Should You Own CP and CNR

With the recent strike at CN Rail and it's rather quick settlement, it got me wondering if this is still a good investment and why I own them. 

I own both of these stocks in all our retirement accounts and have for years. For retirees they are low yielders at 1 and 1.8%.

Your not going to get rich or generate a lot of extra quarterly cash flow but you do get a lot of growth and stability.

Instead of buying any fixed income products for retirement, I consider these two stocks as my balance, diversification and asset allocation. They never really move too much in either direction but just slowly grind upwards.

If the latest work stoppage has taught us anything is that CNR is absolutely 100% essential to the Canadian economy. Why not own it?

All they do is make money year after year. If you buy individual stocks instead of index ETFs then these two rail stocks are a must own for any Canadian.

CNR

Market Cap: $87.6B
Beta: 0.93

ROE: 24.8%

Forward P/E: 19.8

EPS Growth: 5.4%

Revenue: $15B
Revenue Growth: 3.8% yoy

Debt: $14.3B
Free Cash Flow:$648M
Price : $122.49

52 week high: $127.96

CP

Market Cap: $43.5B
Beta: 1.2

ROE: 32.3%

Forward P/E: 19

EPS Growth: 16.5%

Revenue: $7.7B
Revenue Growth: 4.3% yoy

Debt: $9.3B
Free Cash Flow: 1.19B
Price: $317.29B

52 week high: $323.77

With fixed income and savings accounts yielding so little why not buy some big stable, low yielding, high growth, money making machines like these railroad stocks instead? To each his own but this is the route I took.

I consider them portfolio anchors in a retirement along with a bank, pipeline and a utility stock. You could do worse and they are a lot less volatile than a high yield monthly income stock.

If the Canadian economy simply can't run without the railways then they must be a great investment for individuals.

Do you own CP or CNR or both?

For more ideas on generating cash flow in retirement read my book review on Your Ever Growing Income here.

Flipping Kirkland Lake Gold

Just a short post on how I got lucky flipping KL stock last week and buying it back yesterday.

On Friday 22 November I looked at the chart and surmised that KL was at the top of the mountain and it was time to sell and take profits. I sold at $63.75 and booked a 31% profit on my buy price. The stock closed the trading day at $63.32

I didn't call the top, just got lucky. I had no idea what announcement was coming before the market open on Monday.

Then BOOM!

KL was buying all the assets of Detour Gold. Why not?

They're practically neighbours and KL needs the assets going forward to be a relevant major player in the gold space.

The stock closed Monday 25 November at $52.38 on the merger news.

I bought back my 100 shares at $53.24. The stock plunged.

Didn't catch the bottom but I did save myself 17% on the downside.

I have never owned DGC but what a piddly day as they only gained 40 cents on the day. Market is on wait and see mode for this transaction.

Sometimes it's better to be lucky than good. It was a great time to sell KL as they gave up all their gains for the year.

It remains to be seen if buying back the stock the next trading day was the right move or waiting would have been better.

I still had the money in cash so I decided to pull the trigger.

What do you think? Anyone else own Kirkland Lake Gold?

Are you a Marijuana Bag Holder?

Just a short post documenting my most recent foray into the weed space. I have mentioned on a lot of previous posts NOT to get into any weed stocks. That has changed like all contrarians and speculators would attest to.

This is not for retirement money but for gambling money if you have any and can afford to lose it, That's why I call myself the stock market speculator.

The whole sector is oversold. Which ones to pick.

You can just buy the HMMJ ETF if you want but I would rather try and pick individual companies I think are way overdone.

I added to my position in TGOD and initiated a new position in HEXO.

I now have $10K invested in the weed space. Was today a good day to buy? HEXO went up and TGOD went down. Kinda like my PF most days and I believe just about anytime I decide to buy a stock. Get used to it, stocks go up and then down even on days you jump in.

I have mentioned before about buying in the valleys and not when stocks have reached the top of the mountain. I believe these weed stocks are in a pretty wide valley right now and I'm hoping they don't go to hell.

If they dive 20% from my buy price I'll sell. I have no desire to become a bag holder. Take a loss if necessary and move on.

HEXO

The stock closed up on the day at $2.93 on above average volume. It has a 52 week high of $11.29. That is a great upside potential right there and what I look for in a speculative gamble.

