Update September – Treading Water

It’s been an increasingly choppy market.  It was bad enough when oil was noticeably crumbling near the end of last year, but now we seem be hitting increase volatility with days where we go down hard followed by a jump back up.  Buy the Dip and someone reminded me the saying: “Sell the Rip”.

My portfolio is geared for income, and to provide a cushion in declining markets, has been tested quite a bit by my continued fear of a major breakdown in the markets.  As a result of the volatility I planned to: A) raise some cash, B) streamline and concentrate existing positions in my portfolio to increase responsiveness, C) diversify by industries, and D) improve the quality of income away from REITs and smaller companies.

For a while I was doing well; closing out some old and small positions and taking the hits as I reduced some losing positions.  It hurt a bit, but I had a plan in place.  Then… I got pulled in some interesting stories and let some small holdings creep into my portfolios (Non-Registered and Registered).  Net out, pretty much all the cash I raised have returned into the market.

Along the way to executing my plan I also realized my increased uncertainty, as several times I picked up a position and sold them quickly for either a loss or insignificant gain.  Although I’ve added to positions, I am still very much uncertain of the market, but with the move to higher quality names I feel more comfortable with my portfolio through potential declines.  On one hand I want to protect my principle as much as possible and do my best to avoid losses, but on the other I want to average down or take opportunities to increase holdings of quality names.

Closed Out:

REI.UN*

HR.UN*

BIN*

KMP*

AQN**

* REI.UN, HR.UN, BIN, KMP were very old and small positions and I felt sad to let them go.

** RRSP holding I wanted to trade in and out as it swung back and forth.  Still waiting to see.

Added to existing:

MFC*

IPL**

BNS***

* Added to existing position.

** Averaged down, but I will likely close out the added position

*** Averaged down and closed out the majority of the added position.

New:

DIV*

GRC*

CWB**

X**

* DIV and GRC are the sexy stories of Royalty companies mixed with high yields, which isn’t always the best thing to go by… I deployed a bit of TFIA money to see where they go.

** CWB and X were missteps from writing Puts to gain incremental income and potentially acquire stocks that I want at lower prices. CWB I’ve been interested in and previously traded in and out.

Mulling moving this blog to a new site where I will put up more specific details of what I’ve done and gone wrong: The Distracted Investor

Updates, I’ve been busy. Let it Ride, Work, Options, Games, News, Portfolio Clean Up – Sunday June 28, 2015

I haven’t really been posting much on here.  This has partly been due to the below items.  I’ll add on some additional details.

1) Autopilot nature of my existing income/dividend portfolio.
2) Busy with work.
3) Maintaining my Option Book.
4) Wasting time playing games on my smart phone (the next generation of idiot box).
5) I have been using a written log.
6) Observing news.
7) Tidying up portfolio/shoring up cash reserves.

---

1) Autopilot nature of my existing income/dividend portfolio.

– As per my original portfolio plan, for the most part, I’ve been collecting the dividends and letting it ride.

2) Busy with work.

– Perhaps it is the busy season, but I’ve barely had time to keep an eye on things intra-day and relatively tired after work.

3) Summer time fun

– Just going out enjoying the summer and trying to stay active.

4) Maintaining my Option Book.

– This takes up a bit more time and focus.

– Managing exposure of options to safe levels.

5) Wasting time playing games on my smart phone (the next generation of idiot box).

– Self-Explanatory.

6) I have been using a written log.

– Writing more thoughts and daily ongoings on my market actions.

– I’ve had less to write onto here.

7) Observing news.

– There’s always something going on and what I’ve been trying to keep tuned into are systemic issues; something on the scale of 2008/2009’s or worse.

– Some of focus: FOMC/interest rate meetings and global issues such as China slowing down and the Greek Debt Crisis.

– Today Greek debt problems have escalated and they say there will be bank holidays.  EUR will and has been impacted. Soon, we will see how this translates globally; if reaction is muted because “it’s over there”; or people see there could be knock on effects; or even “it’s already priced in”.

8) Tidying up portfolio/shoring up cash reserves.

– When I first seriously started investing back in 2008/2009 my resources were limited, but as time has passed my portfolio has grown with increased savings.  However, growth tended towards broadening my holdings in an attempt to “diversify”.  In reality, I was trying to own a piece of everything in the market and I amassed over 25 different positions.

– Having +25 positions sounds great, but problem with having that number is the cost of time needed to maintain these positions and how effective would these small positions be in maintaining income/dividends.  Closing or adding to positions becomes expensive as resources will be diffused.

