December 2016 Investing Update

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Christmas in California.

Bakersfield

Time with the grandsons.

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December Results

A great way to end the year.  TSX up almost 1.5%,  Dow up over 3% and the S&P almost 2%, capping off a good year with over 17%, 13% and almost 10% respectively.  Quite refreshing after a dismal 2015 (December 2015 Report) and a scary start to 2016 (January 2016 update). Don’t expect 2017 to produce a repeat.  Just as there is seldom two consecutive bad years, there are seldom two consecutive stellar years.

My results (summarized below) were pretty good too.  I ended the year with over a 21%  gain on my Canadian stocks and 16% on my US stocks for a weighted average of almost 17% including the effects of the strengthened Canadian dollar (almost 20% without exchange rate fluctuation).  For the month, I saw 3% gains across the board.

December YTD
TSX 1.36% 17.51%
DJIA 3.34% 13.42%
S&P 1.82% 9.54%
BB CDN 2.98% 21.40%
BB US 3.55% 16.00%
BB Total (no FX) 3.15% 19.71%
BB Total (incl FX) 3.19% 16.68%

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December Trades

I sold EMR, PFE and RDS.A this month  mainly for tax purposes. I was in a small loss position on each of these stocks. My stock sales for the year had me with a large taxable capital gain so I used these losses to partly offset the gains.

I will likely not buy RDS back unless it moves back to A++, but EMR and PFE will still be on my list as a possible buy later on.

To avoid having too much cash sitting idle, I purchased NVS at just under $69.  I sold this stock in 2015 at over $100 and its prospects look good and of course it fits all of my criteria.

I also sold my preferred shares in ENB and BCE. These were holdovers from my fired financial advisor and had no place in my portfolio.  I decided they were going nowhere and my money could be better used elsewhere.  It also helps to clean up some of my portfolio going into the new year and generate some cash for potential buying opportunities in 2017.  Included in this purge was my Great West Life shares and my shares in RUS which was getting quite high.

I am now sitting on considerable cash that I will have to put to use in the new year.  I’ll keep you posted.

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My Portfolio as of Dec 31, 2016

US Canadian   
Chevron Corporation CVX Bank of Nova Scotia BNS
PepsiCo, Inc. PEP Canadian Imperial Bank of Commerce CM
Johnson & Johnson JNJ National Bank of Canada NA
Procter & Gamble Co PG Pembina Pipeline Corp PPL
International Business Machines Corp. IBM Sun Life Financial Inc SLF
Boeing Co BA Brookfield Infrastructure Partners L.P. BIP.UN
Total SA (ADR) TOT Bank of Montreal BMO
Cisco Systems, Inc. CSCO Suncor Energy Inc. SU
QUALCOMM, Inc. QCOM Royal Bank of Canada RY
Novartis AG (ADR) NVS BCE Inc. BCE
Merck & Co., Inc. MRK Toronto-Dominion Bank TD
Public Service Enterprise Group Inc. PEG TransCanada Corporation TRP
The Coca-Cola Co KO Enbridge Inc ENB
Verizon Communications Inc. VZ Power Financial Corp PWF
Intel Corporation INTC TELUS Corporation T
AT&T Inc. T Fortis Inc FTS
Shaw Communications Inc SJR.B
Manulife Financial Corp. MFC

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On Line Brokers – Discount Brokers

HERE is a recent article ranking the various on-line brokers in Canada:

http://www.theglobeandmail.com/globe-investor/online-broker-rankings/the-globe-and-mails-17th-annual-online-broker-ranking/article27571960/

I use HSBC InvestDirect. This is a holdover from my days overseas when I needed a reputable but truly international bank and HSBC fit the bill.  HSBC InvestDirect is one of the lower ranked brokers for various reason.  Having worked with some of my investment followers on setting up brokerage accounts with various suppliers, I would agree that HSBC is a bit behind the others, but their customer service (not required often) is excellent.  However it appears that customer service is very good with all of the brokers.

In spite of this lower rating, I have been extremely happy with my HSBC account.  That doesn’t mean I would advocate to leave your current broker for HSBC, but what it does mean is that if the lower rated brokers are good, then any other broker will be more than adequate, so you needn’t worry about which service you use.  If in Canada, any of the on line brokerages offered by the banks are great.  If in the US, any of the big names are good.

