Finally, an inexpensive follow-along investment portfolio for Canadians. Grown as a community.
Volume 1: December 2018
News and Discussion
The TSX is down 6.5% on the year. Although the market has suffered, the Stratosphere Premium Portfolio has weathered the storm and has a positive return Year to Date.
The market has faced its first serious market correction in recent memory. The S&P 500 and TSX both fell roughly 10% for negative returns in 2018 YTD. The overvalued tech has taken a real (expected) hit as I have been writing about for a while. Could this longest running bull market be over? No one knows and whoever thinks they know are smoking some of that new legal stuff. Stocks are on sale, for now. Continue to dollar cost average and pick up some great businesses trading lower.
Alimentation Couche-Tard Inc. (most known by Circle K) had a monster quarter due to new acquisitions. Earnings grew 9% and is riding 52 week highs.
Equitable Group shares continue to climb higher as they are approaching their fair value and good financial results. Still very undervalued as their stock crashed with Home Capital Group by association in March 2017. Trading at 7x earnings - still very attractive. Most recent quarter recorded record top and bottom line.
GM closing their Oshawa, Ontario plant is news that is shaking up the auto sector. There have been employee walkouts and 15,000 jobs are at risk in total some reports say. We all know manufacturing in Ontario is trending negatively. Magna is positioned well across the rest of the globe. The concerns with them supplying Oshawa is real and is hard on the local Ontario plants.
CCL Industries agreed to acquire the assets of Unilogo, based near Warsaw, Poland, a supplier of digitally printed, pressure sensitive and sleeve labels for consumer products customers.
Amia And Air Canada oficially Enter Agreement For Purchase Of Aeroplan Loyalty Business. Visa is part of the deal with TD and CIBC are the network partners for loyalty credit cards. Glad to see that AC is using Aeroplan again. The brands have been known as paired together and it makes perfect sense that they re-acquire it. Air Canada used to be a position in the portfolio. Following my strict income rule and sold for 20.85% profit.
TD, closed out another great year with earnings up 12% and revenue up 5% from last quarter. Dividend yield at 3.67% with a 43% payout ratio.
GoEasy has been named one of 2018’s Most Admired Corporate Cultures in Canada by Waterstone Human Capital, one of Canada’s fastest-growing cultural talent management and retained executive search firms.
BTB Real Estate Investment Trust has been named on the 2018 list of the 15 Best Workplace in Quebec.
Stratosphere Investing’s Premium Portfolio 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.
Quantitative TSX Analysis (SI Score)
Download this month’s Spreadsheet.
Stratosphere Premium’s Portfolio has received $253.52 in dividend payouts since inception when including international ETF exposure.
The portfolio has Dividend Reinvestment Investment Plans (DRIPs) on all positions.
Dividends paid this Month:
BTB REIT paid their monthly distribution of $6.69 ($0.035 per share) resulting in one share repurchase.
Top TSX Buy Candidates - December 2018
The following companies may or may not currently be in the portfolio. Regardless, they are attractive buys whether they are owned or not.
Alimentation Couche Tard (ATD.B) (SI Score 298.5)
CCL Industries (CCL.B) (SI Score 304.7)
Premium Brand Holdings (PBH) (SI Score 305.2)
TD Bank (TD) (SI Score 202.5)
Open Text Corp (OTEX) (SI Score 241.8)
Magellan Aerospace Corp (MAL) (SI Score 284.3)
Equitable Group (EQB) (SI Score 232.1)
WSP Global (WSP) (SI Score 276.9)
2018 Capital Deployment Schedule
TFSA Contributions have been made in 2018.
2019 Capital Deployment Schedule
$0 has been invested in 2019.
$6,00 is to be invested in 2019 as the TFSA contribution limit has been raised.
$1500 each quarter OR $500 each month beginning as advised in monthly volumes and email updates.
Note: $500 is a “position weighting” in The Portfolio.
The Current Portfolio
The real money portfolio is currently worth $15,500.00 as of December 3, 2018.
You may invest as much or as little as you wish. 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.