– If there is severe market turmoil, monitoring potential positions to exit (or add to) becomes difficult and again problems of diffusion of resources.

– You get emotional with your stocks sometimes and having so many positions leaves you frozen. Whittling down is difficult.  I created a very simple plan: start closing out small non-core positions. In particular smaller market caps and with a bias towards REITs that depend more on tax structures and low interest rates.

– To this effect, I haven’t closed very much.  Sold two old positions HR.UN and REI.UN.  I have two others in my sights.

– Build cash as it appears we are up for more turbulence and markets have continued to hit new highs (at least some US indices have been hitting highs; TSX has been plateauing and down a bit from highs.)

Exploring Option Writing: Expiration Cost basis and 1405.79% Gain $EMP.A

I haven’t been updating regularly and I had been planning on putting up pieces on my adventures with Option Writing. Anyway, here’s one update (Just don’t ask about my losing trades. har har. ouch. I’ll detail that ridiculousness in another post if I get around to it.)

Recently, Puts I wrote on EMP.A expired, and if my maths is correct, showing a gain of +1405.7915% ($182.05) within a total of 18 trading days (April 3 was the Good Friday holiday).  Breaking it down another way: I made $10.1138 per day.  It was actually quite stressful as the stock fluctuated during that period until expiry and I was in danger of being assigned (option being automatically exercised at expiry) and the exposure of $26,400 would have locked in my money.

Of course most of my Option Writing trades have not raked in such gigantic gains. I tend to close out the trades some time before expiration date for risk control purposes, thereby reducing my overall exposure to any sudden declines of the underlying equity.  However, if I’m feeling patient (and confident that the stock price has moved enough to create a buffer) then I will allow the Option to expire and reap the gains. Further to this – if I feel it might be worth buying the stock, then I would not mind being assigned. That is the key part of my more conservative approach to Option Writing – targeting stocks that I am interested in owning.

For tracking purposes, I made a spreadsheet “Option Writing Book” showing details of both my pending and closed trades.  The below excerpt shows quick details of my EMP.A trade.

Note:

Date = When I wrote the Put (March 24, 2015)

Expiry = When the Put expires (April 17, 2015)

Exposure = How much cash I would need IF my Put was assigned (exercised by someone).

Type = Secured, meaning if assigned I had the cash to cover.

Expired

Date

Symbol

Type

Expiry

Strike

Quantity

Price

Gross

Commission

Net Price

Net Amount

Exposure

Status

Type

Net Revenue

% Gain/Loss

2015-03-24

EMP.A

Put

04/17/15

88

3

$0.6500

$195.0000

$12.95

$0.6068

$182.05

$0.00

Expired

Secured

$182.05

1405.7915%

Steps used to calculate percentage gain:

1) Net Revenue/Cost Basis = % Gain/Loss.

2) Net Revenue = Option Premium – Commissions

3) Cost Basis = Commission (in this case, writing the Option = $12.95, and expiry has no commission)

4) Calculation: 182.05/12.95=14.05791505791506*100=1405.7915%

An ’emerging market’ at home: Canada’s banks making a big push into aboriginal communities

Fast food chain Shake Shack files for an IPO

My first time Shake Shackin’ was also my final Western meal before going to India back in October.

SHAK

Subprime lending market in Canada skyrockets to record as banks tighten reins

CMHC to hike issuer fees and mortgage rates could follow

Practice Makes Perfect – WorkBook: Finding Dividend Information

My mom keeps asking about the dividend paid out by companies she is interested in and I always try to teach her how to locate and calculate this information.  Despite my directions she keeps coming back to ask how and where.  Now, I figure the best way for her to learn this simple, but vital information is to practice and keep practising.

The goal of this workbook I created is not just to figure out the dividend information, but also help develop the ability to go online and research some basic information.  The preference of course is to locate the Investor Relations section of a company website and find the exact information.  NOT to visit some online finance website and take potentially incorrect information.

 

I will print off a copy and hand it off to her later on and see if it helps.

 

Note: Stocks below are all on TSX; and for the sake of simplicity, any dividends paid in USD are represented nominally as CAD.  I greyed out some fields that don’t need to be filled in, but copy and paste into blog site didn’t transfer over.

