November 2016 Investing Update

One Month To Go

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Finally – some time at home

20161030_101146

With Grandson at Hockey

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November Results

What a ride November was.  The ending was good, but there were some tense moments.  The Dow gained over 5% for November, bringing it to 9.75% for the year.  Good showing after three consecutive losing months.  The S&P gained 3.42% for a YTD gain of 7.58%, putting it slightly above its previous high of 6.34% in July – again following three consecutive losing months.

The TSX rose as well, by a very respectable 2% for the month bringing its YTD gain to almost 16%.  This is turning into the best year in a long time for the Canadian market.

My Canadian portfolio almost kept pace with the TSX for the month but is well ahead on the year with almost 18.5% YTD.  My US stocks grew by under 2% for the month.  I’m not invested in many of the “Trump” stocks that saw gigantic gains since the US election (eg, Goldman Sachs), but my YTD US portfolio is still well above the market with 12 1/2% gain on the year.

November YTD
TSX 2.00% 15.93%
DJIA 5.41% 9.75%
S&P 3.42% 7.58%
BB CDN 1.68% 18.42%
BB US 1.64% 12.45%
BB Total (no FX) 1.67% 16.56%
BB Total (incl FX) 1.72% 14.01%

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US Election Results – Impact on Markets:

The initial reaction of the markets to Trump’s election was very negative – the after hours markets tanked by 5% as the news unfolded.  However, the morning after showed a bit more calm with an actual increase in the markets, which persisted for the rest of election week and beyond.  Goldman Sachs has risen almost 25% since election day.  Many economists and financial experts are predicting turbulent times ahead.  Health care companies, defense contractors and some big banks, have seen a spike in share prices, while renewable energy is seeing a steep decline.  Short term (6 month) impact will likely be negligible with frequent ups and downs.    Markets like stability and predictability – two traits President Elect Trump dislikes, according to his public statements. We will have to see what the longer term brings.

HERE is an article on how the election of President Trump might affect Canadian investors.

One financial expert predicts the market will tank – click HERE for that view.

Warren Buffet, no fan of Trump, claims the market will rise – click HERE to get his take.

One thing that’s true about market predictions – they are almost always WRONG.   So don’t bother listening to anyone, just follow your strategy.

The MarketWatch Newsletter had a few interesting articles about investing in the era of President Trump.  Rather than  cherry pick some articles, I have copied the entire newsletter below, complete with links.

1. Trump’s win and your money

By now you may have gotten over the big surprise and possible loss of sleep on Election Night. But Donald Trump’s presidency, with the Republican Party in control of both houses of Congress, might affect you financially in several ways, for years to come.

Maria LaMagna considers how Trump’s presidency may affect prices of consumer goods , while Tony Garcia tallies up possible job losses if Trump gets his way on trade .

Daniel Goldstein shares his thoughts on what Trump’s win will mean for home prices .

2. Trump and taxes

Bill Bischoff takes a detailed look at many tax changes that may take place under Trump’s watch.

3. Stocks that can be helped by Trump

Here are three stocks that can gain from Trump’s win .

Tomi Kilgore covers investors’ fixation with bank stocks in the wake of “Trump’s trifecta.”

Sara Sjolin shows which European bank stocks jumped following Trump’s triumph.

Jennifer Booton explains how Apple Inc. (AAPL) and its stock could benefit from a repatriation holiday after Trump takes office, which would bring its overseas cash hoard to the U.S.

Ryan Vlastelica points to an obvious, but still risky, Trump play: Coal .

4. Why you should move to Canada

It’s not uncommon for celebrities in the U.S. to stamp their feet and threaten to move if an election doesn’t go their way. But Quentin Fottrell has provided five reasons to move to Canada , that have nothing to do with Donald Trump.

5. Why you should not move to Canada

On the other hand, Maria LaMagna’s list of six reasons to think twice before moving to Canada , was massively popular with MarketWatch readers.

6. Protecting your portfolio during the time of Trump

Tomi Kilgore says Donald Trump cannot take credit for the post-election stock-market rally .

Ciara Linnane provides a sector-by-sector guide to how companies will be affected by Trump’s presidency .

Brett Arends offers a 12-step plan to strengthen your portfolio after Trump’s victory .

Barbara Kollmeyer spells out what it will take for the stock market’s post-election rally to continue .