I also like the fact it has a joint venture with Molson Coors to provide cannabis infused beverages.

TGOD

I have jumped in and out of TGOD a few times. If it doesn't get moving soon I will sell at a loss for the first time since owning it to preserve capital. Tomorrow will be a big day in that direction. I have no desire to be a TGOD bag holder. Lots of pumpers out there and specs waiting to dump shares after a slight rise in prices. Tax loss selling is a great time to buy. I like November for that.

TGOD has been as high as $5.81 in the last year. Today it closed @ $0.89

It looks to be finding a bottom between 60-90 cents.

It was down today on heavy volume. This is a pure gamble and it remains to be seen what the demand for organic cannabis products will be. Lots of vegetarians out there who don't buy organic fruits and vegetables. So there's that.

Ontario needs to open more stores where the majority of the population lives.

Lastly these companies need to prove they can make money. Lots will disappear if they don't. I'll be watching closely.

What weed stocks do you like and own if any?

What I Bought and What I Sold This Week

Just a short post on some trades I made during the past week. Some I booked profits and some I checked out early taking a small loss.

Sells

RZZ, KL, NVO, WDO, FR, CNL, FVI, GSV

So all of these are gold and silver stocks. Mistake? Maybe but I booked some nice 30% + profits on a lot of these positions and some like KL and WDO are near the top. NVO could be a mistake as they are announcing nice results from recent samples.

I don't buy and sell on that kind of information anyway. I'm only concerned with volume and the stocks position to it's 52 week high/low.

I want to buy it low and when it gets high, I sell. I have no interest holding long term and look for more lower priced stocks. A lot of the time the stocks go lower which forces me to take losses early and I do.

Buys

WCP, TGOD, TOG, POE

Oil stocks have been beaten to shit. There are so many to choose from, so I picked a couple that seem solid companies with potential to explode higher. They also pay dividends of over 8% if you want to buy and hold them.

POE is a different story. The stock continues to run higher even in these trying times for oil stocks in Canada.

My Thoughts on The Week

You would think that gold would be exploding higher in these uncertain times. So it's all bullshit what you hear on the news about all the fear happening in the world.

Brexit, Wexit, Impeachment, Trade Wars, North Korea, Ukraine, Russia and upcoming elections. People are worried. I'm just worried about trying to make some money trading stocks.

I look in the valley for opportunities and sell at the top of the mountains where the avalanche starts.

You should have sold TGOD when it got to $10 bucks. Did you? NO, most people think it's going to $20.

I initially sold mine for a 30% profit and recently bought back in at 90 cents. Could it go lower? Oh sure. I will look to buy more on Monday if it opens lower.

Oil, oil service, lumber and Weed stocks are all wallowing in the valley. This is where the opportunities lie. Why is that? You decide but once they stop falling people will start buying them back.

What I Like

Looking at WEF, EFR, ACB and TCW. Buying more of ATE an experimental health/bio tech company. I have a small position currently in the green. I may add more to my position.

EFR a uranium stock should run hot if the uranium industry gets a boost from the current administration. This is what speculating is all about.

STOP listening to experts. They know nothing and work for bonuses using investor money not their own.

They would never tell you to buy a lumber stock or an oil field services stock. They would say it's done, no interest and no money.

This turns around and money comes back. This is where contrarians make their bones. Going in where others won't and don't.

Start small and only a few stocks. I have too many right now. Need to trim in the coming weeks

What I own ATM

ATE, ATH, ASM, BTE, BDI, BTR, GPR, GUY, TGOD, TOG, POE, WCP and YGR.

I like buying stocks nobody wants to own. How about you? This is PURE GAMBLING! DO NOT try this unless you are prepared to lose everything.

Investing in an Unstable World

There's always something going on somewhere around the world causing investors a tremendous amount of stress and anxiety.

It's how you respond to it that matters or should you and do you? Most of it is all noise and should just be ignored when it comes to investing in the stock market.

If you are mostly an income investor like myself, all that matters is growing that yearly cash flow and keeping up with inflation. All those other world events are meaningless to your investment portfolio.

Recession Fears

If you are a student of the nightly dribble spewed out by BNN then you worry a lot. Turn it off and relax. That shit will just put you in a cold sweat and make you do something stupid and sell good companies you own. One day a recession is imminent and the next all bets are off.