1) Find the Yield based on Current Price (Yield Calculation: (Dividend / Price) x 100 = Yield %)
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
Canadian Imperial Bank of Commerce	CM	$97.53	$4.100	$1.025	4.204%	Quarterly
Toronto Dominion	TD	$53.47	$1.880	$0.470	3.516%	Quarterly
Royal Bank of Canada	RY	$78.82	$3.000			Quarterly
Bank of Nova Scotia	BNS	$67.31	$2.640			Quarterly
Bank of Montreal	BMO	$79.79	$3.120			Quarterly
National Bank	NA	$50.62	$1.920			Quarterly
Laurentian Bank of Canada	LB	$48.53	$2.080			Quarterly
Canadian Western Bank	CWB	$37.08	$0.800			Quarterly
Manulife Financial	MFC	$20.04	$0.620			Quarterly
Sunlife Financial	SLF	$38.09	$1.440			Quarterly
Power Corporation of Canada	POW	$28.64	$1.160			Quarterly
Power Financial Corp	PWF	$31.80	$1.400			Quarterly
IGM Financial Inc	IGM	$43.70	$2.150			Quarterly
Great-West Lifeco Inc	GWO	$30.22	$1.230			Quarterly
Industrial Alliance Insur. & Fin. Ser.	IAG	$42.47	$1.040			Quarterly
Manitoba Telecom Services Inc	MBT	$28.24	$1.700			Quarterly
2) Using Stock Symbol, find Company Name
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
	T	$38.04				Quarterly
	RCI.B	$42.28				Quarterly
	BCE	$47.33				Quarterly
	SJR.B	$27.29				Monthly
	CJR.B	$24.78				Monthly
3) Using Company Name, find Stock Symbol
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
Thompson Reuters Corporation		$39.99				Quarterly
Enbridge Inc		$50.98				Quarterly
TransCanada Corporation		$52.71				Quarterly
Pembina Pipeline Corp		$45.40				Monthly
Inter Pipeline Ltd		$34.90				Monthly
4) Find the Dividend and Calculate the Yield
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
Emera Inc	EMA	$35.36				Quarterly
TransAlta Corporation	TA	$10.87				Quarterly
Fortis Inc	FTS	$34.85				Quarterly
Canadian Utilities Limited	CU	$38.88				Quarterly
ATCO Ltd	ACO.X	$46.06				Quarterly
6) Find the Dividend per payout Frequency and the Yield. (ie. Price divided by either Quarterly = 4, Monthly = 12)
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
ARC Resources Ltd	ARX	$28.68	$1.200	$0.100	4.184%	Monthly
Crescent Point Energy Corp	CPG	$37.68	$2.760			Monthly
Baytex Energy Inc	BTE	$35.70	$2.880			Monthly
Encana Corporation	ECA	$21.02	$0.280			Quarterly
Suncor Energy Inc	SU	$37.73	$1.120			Quarterly
5) Find the Dividend/Frequency (Dividend Paid by Frequency) ie. Quarterly = 4 or Monthly = 12
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
Husky Energy Inc	HSE	$27.90	$1.200		4.301%	Quarterly
Brookfield Asset Management Inc	BAM.A	$51.17	$0.640		1.251%	Quarterly
Keyera Corp	KEY	$89.45	$2.580		2.884%	Monthly
Canadian National Railway Company	CNR	$73.60	$1.000		1.359%	Quarterly
Canadian Pacific Railway Inc	CP	$224.99	$1.400		0.622%	Quarterly
6) Find the missing information
Company Name	Symbol	Price	Dividend	Dividend/Freq	Yield	Frequency
SNC-Lavalin Group Inc		$47.88				Quarterly
Magna International Inc	MG	$101.59				Quarterly
	L	$53.97	$0.980			Quarterly
Metro Inc	MRU	$74.54				Quarterly
Empire Company Limited	EMP.A	$74.57				Quarterly
	IMO	$51.45	$0.520			Quarterly
Capital Power Corporation	CPX	$24.90				Quarterly
Badger Daylighting Ltd	BAD	$26.09		$0.030		Monthly
CI Financial Corp	CIX	$32.14				Quarterly
Agrium Inc		$93.36				Quarterly
	POT	$36.00				Quarterly
Gibson Energy Inc	GEI	$31.77		$0.300		Quarterly

$LMT Fusion Energy Development

Is it time to think about what would change if we did have viable fusion energy?

Lockheed says makes breakthrough on fusion energy project
BY ANDREA SHALAL
WASHINGTON Wed Oct 15, 2014 1:09pm EDT

(Reuters) – Lockheed Martin Corp said on Wednesday it had made a technological breakthrough in developing a power source based on nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could be ready for use in a decade.

