Finally, a flat-fee follow-along investment portfolio for Canadians. Grown as a community.
Volume 2: February 2019
*The Questrade trade credit is for users looking to open an account or switch over to the service from another discount brokerage. You will recieve a rebate up to $150 rebate from Questrade if switching brokerage providers incurs a transfer fee. In my experience, this covers the entire transfer out fee from all brokerages.
News and Discussion
The market is rallying hard after the Christmas Correction. The Portfolio is off to a great start to the year. The last two position recommendations, Open Text (OTEX) and WSP Global (WSP) are already up 7.26% and 14.97% respectively.
For long term investors, the last few months is a prime example of allocating capital when markets are depressed. A consistent schedule of $500 a month will dollar cost average and mitigate risk from short term price action.
TFI International (Ticker TFII) is this months pick and is a new add to The Portfolio. An impressive growth by acquisition story in Canada and the US. They are an undervalued dividend growth play.
OpenText has bought Catalyst Repository Systems, Inc. OpenText is showing continued execution of their growth by acquisition strategy.
OpenText also released earnings on January 31 beating analyst estimates. OpenText delivered another strong quarter in Q2. Total revenues grew to $735 million, Annual Recurring Revenues grew to $530 million, up 3%, year over year, with record Adjusted EBITDA margin of 42%
Equitable Group Completes Strategic Acquisition of Bennington Financial Services Corp.
Magna is proud to announce it will assemble the all-new Toyota GR Supra sports car at its complete vehicle assembly facility in Graz, Austria. Revealed this week at NAIAS, the Toyota GR Supra is expected to begin production in early 2019.
CCL Industries Announces Bolt-on Acquisition for Avery.
TD Bank Announces Organizational Changes to U.S. Consumer Products Business. TD Banks continued growth to the retail banking sector in the US could be very promising.
Go Easy has some major insider purchasing during the large selloff of their stock at the end of 2018. All members of the senior management team and five members of the Board of Directors, collectively purchased a total of 213,995 common shares at an average price per common share of $39.93 for a total value of $8,545,834.
BTB Real Estate Investment Trust is pleased to announce that it has leased to Nuera Enterprises Canada Inc. the entire 133,000-square-foot property located at 3695 Autoroute des Laurentides in Laval, Québec.
Quantitative TSX Analysis (SI Score)
Download this month’s Spreadsheet.
Stratosphere Premium’s Portfolio has received $315.78 in dividend payouts since inception when including international ETF exposure.
The portfolio has Dividend Reinvestment Investment Plans (DRIPs) on all positions.
Dividends Paid Last Month:
Go Easy paid their quarterly dividend of $3.83.
TD paid their quarterly dividend of $11.39.
Equitable Group paid their quarterly dividend of $3.64. Seeing some nice consistent dividend growth from EQB.
The International Index XEF paid out $14.89.
The US Index VUN paid out $8.19.
The Emerging Markets Index VEE paid out $3.39.
BTB REIT paid their monthly distribution of $6.76, resulting in one share repurchase.
This Month’s Activity
This Month’s Purchase
This month’s purchase is TFI International (TFII). TFI International is a transportation and logistics company domiciled in Canada. The company organizes itself into four segments: package and courier, less-than-truckload, truckload, and logistics. The package and courier segment picks up, transports, and delivers items across North America. The less-than-truckload segment transports smaller loads. The truckload segment transports goods by flatbed trucks, containers, or a more specialized service. The company provides general logistics services through the logistics segment. TFI International derives the majority of revenue domestically, followed by the United States.
No rebalancing or purchasing of international index ETFs were purchased this month.
No positions are being sold in this month’s volume. See past “Closed Positions” below.
2019 Capital Deployment Schedule
$6,000 is to be invested in 2019 (current TFSA Contribution Limit).
$500 each month will be deployed as advised in monthly volumes and email updates.
History Year to Date:
January - 1x position weighting ($500) into WSP Global (WSP). This bought 8 shares for a book value of $468.08
February - 1x position weighting ($500) into TFI International (TFII). This bought 13 shares for a book value of $507.65.
ETF Deployment Schedule:
International stocks are held through broad based index funds and aims to make up 30% of the portfolio. Some months will include rebalancing these funds to desired allocations and will be featured in “This Month’s Purchase”.
The US Total Market Index (VUN) will be bought at end of Q1 2019 to approximately desired portfolio allocation (15%).
The International Index (XEF) will be bought at end of Q2 2019 to approximately desired portfolio allocation (10%).
The Emerging Markets (VEE) Index will be bought at end of Q3 2019 to approximately desired portfolio allocation (5%).
The Current Portfolio
The real money portfolio is currently worth $15,706.05 as of February 1, 2019.
You may invest as much or as little as you wish within contribution limits. Maximize TFSA contribution limits first.
Returns are since inception in July, 2015.
The Portfolio by Recommended Position Weighting (%)
Why the international ETF exposure? As Canadians, it would be unwise to be wholly invested on stocks only bought on Canadian exchanges. 100% Canadian Home Bias is an ineffective way to manage a portfolio. The beauty of these ETFS is that they are all traded in Canadian Dollars (CAD). The exposure from these three ETFs will provide investors global diversification from markets as seen from the maps below.
Stratosphere Premium’s Rule-Based Management Philosophy:
A defined set of rules to maintain discipline in our strategy.
The Buy Rules:
1. Buy companies trading below determined upper limits of valuation multiples.
2. Buy companies that have demonstrated recurring top line revenue growth.
3. Buy companies that pay a growing dividend.
4. Buy companies with a history of profitability and high return on equity.
5. Buy companies with an obviously recognizable qualitative moat.
6. Buy companies that have demonstrated a history of share repurchases.
The Avoid Rules:
1. Avoid companies trading above determined upper limits of valuation multiples.
2. Avoid companies that have demonstrated meager or no top line revenue growth.
3. Avoid companies with high total debt to equity ratios.
4. Avoid companies with high payout ratios.
5. Avoid companies that depend on factors in the political landscape and macroeconomic conditions.
6. Avoid companies that do not have an easy to identify competitive advantage.
7. Avoid companies with business models that produce unpredictable generation of free cash flow from operations.
8. Avoid companies that are well without a circle of competence.
The Sell Rules:
1. Sell held companies that have exceeded determined upper limits of valuation multiples.
2. Sell held companies that cut dividend payouts.
3. Sell companies with consistently declining top line revenues.
4. Sell companies with a identifiable slipping of competitive advantage.