HERE is a ranking of US on line brokers:

http://www.barrons.com/articles/barrons-2015-ranking-of-online-brokers-1425705011

The main message is to get away from your full service broker (who is likely making you broker) and do it yourself.  You will be handsomely rewarded over the long term.  Feel free to ask for my help to get you set up.

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Stock Picks

Click this link to see my most recent stock analysis on an Excel spreadsheet.

stock-picks-dec-5-2016

I have ranked all US listed by ValueLine as A++ regardless of their dividend yield or growth and ranked them according to several factors.  I have done the same for Canadian stocks, but with ValueLine ratings as low as B+

This makes for a longer list than normal , but may be useful for those investors who may not be as concerned with dividends at this point in their investing life.

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Go International

Most “experts” will tell you to diversify your portfolio internationally.  While this is relatively wise advice, it does not tell you the risks associated with investing in foreign stock exchanges and directly in foreign companies.  The Canadian market and the US markets are reasonably transparent and well regulated.  The same cannot be said for markets in China, India, the Middle East, Africa, etc.  Having lived it other countries, I developed a healthy skepticism about non-US or non-Canadian companies.  Although European markets and companies, may be transparent and reasonably well regulated, I am not familiar with their rules, so I avoid them.  I only invest in the TSX and the US markets.

So how can you “go international” and still feel safe?

In my March 2014 update and in my book, “Simple and Successful Investing“,  I discussed how to go international with US stocks.  Most major US companies derive significant amounts of their income from non-US operations.  So you can actually be very internationally diversified by only investing in US stocks.

But what about Canada?  Many of you have the bulk of your financial assets denominated in Canadian dollars.  I do not advocate moving money between currencies as an investment choice because you are introducing an additional element of risk via currency fluctuations.  Also, if you have your money in Canadian RRSPs there is a restriction on how much non-Canadian investment you can do and you are not allowed to hold any cash other than Canadian cash, which makes investing in US stocks more difficult.

There are some international ETFs traded on the Canadian market, which is one option.  However, many of the major Canadian companies are somewhat internationally diversified themselves allowing you to have some international exposure while sticking with Canadian companies. They are not as internationally diversified as major US companies, but many derive a third or more of their revenues from non-Canadian sources and have many of their assets in other countries.  Most of the international exposure is US, but many do have holdings and revenues in other countries as well.  The big Canadian banks derive 30 to 40% of their revenues from outside Canada. Energy companies rely on foreign sales for much of their revenues.  Insurance companies have significant international exposure.

So you can get the international experience without leaving home.

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Reader Question

TK from Doha asks:

I have a question about buying into stocks during a bull run. Some of the recommended stocks are very near their 52 year high…as would be expected in a bull run. I am confused as to when to buy in. Do you use technical analysis to help you decide when to buy, in addition to the Value Line ratings? Do you wait?  I am hesitant to buy a stock at its height, only to have it wind down lower if a Trump inspired bull run is non sustainable.(If the rating is affected and I need to sell..it might be an issue…)

My Response:

You are basically asking about market timing.  This is a skill that absolutely no one has mastered, but we all try it.  Even the experts have a poor record.

I use a rustic system that sometimes works and sometimes doesn’t.  It is always nice to buy before a run up, but it is still better to think in the long term – is this a stock that belongs in my portfolio.  If so,  and you have the cash, then buy it.

I have attached my latest analysis that will be included in my next report. (stock-picks-dec-5-2016) I have included all acceptable stocks whether they have a good dividend or no, so the list is longer than usual. In concept, the ones at the top of the list are better for buying now, and the ones nearer the bottom are later buys.  It doesn’t always work out that way, but it is a method.  Look also at the “timeliness” indicator that ValueLine uses.  The number “1” indicates a good time to buy and a “5” is a poor time.  But these rankings can sometimes be dated, so I have introduced a bunch of other factors.

I would focus on building your “ideal” portfolio of 15 to 30 stocks depending on your available funds.

I look primarily at dividend yield, dividend growth and dividend sustainability (based on historical trends).  The value of the stock will go up and down, but the dividend is my retirement income and it shouldn’t be subject to fluctuation, but rather grow constantly. 

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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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