August 12, 2018

Portfolio Update August 2018

After a hot streak on the markets followed by a torrid start to the summer weather-wise, we are glad to present you our latest DIY Portfolio update. As usual, you can expect our next update in about 12 weeks, in November 2018.

You can also access our earlier portfolio updates here:

Last time, we talked about many possible opportunities looming. Well, some of them materialized but kind of quickly went away after the markets significantly surged in June. In those circumstances, the end result is often that you will grab some but miss others. We’ll elaborate on a particular one we failed to detect in advance.

Again, we’ll talk about world leaders potentially having a huge impact on our lives. Especially the noisy clumsy one south of the border.

We’ll finish by doing a recap of movement in our DIY Portfolio. Things kind of oddly quieted down in the last few weeks, at least in terms of opportunities, after all the effervescence back in June. Maybe markets also felt like taking a vacation.

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

Missing and Seizing Opportunities

Alternatively, opportunities come by and go away. Don’t despair if you missed one, another one will eventually come along. Remember that to achieve acceptable above-average long-term performance, patience and time go a long way.

Despite the fact we know it’s not the end of the world, the one we missed in the last few months particularly hurt. Colgate-Palmolive (CL) is a rock-solid dividend king that perfectly fits our investing motto. In fact, CL has now paid dividends for over a hundred years. Its dividend payments have also increased for more than 50 years in a row. It may be kind of boring, but its stable predictable nature makes it a perfect candidate for our DIY Portfolio.

CL significantly stumbled in May and continued struggling in June. Its Dip Factor even surged to around 4. But sadly, we only noticed it in mid July, after its value got back up.

It was not on our radar because CL’s sector is well represented in our DIY Portfolio and we also recently decided to somewhat shy away form US stocks. With the strong US dollar and economy that probably relatively can only go down, we are keeping our existing positions but are hesitant to initiate new ones. CL would have been an exception if we had been prepared.

We still didn’t buy out of panic. We know that when an interesting stock stumbles, it’s often too late to start analyzing it. If you missed the opportunity to buy it at an interesting price, just prepare yourself for next time. We will never stress enough the importance of adequate research and preparation.

Worrying Leadership

Talking about not being prepared, it’s frightening how a handful of people have so much power. One dumb move or a few twisted words could be catastrophic not only to the economy and our stock holdings but for Humanity in general.

It’s a tragedy how poverty, violence and wars still ruin so many lives in our supposedly modern world.

It may never have the same implications, but some don’t seem to realize that commercial wars can stink too. We will always be better off in a context of peace and harmony. The same people have apparently forgotten that free trade is at the heart of American and republican philosophy. Protecting non-productive US sectors is a lousy solution, bad for free commerce and in the end, bad for everyone, US citizens and businessmen included.

Because we can’t do much about it, in the end, there’s no point thinking about these doomsday scenarios too much apart from basic common-sense precautions.

Concerning our DIY Portfolio, we recently talked about how we already are Handling Bad Decline Days.

The main points would be to never sell out of panic and to only react after the fact. At least, as far as stock transactions are concerned. Staying calm and somewhat expecting these inevitable setbacks, you can prepare yourself ahead to eventually seize outstanding buying opportunities.  

Lone Transaction in Flowing Along Mode

As anticipated Last Time, Royal Bank (RY) was our next transaction as we added additional shares to our existing position after its Dip Factor briefly surged in late May.
What is really surprising on the other hand it that it was our only acquisition of the quarter. Markets were kind of on a roller coaster ride especially in June, but interesting buying opportunities were only outside our short buy list. As we mentioned above, we missed a great opportunity to buy Colgate-Palmolive (CL) after it was down by a little more than 20% from its 52-week high.
In general, markets have done well since that point. Once again, our calmness paid off as our DIY Portfolio climbed back up after a few rough months. As always, we are glad to keep collecting dividends that provide us a solid stable base. It helped us remain patient while our capital return has reversed back up. A stronger US dollar also improved our performance a little. All this maintains our long-haul return still a notch over our ambitious Long-Term 12% Objective.
Despite the fact we have been particularly passive lately, many US stocks are now attracting our attention and we would probably acquire some of them in different circumstances.  We especially like Johnson & Johnson (JNJ Down 10.65% Dip Factor 3.07), 3M (MMM Down 18.27% Dip Factor 3.66), Procter & Gamble (PG Down 14.57% Dip Factor 3.32) and of course, Colgate-Palmolive (CL Down 13.99% Dip Factor 3.40).

The best opportunities on the Canadian side are still in the utilities sector with robust long-term contenders like Emera (EMA Down 14.81% Dip Factor 3.14), Fortis (FTS Down 12.23% Dip Factor 3.11), Canadian Utilities (CU Down 19.20% Dip Factor 3.75) or Atco (ACO.X Down 16.46% Dip Factor 3.03).

We don’t really care about short-term turbulence but let’s hope events somehow remain on their cozy-along mode. Meanwhile, we’ll continue to do our thing (almost nothing or just a few simple things) and report back in a dozen weeks or so.

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