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STRATOSPHERE PREMIUM

Volume 6: June 2019

Finally, a flat-fee follow-along investment portfolio for Canadians. Grown as a community.


Discussion

  • Due to geopolitical reasons and talks of trade war, global stock markets have been down over the past month. The US index being down over 4%. Luckily, the Canadian market is only down 2.5% in May.

  • This is why you continue to dollar cost average, buy great companies that grow their dividends and hold for the long haul. Markets go through all kinds of ups and downs. The only person who dies from a rollercoaster, is the one who jumps off. It is best to focus on the things you can control like being a rule based investor and following guidance from Stratosphere Investing :)

  • This month’s pick is a new name, Enghouse Systems Limited (ENGH). Another very strong name in the enterprise management software industry. Enghouse is a Canadian based software and services company founded in 1984 serving a number of distinct vertical markets through its three divisions, each developing and selling enterprise oriented applications software.

News in The Portfolio

  • This month’s pick just closed two acquisitions this month. Enghouse acquired Espial group headquartered in Ottawa, Canada, Espial provides a next generation, cloud-based software platform that enables Video Service Providers ("VSPs") or operators to deliver video and entertainment services. Espial's primary solution is a true SaaS cloud-based multi-tenant IP Video platform.  The solution powers millions of operator-managed set-top boxes and consumer owned devices globally.

    Additionally, Enghouse has acquired Vidyo, Inc. for a purchase price of approximately $40 million. Vidyo's annual revenue is approximately $60 million. Headquartered in Hackensack, New Jersey, Vidyo is a provider of enterprise-class video software solutions that support visual communications across diverse end-points, networks of varying bandwidth and geographically dispersed locations. The company's infrastructure software platform leverages patented video routing, management and interoperability technologies to deliver best-in-class video quality, reliability, scalability and security. Delivered in the cloud, on-premise or as a hybrid solution, Vidyo enables customers to more efficiently collaborate, interact and engage.

  • MTY Food Group Inc has now officially completed the acquisition of Papa Murphy's Holdings, Inc. ("Papa Murphy's"), the craft pizza joint.

  • CCL Industries Inc. has acquired the shares of Colle a Moi Inc. (“CAM”), a privately owned company, based in Quebec City, Canada. Founded in 2015, CAM is a leading manufacturer of personalized kid’s labels in Quebec. Forecast sales for the year ending July 31, 2019 are expected to be $1.3 million with an estimated 65% EBITDA margin. The debt free, all cash purchase consideration, subject to customary closing conditions, is approximately $3.0 million.


 

Quantitative TSX Analysis (SI Score)

Quantitative TSX Analysis

Download this month’s Spreadsheet.

 

$ 425.58

Dividend Income

Stratosphere Premium’s Portfolio has received $425.58 in dividend payouts since inception.

The portfolio has Dividend Reinvestment Investment Plans (DRIPs) on all positions.

Dividend Income Paid Last Month:

The Portfolio brought in $8.35 of income this month.

  • MTY Food Group paid their quarterly dividend resulting in $1.49.

  • BTB paid their monthly dividend resulting in $6.86 and a share repurchase (DRIP).

 

This Month’s Activity

This Month’s Purchase

A new position is added this month named Enghouse Systems Limited, an enterprise management software company. The zero debt to equity, recurring revenue, growing top line, growing earnings and of course, growing dividends are just some of the reasons why this company is being added to the portfolio.

15 shares of Enghouse are added to The Portfolio for this volume.

ENGH

ETF Activity

No ETF activity this month.

Sell Activity

No positions are being sold in this month’s volume. See past “Closed Positions” below.

 
 

$3,021.28 Remaining

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.

March - 1x position weighting ($500) into MTY Food Group (MTY). This bought 9 shares for a book value of $533.70.

April - 1x position weighting ($500) into Toromont Industries (TIH). This bought 7 shares for a book value of $477.89.

May - 1x position weighting ($500) into TFI International (TFII). This bought 11 shares for a book value of $481.25.

June - 1x position weighting ($500) into Enghouse Systems (ENGH) . This bought 15 shares for a book value of $505.05.

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 (XUU) will be balanced at end of Q1 2019 to approximately desired portfolio allocation (15%).

The International Index (XEF) will be balanced at end of Q2 2019 to approximately desired portfolio allocation (10%).

The Emerging Markets (VEE) Index will be balanced at end of Q3 2019 to approximately desired portfolio allocation (5%).

 

$   18,332.59

The Current Portfolio

The real money portfolio is currently worth $18,332.59 as of June 3, 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 Position Weighting (%)

premium-portfolio
premium-etfs

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.

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Returns

Returns YTD

 
 
returns-vs-book
 
 

Historical Returns since Inception

 
Annual Returns
 
Returns Chart

Returns are calculated via the Modified Dietz Method which is a money weighted return on investment (the way all portfolios should be measured) calculation that incorporates cash flow contributions.

 
 

Closed Positions

Sold Positions
 

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.


*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.


Nothing contained on this website should be considered investment advice, an offer to sell, or a solicitation of an offer to buy any security, nor shall Stratosphere Investing offer, sell or buy any security to or from any person through this site or reports on this site. Stratosphere Investing is not registered as an investment advisor in any jurisdiction. The content and materials contained on this website are provided for information purposes only and nothing contained therein is investment advice nor should it be construed as such. Prior to making any investment or subscribing to any of Stratosphere Investing free or premium services and products, you should consult with professional financial, legal and tax advisors to assist in due diligence as may be appropriate in determining the appropriateness of the risk associated with a particular investment.