Remember why you bought them and what for.

Here's a more recent example to just ignore day to day stock market news.

In December 2018 the S&P 500 recorded their worst performance since 1931 and plunged 20% on Christmas Eve. Did you panic like a Leaf fan and decide to get out and sell everything because the sky is falling?

Too bad if you did because on December 26th, the very next session the Dow jumped up 1,000 points. It's biggest one day point gain in history.

The Toronto market is up 19% since the beginning of 2019 after financial gurus recommend you go to cash. Hmmmm!

You would have missed it had you bailed.

Trade wars, recession fears, interest rates, Hong Kong, North Korea, election fever and on and on it goes. Try to tune it all out and go work on your exercise plan. That is time better spent than in front of the TV shaking about Brexit, Wexit, Putin or China.

Markets go up 70% of the time so hang in there, always!

Investors embrace fear much to easily and are talked out of their strategy just as easy. If this is you maybe hand your money over to a professional because you're too emotional.

Of course the markets will go down, people will borrow more money than they can afford to pay back and there will always be volatility in financial markets. It's what you do about it that matters.

Stay out of the bank and don't move everything to cash and don't buy crypto or weed stocks, then you should be fine.

It's NOT different this time.

Stay invested and for me it's equities and dividend paying growth stocks.

Just because markets are high is NO reason to sell.

Don't buy GICs, savings accounts (HISA), bonds, prefered shares, funds or ETFs.

...and

for the love of god don't by seg funds and their life sucking high management fees. 

Only sell anything if you need the money. If you don't, enjoy the cash flow and stick around for the long term and just ride out the ups and downs. 

That's investing!

What Investing Advice do you Give Others?

First of all I only pass on what I've learned to others when they ask me. It doesn't happen too often. I never preach to anyone ever.

Most people never talk about money or are interested in sharing their inner most money woes.

They just buy what the bank is selling or keep their money in brain dead GICs or savings accounts.

One thing I've never bought is a GIC.

You will find they like to buy mutual funds, ETFs and bond funds and their pref share proxies. Why?

Easy is why. They have been sold a product and not really went out and bought anything. That's a big difference. Knowing exactly what you're buying is the most important aspect of investing money.

I have a lot of friends who just own bank mutual funds. They bank there so they are repeat customers for all kinds of other products. They would never think to buy the bank's stock. That's what I do.

I bank at Scotiabank and use Scotia iTrade to buy stocks.

That is the first thing I recommend, open an investing account where you bank and once opened, buy shares in the bank itself. Why not? If you have faith enough to bank there, you might as well own a piece of the business.

Don't Buy the Canadian Market

Too many resource and oil companies making it full of bad companies you don't want to own. I stick to banks, utilities, telecomms, pipelines and rail stocks. Strip away your holdings to just these areas and you have the best part of the Canadian market.

Ya but it's easier to just buy a fund or an ETF so I get everything right?

True but you pay an ongoing fee for that privilege. Why pay anyone anything at anytime? You just pay a small trading fee to buy your bank stock and then sit back and do nothing. You're invested.

That's all I do.

Stick to quality established dividend growth companies. They all pay you money on a monthly or quarterly basis to own them. NOT the other way around. I find comfort in knowing that no company is slowly bleeding away my retirement account with management fees.

Buy What You Use Every Day

It's not a new concept but it's a nice place to start.

If you get bored with just banks and utilities start looking around where you spend money and what you spend it on and make a list of those businesses to study for a possible investment.

What's good for me is not necessarily good for you. 

I call this the retail investor's hedging strategy. You invest where you spend your money.

Do you line up at Tim Horton's or McDonald's for your daily coffee fix? Why not buy QSR or MCD stock? Will they go out of business?

Do you shop at Dollarama, WalMart or get lotto tickets at Circle K?

Good investments? Maybe, but do some homework and decide if you want to become an owner. I love this idea more than I would love buying an ETF or bonds.

Use a Visa or Mastercard to pay for purchases. Ever thought of buying shares in either company? Hmmm, could be good.

I shop a lot at Costco. I own Costco stock because I love the business and they make money.

Look at what the kids are using as another place for investment. Most have iphones, watch youtube and have Instagram and Facebook accounts.

