with my portfolio weightings.  Here is my response.

 

Below are the details of my portfolio weightings.  I don’t spend a lot of time on asset allocation or weightings, but I do watch to make sure I don’t get too heavy in any one stock or sector.
 
I have 69% of my portfolio in Canadian and 31% in US.  That is more of a function of where I earned my money than moving money between currencies.  I don’t advocate changing currencies unless there is some compelling personal reason.
 
Within my Canadian portfolio, I have 20% in fixed instruments.  That is due to the remnants of a financial advisor that I just dumped due to a series of poor choices.  Other than the bond ETF, I wouldn’t recommend any of those fixed instruments – they are dogs and I had some heated words when my advisor picked them.
 
I have 25% of my Canadian portfolio in Canadian banks but would have no problem moving that to 30%.  Don’t touch any foreign banks, Canadian banks are the strongest in the world.

Canadian portfolio 69% of portfolio US portfolio 31 % of portfolio
Banks Technology
CA;BMO BANK OF MONTREAL 5.47% US;CSCO CISCO SYSTEMS INC 2.46%
CA;BNS BANK OF NOVA SCOTIA 1.10% US;IBM INTL BUSINESS MACHINES 6.19%
CA;CM CDN IMPERIAL BK COMMERCE 2.26% US;INTC INTEL CORPORATION 6.29%
CA;NA NATIONAL BANK OF CDA 3.53% Total    14.94%
CA;TD TORONTO DOMINION BANK 6.22%
CA;RY ROYAL BANK OF CANADA 6.60% Energy
Total 25.18% US;CVX CHEVRON CORP 4.39%
US;RDS.A ROYAL DUTCH SHELL ADR-A 1.24%
Energy US;TOT TOTAL S.A.SP ADR 1.23%
CA;CVE CENOVUS ENERGY INC 1.47% Total    6.86%
CA;ECA ENCANA CORP 0.89%
CA;ENB ENBRIDGE INC 3.90% Industrial
CA;HSE HUSKY ENERGY INC 0.48% US;EMR EMERSON ELECTRIC CO 4.34%
CA;PPL PEMBINA PIPELINE CORP 2.22% US;LMT LOCKHEED MARTIN CORP 9.83%
CA;TRP TRANSCANADA CORP 4.42% Total    14.18%
CA;TA TRANSALTA CORP 1.06%
CA;SU SUNCOR ENERGY INC NEW 2.83% Consumer
Total 17.28% US;KMB KIMBERLY CLARK CORP 6.93%
US;KO COCA COLA CO 6.26%
resources US;PEP PEPSICO INC 5.44%
CA;AGU AGRIUM INC 4.15% US;PG PROCTER & GAMBLE CO. 5.76%
CA;G GOLDCORP INC 0.57% US;UL UNILEVER PLC ADR 5.08%
CA;POT POTASH CORP OF SASK INC 4.27% Total    29.47%
CA;TCK.B TECK RESOURCES LTD -B- SV 0.57%
CA;RUS RUSSEL METALS INC 0.79% Drug
Total 10.35% US;JNJ JOHNSON & JOHNSON 5.95%
US;MRK MERCK & CO INC-NEW 4.76%
Industrials US;PFE PFIZER INC 5.25%
CA;ACO.X ATCO LTD CL-I NV 1.26% Total    15.96%
teleco Utiltiy
CA;BCE BCE INC 2.18% US;PEG PUBLIC SERV ENTERPR GROUP 4.88%
CA;T TELUS CORP 3.79%
CA;SJR.B SHAW COMMUNICATION-B NV 2.89%
Total 8.87% Teleco
US;T AT & T INC 6.57%
Utility US;VZ VERIZON COMMUNICATIONS 7.15%
CA;FTS FORTIS INC 4.45% Total    13.73%
Insurance/financial
CA;GWO GREAT WEST LIFECO INC 1.97%
CA;MFC MANULIFE FINANCIAL CORP 3.67%
CA;PWF POWER FINANCIAL CORP 2.66%
CA;SLF SUN LIFE FINANCIAL INC 3.74%
Total 12.04%
Fixed instruments
CA;BCE.PR.D BCE INC-CUM RED 1ST PF-AD 2.19%
CA;BIP.UN BROOKFIELD INFRA PTNR LPU 3.01%
CA;BNS.PR.A BK NOVA SCOTIA F/RT PF-19 3.35%
CA;CBO ISHRS 1-5Y LADD CP BD ETF 6.94%
CA;ENB.PR.B ENBRIDGE INC 4%-B PFD 2.22%
CA;REI.PR.A RIOCAN REIT T/U SER-A PFD 2.86%
Total 20.57%