Alessandra Malito advises you to look in the mirror and make careful investing decisions , rather than reacting to political news.

7. Trump’s politics and actions while president

Rex Nutting believes Trump will not be able to satisfy the people who voted for him .

Tim Mullaney compares Donald Trump to Ronald Reagan .

Paul Brandus points out that Trump may find it difficult to get used to leading by consensus .

8. What about Obamacare?

Emma Court explains how difficult it will be for President Trump and the Republican-controlled congress to repeal or fix the Affordable Care Act , which has become unaffordable for many people. She also explains the difficulty women are facing as they worry Obamacare’s birth-control benefits may disappear .

9. Trumps pick(s) for the Supreme Court

The Supreme Court short has been one justice since the passing of the conservative Antonin Scalia in February, because Senate Republicans made it clear they would refuse even to consider any nomination made by President Obama. Robert Schroeder describes the makeup of the Supreme Court and lists several judges whom Donald Trump may nominate , not only for the current vacancy among the justices, but the additional vacancies that seem very possible

10. Don’t forget about the Democrats

Darrell Delamaide takes the Democratic Party to task for its “hubris and ethical blindness ,” while also pointing the way to “the right balance for a center-left party” under a new generation of leadership.

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Questions from Readers

POT and AGU – see the comments section for a recent question and my response.

DP, a Canadian world traveller, formerly of Japan, Qatar and Thailand, and now living somewhere in Central America, asks:

This question is about the stock marker since Trump is president-elect.
Seems the markets are going up, but I surmise one false step and they’ll drop like a lead zeppelin. Add to that the Brexit thing and boy, the horizon looks a little dodgy.
I am wondering if I should put a stop loss in place on my holdings, just in case. My feeling is they are going up in a giddy fashion but the rug will be pulled out from under – as what happened in 2008. That’s why I think a  stop loss in place might be a way to prevent losing too much and leave it on the side until the markets rebalance.
What are your thoughts on the current political situation,  the market and stop loss measures.

My Answer:

I don’t see a parallel to 2008.  The market decline was driven by the policies of the previous 8 years and manifested itself long before the election.  That doesn’t mean that we won’t see a decline.  I think there will be lots of unrest as policies evolve.  Most recessions and market declines occur under Republican/conservative regimes.
So what to do?  I held tight during the 2008/9 decline and was rewarded with a solid recovery.  I had a good friend who follows the same strategy as me – as a matter of fact, he and I developed the strategy together.  He panicked and sold everything right at the bottom (crazy advice from Jim Cramer) and missed all of the recovery, locking in his losses forever.
I like to see the growth and capital gains, but I am really relying on the dividends.  So as long as I have companies that grow their dividends my retirement income is secure.  So I don’t plan on any rash moves.  I will continue to rebalance as time goes on – selling big winners, hopefully at the top and buying bargains – but this is just really playing at the margins.
Stop loss is more for a strategy of speculation.  You will have to make your choices, but  I have no solid evidence on which to drive any major changes.

Response from DP:

Truly sage advice here. Your wisdom from experience to describe the scenario from what happened before and the two possible routes to go: hold (your strategy) or panic (Jim Cramer’s).
I like the way you never really say what to do, only to lay bare the conditions so others can make their own choices.
What the hell, I’ll hold on for the adventure ride that will unfold!

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Suggested Stocks

US

In July I listed an analysis of what I considered the “Ideal US Portfolio” consisting of CVX, KO, PG, TRV, JNJ, MRK, BA, MCD, IBM, VZ.  Rather than keep showing my list of the same US stocks each month, I will provide the list one more time and will only update it a couple times each year.  The following stocks are A++ by ValueLine, have over a 2% dividend yield and have increased their dividends regularly.  I suggest you only pick from these stocks.  If you have questions on others, please feel free to let ask.