Tom McGuire, who heads the project, said he and a small team had been working on fusion energy at Lockheed’s secretive Skunk Works for about four years, but were now going public to find potential partners in industry and government for their work.

Initial work demonstrated the feasibility of building a 100-megawatt reactor measuring seven feet by 10 feet, which could fit on the back of a large truck, and is about 10 times smaller than current reactors, McGuire told reporters.

In a statement, the company, the Pentagon’s largest supplier, said it would build and test a compact fusion reactor in less than a year, and build a prototype in five years.

In recent years, Lockheed has gotten increasingly involved in a variety of alternate energy projects, including several ocean energy projects, as it looks to offset a decline in U.S. and European military spending.

Lockheed’s work on fusion energy could help in developing new power sources amid increasing global conflicts over energy, and as projections show there will be a 40 percent to 50 percent increase in energy use over the next generation, McGuire said.

If it proves feasible, Lockheed’s work would mark a key breakthrough in a field that scientists have long eyed as promising, but which has not yet yielded viable power systems. The effort seeks to harness the energy released during nuclear fusion, when atoms combine into more stable forms.

“We can make a big difference on the energy front,” McGuire said, noting Lockheed’s 60 years of research on nuclear fusion as a potential energy source that is safer and more efficient than current reactors based on nuclear fission.

Lockheed sees the project as part of a comprehensive approach to solving global energy and climate change problems.

Compact nuclear fusion would produce far less waste than coal-powered plants since it would use deuterium-tritium fuel, which can generate nearly 10 million times more energy than the same amount of fossil fuels, the company said.

Ultra-dense deuterium, an isotope of hydrogen, is found in the earth’s oceans, and tritium is made from natural lithium deposits.

It said future reactors could use a different fuel and eliminate radioactive waste completely.

McGuire said the company had several patents pending for the work and was looking for partners in academia, industry and among government laboratories to advance the work.

Lockheed said it had shown it could complete a design, build and test it in as little as a year, which should produce an operational reactor in 10 years, McGuire said. A small reactor could power a U.S. Navy warship, and eliminate the need for other fuel sources that pose logistical challenges.

U.S. submarines and aircraft carriers run on nuclear power, but they have large fission reactors on board that have to be replaced on a regular cycle.

“What makes our project really interesting and feasible is that timeline as a potential solution,” McGuire said.

Lockheed shares fell 0.6 percent to $175.02 amid a broad market selloff.

(Editing by Jeffrey Benkoe)

CDN Pipeliners down since mid-Sept 2014 post- $TRP “rumour”.

I suppose if you aren’t worried about economic, global political, etc issues then you might see this as an opportunity to buy. The price declines would be nothing more than one of those blips in a chart before the price rallies to new highs again, that lovely “V”. If you’re bearish you’d think it’s just part of the long slide into oblivion, the dreaded “L”.

I would say the peak was made with the released “rumour” of American activist investors looking into TransCanada Corporation. If I was the suspicious type I’d probably think that was strategically released at an uncertain time (Scottish Independence Referendum, September 19, which resulted in a No.); the TSX was starting its slide; and drew buyers into pipeline stocks – along with TRP, I keep an eye on IPL and saw it jumping up significantly during that time.

I don’t follow PPL, KEY, and ENB.

Regardless, here is where we are at as of September 29, 2014.

PPL -12.06%
KEY -11.14%
TRP -9.34%
IPL -8.75%
ENB -5.38%

Stock pricing data copied from http://www.stockchase.com

Pembina Pipeline Corporation (T.PPL)
Price: $46.64 | Change: $-0.96 | %Change: -2.02%
52 Week High/Low: 53.04/32.70

Keyera Corp (T.KEY)
Price: $88.71 | Change: $-1.56 | %Change: -1.73%
52 Week High/Low: 99.84/56.57

TransCanada Corporation (T.TRP)
Price: $57.89 | Change: $-0.25 | %Change: -0.43%
52 Week High/Low: 63.86/43.94

Inter Pipeline Ltd (T.IPL)
Price: $35.54 | Change: $-0.17 | %Change: -0.48%
52 Week High/Low: 38.95/23.80

Enbridge Inc (T.ENB)
Price: $53.81 | Change: $-0.03 | %Change: -0.06%
52 Week High/Low: 56.87/41.74