In spite of some big slippage in the last week of January, it was quite a respectable month on the markets. The TSX and Dow are up over half a percent and the S&P was up three times that.
My portfolio failed to keep pace for a couple of reasons. Overall I was down just over a quarter of a percent. The main contributor was a strong Canadian dollar which rose over two and a quarter percent on the US dollar. In addition I had a couple of hits on my US stocks. QCOM is embroiled in a legal battle resulting it a big drop and Verizon saw a big decline. My US portfolio ended basically flat. My Canadian portfolio, on the other hand, gained almost one and a quarter percent, better than the TSX.
|BB Total (no FX)||0.78%|
|BB Total (incl FX)||-0.36%|
Trump Rally or Goldman Sachs Rally?
The Dow Jones continues to set records; up almost 10% since the US election. The rally has slipped considerably since inauguration day, with market concerns over policy. It is interesting to note that the two bank stock on the index, Goldman Sachs and JP Morgan are up 30% and 20% respectively over the same time frame. Neither of these stocks appear on my suggested list. GS is “A++” but has a low dividend and a poor history of dividend increase. JPM is only rated “A” and has a sketchy dividend record. In general, US banks are quite speculative (especially compared to the stable Canadian banks). City Bank, was a component of the Dow until it pretty well went bust in 2009 and had to restructure, stiffing investors (including me) with a 90% loss.
The market seems to feel that the US banks will have a tail wind in the near future. Canadian banks are tightly regulated (thanks to the policies of the 1990s) while the US banks have faced less regulation, which was one of the reasons for the 2009 crash. Tighter regulations imposed after the crash may be loosened under the new administration, based on comments so far. Buckle up.
HERE is an interesting article on how insignificant the US president is to the stock market:
Every president has presided over a pullback, correction or crash, sometime during his tenure. The largest drops in modern times have occurred under Nixon, Reagan, and George W. Bush.
Long Term Returns
I follow Rob Carrick (http://www.theglobeandmail.com/authors/rob-carrick) of the Globe and Mail. He often has some interesting stories on investing. Here was a recent question to his site that made me a bit sad for people who invest. The person asking the question uses an investment advisor who puts him in low performing mutual funds. Rob’s answer is not much more encouraging. For comparison, my returns over the same period of time was around 10% per year. Further evidence to dump your advisor, sell your mutual funds and do it yourself.
The question: “What is an average rate of return on RRSPs, in balanced funds, over the last 15 years? Should it be comparable to market returns? My return on investment since 2005 was 1.37 per cent (as of June). Should I change financial advisors?”
My reply: First, ask your current adviser to compare your portfolio returns to an appropriate mix of stock and bond market benchmarks. Ask specifically why your portfolio has clearly under-performed. A look at some of the country’s biggest balanced funds shows 15-year annualized returns coming in between 4 and 7 per cent to the end of last year. If you can’t get a satisfactory explanation and a plan for improving your returns, then a change in advisers is definitely worth considering.
Here are my returns by company for 2016. Some of these stocks (BA, NVS) were purchased late in the year and the gain is only actually part of the year, not the full year. Some of the stocks were sold during the year (LMT, PFE, UL, EMR, RDS, KMB). The Canadian list does not include the stocks I sold during the year for a profit.
|Bank of Nova Scotia||BNS||34.62|
|Canadian Imperial Bank of Commerce||CM||21.50|
|National Bank of Canada||NA||16.55|
|Pembina Pipeline Corp||PPL||17.67|
|Sun Life Financial Inc||SLF||19.47|
|Brookfield Infrastructure Partners L.P.||BIP.UN||28.64|
|Bank of Montreal||BMO||22.63|
|Suncor Energy Inc.||SU||17.19|
|Royal Bank of Canada||RY||12.28|
|Power Financial Corp||PWF||7.11|
|Shaw Communications Inc||SJR.B||13.49|
|Manulife Financial Corp.||MFC||16.13|
|Cisco Systems, Inc.||CSCO||11.29|
|The Coca-Cola Co||KO||– 3.49|
|Procter & Gamble Co||PG||5.88|
|Emerson Electric Co.||EMR||19.02|
|Johnson & Johnson||JNJ||12.16|
|Unilever plc (ADR)||UL||10.11|
|Total SA (ADR)||TOT||7.96|
|Royal Dutch Shell plc (ADR)||RDS.A||14.10|
|Merck & Co., Inc.||MRK||12.81|
|Kimberly Clark Corp||KMB||6.90|
|Public Service Enterprise Group Inc.||PEG||13.41|
|Pfizer Inc.||PFE||– 3.39|
|Verizon Communications Inc.||VZ||15.49|
|Lockheed Martin Corporation||LMT||17.43|
|International Business Machines Corp.||IBM||15.32|
|QUALCOMM, Inc.||QCOM||– 1.47|
|Novartis AG (ADR)||NVS||5.61|
January 2017 transactions
I made no sales during January, but I had excess cash that I wanted to put to work so I made the following purchases. Other than XOM, all purchases were to increase existing holdings. I am pretty happy with my current holdings and allocation. I have ten broad categories and 36 individual companies. The largest holding represents less than 5% of my portfolio and the smallest is 1%. My largest category (Canadian Banks) represents 20% of my holdings, with oil close behind at 19%. I hold about 5% in cash right now.
US: XOM, TOT, PEG
If I had more cash I would buy PFE and perhaps sell my PEP. I want to hold each A++ on the Dow Jones that has a yield of 3% or better.
Canadian: SJR.B, BIP.UN, PPL, BNS, MFC
More on On Line Brokers
Last month I linked a few rankings of discount brokers. HERE is another look at the top ranked broker in Canada and the US.
GW of Doha and soon moving to Japan communicated with me about some difficulty he was having acquiring a good international broker. My usual “go to” international broker is TD Direct Investing International in Luxembourg. However there are some countries of residence that they will not service, notably Turkey and now I find out, Japan. So if you are travelling the world to live in other countries, check with your broker to see if they service that country. GW and I are still looking for a solution to his Japanese residency.