February 12, 2017

Portfolio Update February 2017

Please note that our next update can be expected in about 12 weeks, in May 2017.
You can also have a look at our actual portfolio and previous portfolio updates here:

Despite everyone’s fears after the US election, markets ended 2016 very well. In fact, this year usual «Santa Claus Rally» was replaced by a very nice «Trump Rally».

Will it last? Our typical answer prevails: nobody knows!

Markets still look expensive as they continue to hover close to record highs. In the latter part of January, we could sense markets were getting nervous about the first moves of the Trump administration. In fact, turbulences began around inauguration day.

Investors initially seem pleased about Trump’s probable economic policies. But markets don’t like uncertainty and President Trump sure brings his fair share to the table.

So, it appears we could be in for some wild ride.

What are we going to do with our DIY Portfolio from now on?

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 to do all necessary research and consult a licensed financial professional if need be. 

Entering Consolidation Phase after Milestone

The short answer is that it will simply remain business as usual.

As we discussed in our last update, we will continue to avoid buying and selling in anticipation and Only React to Important Events Using Known Facts. As far as investing is concerned, there’s no use trying to predict the future. And this is especially true about foreseeing Trump’s influence. We can only choose to invest in solid companies and remain optimistic about their long-haul perspectives.

Up to now, we are very pleased with the performance of our DIY Portfolio and are still very confident about getting similar long-term results in the future.

Back in December (on the 16th to be precise), we achieved a very motivating milestone: the Double 100K$ Mark. On top of more than 100K$ of fresh money we put in our portfolio over the years, it also grew up by itself by more than another 100K$ (note it got back just under that mark since then) for a total of more than 200K$.

We’ve also noticed that it took a lot less time to amass our second 100K$ as the first one accumulated over about 10 years (from 2003 to 2013) and the second one within a bit more than 3 years (from 2013 to 2016). This can be explained because we were able to put in more capital but also because our investing technique as greatly improved.

We hope the next major step, 300K$, will come to us as easily.

As we already mentioned before, our DIY Portfolio has now entered a consolidation phase. In line with our 12-Minute Approach, we are content to limiting its scope to 3 sets of about 12 stocks each: our Canadian Prime 12, US Prime 12 and Extra 12 groups.

On top of providing us with sufficient diversification, that limited number of different stocks allows us to monitor and manage our DIY Portfolio with minimal time and effort.

To some extent, you could say our DIY Portfolio is now on cruise control. A few new candidates will still be used but only to replace less adequate old ones.

Staying Prudent with Recent Buys

As stated above, valuations of many stocks appear rather expensive as market levels are continuously flirting with record highs. Our Portfolio Variations numbers pretty much tell the same story. Our Dip Factor averages are almost at all-time lows. In our last two updates, we explained Why we were holding on to more cash.

Nonetheless, we are staying vigilant as some promising buying opportunities are starting to timidly creep up.

With all that in mind and because new money continues to pour in our DIY Portfolio, we decided to start acquiring stocks again but our initial selections still have been relatively careful and somewhat conservative.

In fact, in line with our recent consolidation mode, we only purchased additional shares to consolidate existing positions.

Consequently, here are our choices this time around.

Metro (MRU)      Down 15.96% Dip Factor 3.45

Mostly known for its supermarket chain, Metro is a well-diversified giant established in the food and pharmaceutical distribution sector.

Metro is a fairly conservative stock that is stress-free to own. It has delivered solid results and steady growth over the years. Its stock value keeps going upward, slowly but surely. Occasional temporary dips also makes it a stock relatively easy to acquire at attractive prices.

Metro probably won’t get you spectacular short-term results but bad surprises won’t come from that steady performer either.

We first purchased Metro in 2013 and added to that original position a couple times since. Frankly, we wonder why we didn’t buy in that rock solid corporation earlier.

Fairfax (FFH)      Down 20.91% Dip Factor 4.09

Fairfax Financial Holdings Ltd is mainly engaged in the casual insurance sector.

The mastermind behind Fairfax success, CEO Prem Watsa kind of goes against the grain. Because of his incredible instinct and business sense, Fairfax usually performs better than most stocks in difficult markets conditions.

With a Dip Factor over 4, we felt Fairfax represented an interesting opportunity and decided to increase our previous stake in it.

That’s it from us for this update. Come back again for another one in a couple months…

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