An October to Forget

Worst month for the S&P since 2011. $2T was shed alone in October. Both the TSX and S&P 500 lost 7% and 6.5% respectively.

Lots of money was wiped out but on the bright side we did close the month with consecutive days of triple digit gains.

Here's the thing, you probably were more likely to panic if you've never lived through this before. "In the last 10 years the S&P 500 has dropped at least 5% 23 times. That's an average of twice a year." So says Barry Schwarz of Baskin Financial.

If you are going to invest in equities then you have to expect and embrace months like we just had. I'm 100% stocks. US and Canada. No bonds, prefs and just a small amount of ETFs. That's just me and not a suggestion for you to do the same.

Even my wife's balanced fund lost money so there was nowhere to hide in October. I am looking to unwind that fund and buy some bargain based stocks during the tax loss selling season. I may wait until the new year, I haven't made a firm decision yet. It did tell me that the 40% bond allocation did nothing to save money during this past month. The fund shed almost $1K.

I did sell some stocks during the first week of the correction as I was holding them with borrowed money. I had used my HELOC for purchases. It turned out to be a good decision as my rate rose to 4.2% and the dip was followed by an even greater pullback last week.

I punted DOL, ATD.B, TOY, QSR, LNR and OTEX

The only stocks that I would consider buying back are ATD.B and TOY

QSR is mired in debt OTEX has been over hyped and is down 13% since I bought it. It is still digesting acquisitions and too many people like this stock. Probably why it's tanked. DOL is a disaster. Nothing sells for a dollar and now it's being heavily shorted by a US hedge fund. They claim it's overvalued. Why be there? LNR is suffering from the tariff war and my play on that did not even come close to working out.

I did not sell anything in my retirement accounts. As it turns out I bought Costco at a good time but Facebook, Amazon, Berkshire are all below my purchase price. I like them even more after the pullback.

Be Different

You only win this game by thinking long term and holding. The only reason I sold the stocks mentioned is because of leverage. With interest rates continuing to rise this is not a good strategy to continue. The dividend payments and or growth of the stock does not keep up with interest payments. It's just too hard to make some short term capital gains so I'm out for now.

Hunting for Value

Where to look? All the recommendations for the 'Dogs of the TSE' made in February are down a combined 7%. The worst performers and if I was looking to put money to work, look at BNS 11.7%, BCE 9.6% and TRP 10%.

Will this list get cheaper? I have no idea but after the sell off we just experienced, now is the time to start looking. If not now when?

Hunting for Growth

I like to stick to what's been working so far and how can you argue with old giants like CNR and CP. Low dividend sure but they continue to make money, beat earnings and rise in price. I just keep buying more when I have the money. I believe all portfolios should hold at least one of these rail stocks.

CP has an ROE of 37% and CNR 35%. These guys know how to allocate capital and in this era of crude by rail it should continue for years.

I also like food stocks just like Buffett does. I love and own MTY with it's 21% ROE. During this correction it has actually ended up higher than where it was 2 weeks ago. This is what's working and where I want to be. ATD.b should also be on your radar with it's 24% ROE. 

Dividends and Income

I use a combination of growth and dividend growth stocks to build wealth in my retirement accounts. It all depends on age and what your comfortable with. For me I love this combination. My core holdings include banks, telcos, utilities, food and pipelines that pay dividends. I have only sold ETFs this year and then bought stocks for our retirement accounts. I continue to add to positions as dividend income builds up.

Growth stocks I hold in these accounts include; FB, COST, AMZN, BRK.B, TFII, CSU and MTY. 

Buy businesses you understand and use. I'm looking at Netflix. Everyone I know uses it and has to have it. Don't you want to own something like that? It will always be expensive so who knows where it's going.

New Book and Recommended Reading

This is the second edition of Robin Speziale's book 'Capital Compounders'. I have just received a review e-book version that I am currently reading and will have a review posted here and on Amazon in the coming weeks.

Robin invests in growth stocks and is the best selling author of 'Market Masters'

Robin has been saving, investing, and building his portfolio since the age of 18. Now, 10 years later, at the age of 28, he’s amassed a $225,000 stock portfolio. He lives in Toronto.

Besides following his blog he has a Capital Compounders Facebook Page well worth joining for learning where to better invest your capital.