Previewing my next quarterly household portfolio review

September brings my next quarterly portfolio review and my next, self-imposed, securities trading window (I only trade four times a year). I have been giving a fair bit of thought this summer to what’s next for our portfolio.

Here’s a preview of my thinking….

 

 

 

 

 

My latest article on secular trends and investing has been published in Canadian MoneySaver

Canadian MoneySaver published my latest article on thematic investing in the July/August 2018 edition.

This time I discuss the investment opportunities in alternative energy. While there are headwinds in the short to medium term, long term this theme offers considerable potential, especially in Asian markets.

See more here (paywall): Canadian MoneySaver

Second quarter secular trends fantasy portfolio results are now posted

With the second quarter completed, I’ve updated my secular trends fantasy portfolio performance report.

It’s been a strong year so far for the overall performance, but some themes are doing much better than others.

The total portfolio has delivered a 5.89% total return so far this year. The leaders are Amplify Online Retail ETF (IBUY), up ~25% and ETFMG Prime Cyber Security ETF (HACK), up ~17%.

The laggards are Vanguard FTSE Emerging Markets ETF (VWO), down ~7% and iShares Global Clean Energy ETF (ICLN), down ~5%.

By contrast, my secular trends benchmark is up only ~1% year to date. Other major indexes have total returns year to date as follows:

  • NASDAQ (QQQ) +10.6%
  • S&P 500 (SPY) +2.52%
  • TSX Composite (XIC) +1.14%
  • Dow Jones Industrial Average (DIA) -0.91

So, secular investing this year so far has done fairly well even though performance varies widely by theme. See the full performance report here.

 

Breaking my own asset allocation rules

I have a confession to make. I have broken my own asset allocation rules with my second quarter trades.

I bought more equities even though I was already a bit overweight in them.

Why did I do this?

My reasoning is as follows:

  • I have a relatively low target equity weight to begin with (46% of our portfolio)
  • I had a lot of cash on hand (way over 10% of our portfolio)
  • I have more cash becoming available due to savings, bond maturities, dividends and interest in the next 12 months or less
  • quite a bit of that cash was in our TFSAs and I wanted to get that money working at better than than bond returns since the returns are tax free
  • bond yields are still not that attractive in spite of rising rates (~3.1% yield-to-maturity on a five-year investment grade corporate bond)
  • there are a lot of relatively good deals in consumer staples, utilities and telecommunications right now – several companies are off their highs and are trading at reasonable multiples
  • these three sectors are pretty defensive and could do OK in a recessionary environment
  • I only bought high quality equities with relatively low risk and often decent dividends (with one or two exceptions)
  • I did not add any new positions, just added to our existing holdings to increase their position size to something more in line with our average position size
  • Next quarter is another opportunity to review our portfolio and decide if we should trim some of the big gainers, especially in technology, which are starting to become more dominant single positions in our holdings

What I bought (all in our TFSAs):

  • Algonquin Power (AQN) – initially bought in my Canadian TFSA and journalled to my US TFSA to get the dividend that is paid in US dollars without conversion back to Canadian dollars
  • Bell Canada Enterprises (BCE)
  • Fortis (FTS)
  • Loblaw (L) – has a relatively low dividend
  • ONEX (ONEX) – this is an exception as it is a growth stock with a very small dividend in the multi-sector holdings industry
  • North West Co (NWC)
  • Telus (T)

I also bought some bonds:

  • CALLOWAY-I 3.985% 30MY23
  • FAIRFAX FINL 4.5% 22MR23
  • CANADIAN WESTERN BANK Maturity Jun 16 2022 Coupon 2.737

So, after this investment “spree,” our weightings vs. targets are as follows:

Asset Type Planned Actual Variance
Equities 46.0% 51.9% 5.9%
Bonds 36.0% 29.6% -6.4%
Bullion 9.0% 9.1% 0.1%
Total Cash/Near Cash 9.0% 9.4% 0.4%
TOTAL 100.0% 100.0%

All in all, we’re still in a pretty conservative posture and continue to have flexibility with cash levels if needed.

More to come in early July when I publish my Q2 portfolio review.

The decks from the April 2018 OSC meeting are posted

The decks from Mark Seed on DRIPping and from myself (Michael Patenaude) on the Q1 2018 OSC fantasy portfolios and sector allocations presented at the April 17, 2018 Ottawa Share Club meeting are posted here.

Be greedy when others are fearful?

Just a quick post to point out that for the third time so far this year, CNN’s fear and greed index is down below 10 (on a scale of 0 to 100). This suggests, by its seven measures, investors are “extremely fearful” of the US equity markets right now.

Hmmm. What’s on sale in the markets? (Hint: telecoms, consumer staples, energy, utilities and materials).