Company Ticker Financial Strength Dividend Yield Dividend Growth 10-Year Current PE Ratio
3M Company MMM A++ 2.47 8.5 21.54
Abbott Labs. ABT A++ 2.37 1.5 20.7
Amer. Express AXP A++ 2.02 7.5 11.53
AT&T Inc. T A++ 4.74 3.5 14.27
Automatic Data Proc. ADP A++ 2.54 13 25.42
Boeing BA A++ 3.44 12.5 15.18
Bristol-Myers Squibb BMY A++ 2.69 2.5 22.21
Cardinal Health CAH A++ 2.38 26 17.28
Chevron Corp. CVX A++ 4.28 10 71.93
Coca-Cola KO A++ 3.11 9.5 23.12
Colgate-Palmolive CL A++ 2.2 11 26.36
Deere & Co. DE A++ 2.85 15.5 21.07
Dover Corp. DOV A++ 2.46 9.5 20.98
Du Pont DD A++ 2.31 2.5 21.23
Emerson Electric EMR A++ 3.6 8 17.14
Exxon Mobil Corp. XOM A++ 3.27 9.5 34.64
Franklin Resources BEN A++ 2.25 15.5 12.43
Gen’l Dynamics GD A++ 2.18 13.5 14.71
Grainger (W.W.) GWW A++ 2.21 17.5 18.98
Home Depot HD A++ 2.15 19.5 20.46
Honeywell Int’l HON A++ 2.04 9.5 17.21
Illinois Tool Works ITW A++ 2.06 12 19.25
Infosys Ltd. ADR INFY A++ 2.59 17.5 15.48
Intel Corp. INTC A++ 3.15 17.5 13.75
Int’l Business Mach. IBM A++ 3.65 20 12.68
Johnson & Johnson JNJ A++ 2.77 9.5 19.73
Kimberly-Clark KMB A++ 2.89 8 23.13
Lilly (Eli) LLY A++ 2.76 3.5 21.13
Lockheed Martin LMT A++ 2.86 20.5 20.27
McDonald’s Corp. MCD A++ 2.97 20 21.84
Medtronic plc MDT A++ 2.01 15 15.53
Merck & Co. MRK A++ 3.19 1.5 15.59
Microsoft Corp. MSFT A++ 2.7 19 20.08
Novartis AG ADR NVS A++ 3.42 13 21.23
Novo Nordisk ADR NVO A++ 2.41 26.5 18.38
PepsiCo, Inc. PEP A++ 2.88 11.5 21.14
Pfizer, Inc. PFE A++ 3.51 4.5 18.87
Procter & Gamble PG A++ 3.18 10 23.2
Public Serv. Enterprise PEG A++ 3.85 3 16.67
Qualcomm Inc. QCOM A++ 3.82 22.5 13.23
Raytheon Co. RTN A++ 2.1 11.5 18.07
Schlumberger Ltd. SLB A++ 2.51 15.5 63.67
Smucker (J.M.) SJM A++ 2.18 9.5 21.21
Texas Instruments TXN A++ 2.4 29.5 21.46
Total ADR TOT A++ 5.8 5.5 12.27
Travelers Cos. TRV A++ 2.35 8 11.86
Unilever PLC ADR UL A++ 3.08 6.5 23.73
Union Pacific UNP A++ 2.49 21 17.03
United Technologies UTX A++ 2.56 12.5 15.35
Verizon Communic. VZ A++ 4.13 3 13.84
Wal-Mart Stores WMT A++ 2.77 14.5 17.37

Canada

In June I listed what I considered the “Ideal Canadian Portfolio” consisting of TD, RY, PWF, BCE, RUS, AGU, SU, TRP, FTS, TRI.  There are other stocks that adequately fit my strategy of a strong company with a long record of issuing good dividends and increasing those dividends regularly.  Rather than continually listing the same companies over and over again in each blog, I will only update the list a couple times each year. Here is a complete list of suggested Canadian stocks with a dividend yield of over 3%.  I suggest you only select Canadian stocks from this list.  There are a few more with lower yields so if there are any others you are curious about, feel free to ask.

Agrium, Inc. AGU
Bank of Montreal BMO
Bank of Nova Scotia BNS
BCE Inc. BCE
Can. Imperial Bank CM
CI Financial Corp CIX
Enbridge Inc ENB
Fortis Inc FTS
Great-West Lifeco Inc. GWO
Manulife Financial Corp. MFC
National Bank of Canada NA
Pembina Pipeline Corp. PPL
Power Financial Corp PWF
Royal Bank of Canada RY
Russel Metals RUS
Suncor SU
Sun Life Fin’l Svcs. SLF
TELUS Corporation T
Thomson Reuters Corp TRI
Toronto-Dominion Bank TD
TransCanada Corporation TRP

Europe

As with the US and Canadian stocks, this list does not change much.  I will refer you to the previous months to check which stocks I suggest.  I will update this list a couple of times next year.

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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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