Time to report our DIY Portfolio progress has come again. Unsurprisingly, you can
expect our next update in about 12 weeks, in August 2019.
You can also access our earlier portfolio updates
here:
After a tough patch in
late 2018, markets are still growing strong and have been on an impressive roll
for about the last six months. Many investors currently rejoice. We are also
glad about our significant gains. But as usual, we remain cautious and expect the
unexpected as far as what the future of stock markets holds for us.
Once more, I’ll remind you that I
am not an investment or tax professional of any kind. The intent of this blog
is not to give specific investing advice. Before investing yourself, we suggest
you do all necessary research and consult a licensed financial professional if
need be.
Patience Still the Name of the Game
With retrospect,
putting new money in could have been even better. We artificially did that with
a few buys, but accessible funds were still limited for us. We still appreciate
the ongoing run. But in the end, it does not really matter with our persistent long-term
perspective.
We don’t have much to
mention. Apart from the fact that I have been enjoying the concretisation of my
8-month leave for the last couple weeks. It’s already the third time I’ve done
this, but I still have to adapt in the first weeks, if not months. I know I’ve
earned it and planned for it, but I still feel a little guilty about it.
Sometimes, it’s tough to enjoy all that free time when so many other people are
struggling.
Despite a less hectic
schedule, it’s strange how time still flies by. New things to do always seem to
pop up. Some think I’m doing nothing because I don’t go to work. Let’s just say
my days are quite occupied. Not that I what to complain but, I know I will
struggle for some time before I can get in complete enjoy-life-to-the-fullest
mode.
Speaking of doing
nothing, that’s probably what’s often best for your stock holdings. The recent
months were a great example.
Looking to Sell Weaker Stocks
We have a confession to
make, we are not really doing nothing about our stocks. We will never make
hastily decisions or transactions but, we are always looking for ways to make
our DIY Portfolio stronger.
The main objective is to
make it more robust ahead of more turbulent times because the question is not if they will come by but more when. We know we can’t predict when an
inevitable downfall will occur, but we’ll try to be as ready as possible.
In that perspective, we
have been looking for a way to identify our weaker stocks. Selling a couple of
these and keeping our stronger holdings should put us in a better position to
get thru the eventual storm or storms.
Like we talked about Here, we’ve been using a 20-year span to identify stocks that would best
mimic the Perfect Stock and its Trend. Our grading system also considered
long-term returns in that same span.
After some analysis, we
have decided that our additional focus will now be dividends, and particularly
their growth and sustainability. We think stocks that can sustain steadily
increasing dividend payments will be the best candidates to survive a downturn.
Healthy dividends will also help us remain patient in those more difficult
circumstances.
We are not only looking
for stocks with constant dividends but rather for stocks with constant growing
dividends. Our standard is an average 10% dividend growth over at least 10
years. We will consider stocks with only an 8% average acceptable but will slightly
slide down their grade.
As constant dividend
growth is also a key, we will prefer stocks that steadily grow their dividend
at a slower pace as opposed to stocks with figures all over the place even if
the latter provide more aggressive growth.
With that concept in
mind, we added the new Overall column to our Portfolio,
Watch List and Monitor List reports. That grade is half the old one and half the new dividend grade.
We’ll probably elaborate more on it at another occasion.
New Buy and Sell Candidates
That dividend-focused
process generated new potential sell and acquire candidates.
We are not completely
surprised about some of the sell nominees that have been lagging for a while
like AT&T (T) or RioCan REIT (REI.UN). Others also have been going nowhere
like Fairfax Financial Holdings (FFH).
But a few sell
candidates have been quite good for our DIY Portfolio
in the past like CGI Group (GIB.A) with an annualized return over 24%, a veteran
in Pfizer (PFE) at around 11.5% or Merck (MRK) and American Express (AXP) both at
almost 14%.
We won’t get rid of all
these overnight, but we consider the current market run an appropriate period
for some selling. In the actual context, we just consider many of these stocks a
little too risky.
You will note that we’ll
probably get out of another resources stock, Nutrien (NTR)…simply not our cup of
tea. Our only remaining ETF (XIU) is also on the chop.
Canadian insurance
companies have been on a wild ride for more than a decade. That’s why we are
looking to replace Manulife (MFC) with a more robust US stock from the same industry,
Travelers (TRV).
TRV is one of the new
contenders emerging on our renewed list. We can notice old favorites like Canadian
National Railway (CNR) and Automatic
Data Processing (ADP).
New faces include
Alimentation Couche-Tard (ATD.B) and
AXP replacements in Visa (V) and
Mastercard (MA). Look for these to
be introduced in our DIY Portfolio
in the coming months.
We are still debating
about Suncor (SU) being added to our Buy List. Like we said, we don’t really
like resources dependant stocks.
Because all those probable
sells will boost our buying power, we will also have to reinforce establish
positions. That’s why stocks with better grades have been moved towards the top
of our Watch List.
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