 

 

***

Reader Question

Irfan in Saudi Arabia asked the following questions  – my answers are in red.

Question: I currently have a non-resident USD bank account with BMO – is this sufficient as a “recognized international bank”?

BMO is a recognized international bank and you should have no problems transferring from there to whatever brokerage account you select.  You might ask them if they will let you set up a brokerage account with their discount brokerage, but being a non-resident they may say no. In which case, just use TD in Luxembourg
Question: Should I keep my funds in USD or some other currency? (yen?)
Keep your money in USD.  I do not advocate speculating with exchange rates – you always lose.  When you return to Canada you might consider converting to CDN if you need the cash but we can look at that at the right time.
Question: What strategy do you use when determining how many shares to purchase? (e.g. do you buy 1000 shares of each of the company in your list, or do you spend 10K on each company or some other hybrid way?
I try to keep my trading fees as low as possible as a percent of principal.  I usually advocate minimum $10,000 per trade to keep the fees low.  With TD in Luxembourg you are paying up to $50 per trade and that can get expensive at low volumes.  If you have a discount brokerage in Canada or the US you can lower it a bit as fees are lower, but I still would prefer trades of 10 – 15,000.

 

***

Suggested stocks

 

US

Note: RDS.A and RDS.B have been lowered to A+ and are now not on the list

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3M Company MMM A++ 2.98 7.5 17.71
Abbott Labs. ABT A++ 2.63 1.5 17.47
AT&T Inc. T A++ 5.56 4 12.56
Automatic Data Proc. ADP A++ 2.73 13 24.16
Boeing BA A++ 3.53 11.5 13.36
Bristol-Myers Squibb BMY A++ 2.41 2.5 35.67
Cardinal Health CAH A++ 2.06 26 18.2
Chevron Corp. CVX A++ 5.28 10.5 14.4
Coca-Cola KO A++ 3.38 9.5 20.49
Colgate-Palmolive CL A++ 2.53 12 22.02
Deere & Co. DE A++ 3.29 15.5 16.71
Dover Corp. DOV A++ 3.18 9.5 14.25
Du Pont DD A++ 2.95 2.5 19.62
Emerson Electric EMR A++ 4.43 8 14.41
Exxon Mobil Corp. XOM A++ 3.94 9.5 19.35
Franklin Resources BEN A++ 2.17 15 10.41
Gen’l Dynamics GD A++ 2.22 13 13.46
Grainger (W.W.) GWW A++ 2.52 17 16.38
Home Depot HD A++ 2.1 19 20.69
Honeywell Int’l HON A++ 2.46 8.5 15.38
Illinois Tool Works ITW A++ 2.69 12 15.44
Infosys Ltd. ADR INFY A++ 2.02 27.5 19.42
Int’l Business Mach. IBM A++ 4.23 19.5 9.63
Intel Corp. INTC A++ 3.24 23.5 12.11
Johnson & Johnson JNJ A++ 3.28 10.5 15.09
Kimberly-Clark KMB A++ 2.82 8.5 25.19
Lilly (Eli) LLY A++ 2.51 4 24.08
Lockheed Martin LMT A++ 3.2 22.5 17.76
McDonald’s Corp. MCD A++ 3.02 23 23.11
Medtronic plc MDT A++ 2.15 15 14.8
Merck & Co. MRK A++ 3.61 1.5 14.11
Microsoft Corp. MSFT A++ 2.85 19 18.16
Novartis AG ADR NVS A++ 3.33 14.5 20.02
PepsiCo, Inc. PEP A++ 3.04 12.5 20.27
Pfizer, Inc. PFE A++ 3.92 5 21.84
Procter & Gamble PG A++ 3.45 10 20.19
Public Serv. Enterprise PEG A++ 4.14 3 13.07
Qualcomm Inc. QCOM A++ 4.46 22.5 12.19
Raytheon Co. RTN A++ 2.28 10.5 17.5
Schlumberger Ltd. SLB A++ 3.26 13.5 20.42
Smucker (J.M.) SJM A++ 2.3 9.5 20.46
Texas Instruments TXN A++ 3.05 28 17.36
Total ADR TOT A++ 6.58 8 14.14
Travelers Cos. TRV A++ 2.38 6 9.51
Unilever PLC ADR UL A++ 3.35 8 20.81
Union Pacific UNP A++ 3.1 20.5 12.89
United Technologies UTX A++ 2.99 14 13.82
Verizon Communic. VZ A++ 4.93 3 11.47
Wal-Mart Stores WMT A++ 3.23 16.5 14.56

