I had some unexpected time available today to make my first quarter trades (normally made on the 15th of the month, so a day early).
I previously posted some considerations I had in mind for this cycle, and received some helpful feedback in reply to that earlier post (thank you FletcherLynd!). I also posted a related question to 5i Research. (All the feedback and discussion is contained in the replies to my earlier post if you wish to follow along.)
So, in the end I did the following to take advantage of utility stocks for sale at a relative market discount and to address some major holes in our bond ladder:
- Sold Valener (TSX:VNR) and bought, with the proceeds and a small top-up to a full position, Algonquin Power (TSX:AQN) – this trade is intended to improve the quality of my utility holdings (I still like VNR but I like the total return prospects of AQN better)*
- Topped up Fortis (TSX:FTS) and Brookfield Renewables (TSX:BEP.UN) to bring them to full positions
- Journalled the new BEP.UN shares from a Canadian dollar account to a US dollar acount (BEP) to capture dividends in US dollars without incurring currency conversion rates (this will occur on settlement March 16) – I bought in a Canadian dollar account because I didn’t have enough US cash in the account to make the purchase directly in the US account
- Bought about 25% of my required bond purchases for the year, going short duration to fill holes in my investment grade ladder and in anticipation of higher rates later in the year (I will buy slightly longer duration bonds in June, September and December):
- FORD CREDIT CANADA LTD SR UNSECURED Maturity Jun 22 2022 Coupon 2.766 for a yield-to-maturity of 2.9%
- FAIRFAX FINL 6.4% 25MY21 for a yield-to-maturity of 2.84%
The net result is I’ve gone a bit overweight equities (I was slightly over-allocated already before trading). I sit at 49.5% versus 46% target, in part because equities, in spite of the correction last month, are still surging in my portfolio (tracking 17.3% on an annualized basis so far this year).
I’ll keep an eye on equity allocations as the year progresses and may trim a bit in technology if current trends persist. New cash should also help offset this imbalance a bit.
I will be doing my quarterly review at the end of the month and will post it along with my previous reviews here.
*Full disclosure – I’ve been a bit erratic with Valener. I bought it in September 2017 (just six months ago) as a long-term holding. At the time I wanted to buy Algonquin Power but thought it was too expensive. I have traded VNR for AQN opportunistically because of the sector rotation taking place in utilities that has made AQN’s price a more attractive entry point.