Sunday, 15 April 2012

Recent Market Plays: April 2012

Awhile back I decided to use a small portion of my funds to "trade" as oppose to invest. The logic was that by using a fraction of my portfolio to satisfy the need to "do something," I would leave the majority of my portfolio alone so that it can carry out my long term financial plan of using shares of solid dividend paying companies to build wealth.

So a few weeks ago, I bought gold in the form of Kinross Gold. As Warren Buffett put it in his annual Chairman's Letter to shareholders,

[I]f you own one ounce of gold for an eternity, you will still have one ounce at its end.

I believe this view that gold doesn't produce anything so it won't be able to generate any value. However, I wanted to do some trading and the volatility of precious metals make them great for "playing the market."

I don't know what will happen with this little experiment of jumping in and out of stocks rather than investing for the long haul; I may make some extra profit for a little bit or I may get burnt. Most likely though, I won't get demolished but I'll probably under-perform the benchmark and my dividend paying strategy. I'm interested to see how it goes. As of writing, Kinross is in a bit of a nosedive but Kinross pays a tiny dividend so I don't feel too bad about doing this.

As for actually investing and furthering my goals, I did that as well! I recently bought positions in both George Weston Limited and BCE Inc.

George Weston has two operating segments: Weston Foods and a little supermarket place called Loblaw (which is operated by Loblaw companies Limited). It has brands such as No Name, President's Choice and Joe Fresh. Through its controlling interest in Loblaws, George Weston owns the supermarkets under the name No Frills, Fortinos, the Real Canadian Superstore. On the Weston Foods side, the company owns bakery brands such as Wonder and Country Harvest. George Weston is a huge player in food not only in Canada but in the United States as well. The yield is a little low but the company has a low payout ratio and hopefully it will continue to grow and reward shareholders.

If you live in Canada, then you've heard of Bell. Along with being one of the "Big Three" phone and television companies, Bell owns a slew of television channels and radio stations. The company has also been making some big buys recently, with the purchase of Astral Media and with rival Rogers Communications, Bell bought the Toronto Maple Leafs. Well technically they bought MSE so they own the Raptors and Toronto FC as well - but who really cares about them? If the Astral Media deals goes well, then I may have even more BCE shares and I'm perfectly fine with that. At the my entry point, I have a dividend yield well over 5% and now I own the Toronto Maple Leafs, so I have a more legitimate reason to yell and complain when they do poorly.

According to my TFSA plans, I also transferred my shares of RioCan into my TFSA to be a little more tax-efficient. However, because the shares are sold in the non-registered account and then repurchased in the TFSA, the entry price is changed. This means that the yield is changed as well so in the next dividend income report, this will be adjusted. Oh and while I'm talking about TFSAs, my DRIP on Sun Life Financial wasn't turned on again. This time the reason was that the position was transferred so I'll need to fill out another form. Hopefully I'll get around to it before the next quarter.

Finally, I was reading one of my older posts and stumbled upon this paragraph:

I also discovered that Claymore ETFs offer DRIPs. I plan to set one up for my position in Claymore 1-5 Yr Laddered Government Bond ETF (CLF.TO). This is where I plan to put most of my cash when I'm waiting for buying opportunities to come along. Many people put those funds in money markets or hold them in plain old cash but I feel that ETFs are liquid enough so that I can grab the money when I need it, and if I don't happen to need the funds (because stock prices aren't attractive to me) then it can sit in the ETF accumulating more shares through the DRIP.

Yes, I did just in fact quote myself (I'm a tad conceited as you'll eventually learn). I still feel that it makes sense to hold my cash in the form of bond ETFs so that it earns more than just sitting in a savings account but is still liquid enough to take advantage of market dips. I completely forgot about this and I had a substantial amount of funds sitting around and not doing much. So I plan to put that money to work as soon as possible. Of course I can't do it with CLF.TO anymore because it's in my TFSA, but I was thinking about putting the money in a corporate bond ETF like CBO.TO (what are corporate bonds you say? Well I may come around to writing about them...eventually).

-the Paperboy

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