Canada

Note that POT has just announced a dividend reduction which then does not fit the criteria

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Agrium, Inc. AGU A 4.16 35 11.22
Bank of Montreal BMO.TO B++ 4.79 7 10.66
Bank of Nova Scotia BNS.TO A 5.39 9 8.89
BCE Inc. BCE B++ 5.29 9.5 14.37
Can. Imperial Bank CM.TO A+ 5.44 6.5 9.4
Can. Natural Res. CNQ.TO B++ 3.83 23.5 77.56
Canadian Tire Corp. ‘A’ CTCA.TO A 2.16 13.5 13.45
Enbridge Inc. ENB.TO B++ 4.75 11.5 18.77
Goldcorp Inc. GG B++ 2.44 14.5 81.83
Jean Coutu Group PJC/A.TO B++ 2.41 10.5 14.97
Magna Int’l ‘A’ MGA A 2.55 6.5 7.32
Manulife Fin’l MFC B++ 3.99 5.5 9.92
Nat’l Bank of Canada NA.TO B++ 6.12 10.5 7.74
Pembina Pipeline Corp. PPL.TO B++ 6.38 4.5 24.72
Potash Corp. POT B++ 9.51 34.5 10.95
Royal Bank of Canada RY.TO A 4.91 10.5 9.89
Russel Metals RUS.TO B++ 9.94 16 15.61
SNC-Lavalin Group SNC.TO B++ 2.76 20 12.17
Suncor Energy SU.TO A 3.9 22.5 35.43
TELUS Corporation T.TO B++ 5 15.5 14.6
Thomson Reuters TRI.TO B++ 2.63 6 23.3
Toronto-Dominion TD.TO B++ 4.31 10.5 10.79
TransCanada Corp. TRP A 6.63 8 15.69

 

Europe

Company Ticker Domicile Code Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
Novartis AG ADR NVS CH A++ 3.33 14.5 20.02
Daimler AG DDAIF DE B++ 3.74 6 7.35
Siemens AG (ADS) SIEGY DE A 4.37 13.5 12.7
Total ADR TOT FR A++ 6.58 8 14.14
AstraZeneca PLC (ADS) AZN GB B++ 4.56 13.5 23.61
Brit. Amer Tobac. ADR BTI GB B++ 4.46 14.5 14.9
BT Group ADR BT GB B++ 3.14 2.5 13.71
GlaxoSmithKline ADR GSK GB A+ 5.94 7 21.33
Rio Tinto plc RIO GB A 9.3 10.5 7.8
Vodafone Group ADR VOD GB B++ 4.8 14 38.03
WPP PLC ADR WPPGY GB A 3.52 17.5 13.8
Unilever PLC ADR UL NL A++ 3.35 8 20.81

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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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One Response to January 2016 update

  1. Pingback: December 2016 Investing Update | Brian Borgford – Investing

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