Should you buy AAPL, FB and GOOG stock? I don't know but it seems like the place to be. At my stage in life I don't invest in growth stocks as I need the income, but these are great places to look to add money if you have a lot of time.

Do you use Nat Gas to heat your house? I pay Enbridge a monthly bill to deliver it to my furnace. Yes, I own shares in the company as a hedge to my yearly expenses. I love this concept.

Go through your house and define what day to day items you use the most and where you spend your money. Do some homework and make a buying decision based on these products.

What I Don't Do

Rebalance!

Warren Buffett doesn't believe in it and that's good enough for me. He buys good companies and rarely sells. They are hard to find so when you do why sell them? His partner Charlie Munger refers to the whole concept as twaddle.

Everything bank salespeople and advisors preach to you is twaddle. Learn to DIY, do it yourself.

Say NO to mutual funds, ETFs, bonds and preferred shares.

Say NO to anything described in MPT (Modern Portfolio Theory).

Don't buy the next big thing. Talking here like Pot stocks that don't pay dividends or make money.

Don't buy what you don't understand.

Don't sell your quality stocks. The safety is in the holding and NOT diversifying into bonds. 

Ignore asset allocation - more twaddle!

My Final Take

"receiving steady cash flow that grows over time is one of the best ways to build your wealth and stay calm during market downturns"
- John Heinzl, Globe and Mail.

The biggest enemy is YOU!

Don't get emotional and sell out too soon.

Go subscribe to dividendgrowth.ca and read Tom Connolly.

STOP consuming too much financial information and stick to your own plan. At least you have one.

Become an income investor, collect the dividends and buy when the markets are priced reasonably. Right now markets are at new highs. (expensive).

Keep focused on investing for INCOME GROWTH!

What advice do you give newbie investors?

Portfolio Update

It's been a couple months since I published an update on my trading activity and given you a portfolio update. As usual I will keep this short so here goes.

Current Holdings

ATE, ATH, ASM, BTE, BDI, BTR, CNL, FR, FVI, GSV, GPR, GUY, KL, NVO, POE, TOG, WDO and YGR.

I never invest more than $4K in any one position.

This is what I do with speculative money and NOT something I recommend for everyone. It is gut wrenching at times.

Only 8/18 positions are in the green. I was way too early making some of these bets. I will just ride it out until the spring and see what happens. I'm down 10% overall.

Stocks I've Sold Recently

In no particular order or timeframe they are;

ALO, ARG, ASM, BTE, CFW, CLIQ, CPG, EFR, ERF, GUY, LAC, LMC, MUX, NGD, NVA, PEY, TCW, TGOD and WEF.

Only 9/19 individual positions were sold at a profit but overall I'm in the green as profits realized outweighed losses incurred.

Only 2 stocks are currently higher than where I sold them telling me my timing on the sells was just about right. If the money is needed by all means go out and sell.

Instead of realizing a gain I would be down a further 18% if I hung on to these stocks.

I did trade in and out of ASM, BTE and GUY and decided to get back in. It was a mistake as they are all still down significantly.

There is no institutional interest in either pot or oil stocks here in Canada. Without it there is no upward momentum to trade these stocks and make money.

My gut feel told me this 2 months ago and so did the market but I thought they were good companies. Always look at the market and if there is enough upside momentum to make money on the stock.

Stocks like KL and WDO seem to be the gold standard inthe space right now. Once momentum improves these stocks should resume their upward trend. I am always looking to sell to lock in gains.

Retirement Stocks and Our Portfolios

Everything is just rocketing higher on a monthly basis. Dividends building slowly and I look to add to our current holdings always.

We own banks, utilities, pipelines and rails.

I don't rebalance or hold bonds, funds, ETFs or pref shares. 100% quality dividend paying growth stocks.

My wife's LIRA only contains;

BMO, BNS, CNR, CP, CU, EMA, ENB, FTS, RY, TRP and TD.

Just 11 stocks, that's it.

I do not believe in Modern Portfolio Theory and it's adherence to a 40% bond allocation in a so-called balanced portfolio.

The market is always correlated to the stock market. Bonds don't save you, quality companies will.

Our other portfolios mirror this LIRA. 

They continue to grow and pay dividends. I re-deploy money when it builds up into the account. Buy the biggest and the best.

I am looking to start positions in AQN, IPL and PPL when money becomes available.

Further Reading