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Portfolio January 15th, 2016

Do it yourself investing

Here is a breakdown of my portfolio including performance, asset allocation, sector allocation and holdings (2% of portfolio minimum) at the end of the day January 15, 2016.

Performance: includes dividends and exchange to Canadian dollars for U.S. account. The allocation helps the portfolio reduce the downdraft compared to fully invested. Of course it means the uplift is lower.

              Portfolio              S&P 500 USA        TSX Canada

2016       -2.56%                   -7.88%                     – 7.20%
2015        5.48%                    1.36%                     -11.09%
2014      13.46%                 13.52%                         7.42%
2013      23.28%                 32.15%                         9.55%
2012        9.50%                 15.89%                         4.00%

Average 2012-2015         12.93%               15.03%                          2.48%

In the first two years my portfolio was just being developed on a value basis. Still even without full investment I am keeping close to the S&P and beating the TSX. If a major correction were to occur then I would become close to fully invested.

The portfolio success has been most accomplished by currency exchange, hedging, rebalancing and allocation.

Asset Allocation:  You will notice allocations are heavy on cash and fixed income. My allocations are attempting to mirror the allocations in the post on managing market risk. I want to have money to invest for a correction so I hold 42% cash fixed income, 2.5% preferred, and another 2% of a short etf for the market giving me 44.5% dry powder from cash fixed income and hedges. This would grow if the market goes down because currently I have two etf’s that would be inverse correlation to the market.

Sector Allocation: Technology and Energy are my two heaviest sectors. This is because tech names like Apple, Corning, and Qualcomm all have lots of cash to cover their debt, trade at low multiples (Apple and Corning at 11 times earnings and Qualcomm at under 15 times earnings).

Energy is growing from the oil crisis. I believe this will be a learning experience and will test my fundamental analysis. I have postions in energy companies Helmerich & Payne (HP), CNOOC (CEO), Transglobe (TSX:TGL) with smaller positions in Chevron (CVX) and Sasol (SSL). My key is the balance sheet while the commodity price is low. Helmrich and Payne, Transglobe and Sasol all have more cash than debt. CNOOC has cash that is 60% of debt. The only ratio not ideal is Chevron at 37% cash of debt.

There is a risk because I do not know when the commodity price will improve but I am buying cheap and hoping the strong balance sheets will help the companies survive. The smallest company is Transglobe (analysis) and the ride has been a wild one. down 25% and up 25% and now down 40% but I intend to buy more averaging down on weakness. My current buy in price is a little over a third of the tangible book value of the company.

Below are the equity holdings 2% or over in the portfolio. Allocation info is above.


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2 Responses to Portfolio January 15th, 2016

  1. DivHut February 23, 2016 at 8:04 am #

    Nice to see the large Canadian banks displayed. I hold TD, BNS and RY in my retirement account and plan to make those core/long term holdings. Though all down quite a bit the last year I still think they offer good value and great current yield. I see a few other names in common between our portfolios too. Thanks for sharing.

    • Doug Taylor February 23, 2016 at 4:35 pm #

      Thanks for the comment DivHut, I am a big believer in the Canadain banks as they show good value right now and are paying higher than normal dividends. They may face headwinds from real estate or commodities like oil but I think their capitalization is good enough to withstand these things.

      I looked at your portfolio and think it looks good. I feel dividend growth is likely what everyone should do as it directs attention away from price fluctuations and dividend growth often shows the business is growing and doing well.

      I will update the portfolio in March. I have contracted my amount of holdings to focus on my highest conviction picks. Still the three major banks are in and I look to add to BNS as it’s valuation, cash to debt and dividend yield are all excellent.

      Will look at your website in more detail. Would be nice to keep in touch. Cheers, Doug

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