Growth Portfolio Charges Ahead
Selected stocks provide big returns for those who are prepared to take some risk
Back in August 2012, we created a Growth Portfolio for readers of my Internet Wealth Builder who were prepared to accept a greater degree of risk in exchange for the potential for higher returns.
The original portfolio was valued at $10,000, distributed among eight stocks. Three were U.S. companies while the rest were Canadian. There are no bond positions in this portfolio.
Here are the securities that make up the portfolio, with an update on how they have performed since our last review in early August.
Simon Property Group (NYSE: SPG). This is the largest retail property group in the United States, with interests in shopping malls across the country. It’s a huge business, with funds from operations (FFO) of $3.235 billion ($8.90 per share, fully diluted, figures in U.S. dollars) in 2014. Net profit for the year was just over $1.4 billion ($4.52 per share) up from $1.3 billion ($1.24 per share) the year before.
On Jan. 30, The Indianapolis-based company announced a 12 per cent dividend increase, bringing the quarterly payment to $1.40 per share. The next distribution is scheduled for Feb. 27 to shareholders of record as of Feb. 13, so it is included in the calculations in this issue.
At the time of the last review in August, the shares were at $167.67. The mid-day price on Feb. 19 was $190.72 plus we have received $4 per share in dividends for a total return of 16.1 per cent since the last update. The total return since the inception of the portfolio is 23.4 per cent.
Alimentation Couche-Tard (TSX: ATD.B, OTC: ANCVUF). There’s no stopping this juggernaut. When we originally added it to the portfolio the shares were trading at a split-adjusted $16.53. At the time of the August review, they were at $30.36. Now they are trading at $47.50, a gain of 56 per cent in just six months. The dividend isn’t much, just $0.045 per quarter, but with growth like this, who cares? Our total return since inception is almost 190 per cent making this stock the top performer in the portfolio.
Here is how the portfolio stood as of mid-day on Feb. 19. Commissions are not taken into account and the U.S. and Canadian dollars are treated as being at par but obviously gains (or losses) on the American securities are increased due to the current exchange rate differential.
IWB Growth Portfolio (a/o Feb. 19/15)
|Symbol||Weight per cent||TotalShares||InitialPrice||BookValue||CurrentPrice||MarketValue||DividendsRetained||Total Return per cent|
Comments: With the exception of Michael Kors, the portfolio has done very well, with a total return since inception of 86.3 per cent. That works out to a compound annual growth rate of 28.26 per cent, well ahead of expectations. That’s very satisfying but don’t expect this portfolio to keep churning out profits at that rate. On a portfolio such as this, an average annual return in the 12 per cent range over the long term would be more in line. Still, we’ll take the profits where we find them.
Changes: I am concerned about the performance of Michael Kors, particularly the downward trend pattern. Therefore, I am selling the entire position, giving us US$1,502.55 to reinvest. We’ll use the money to buy 11 shares of Apple (NDQ: AAPL). It was trading at US$128.80 at the time of writing for a total cost of $1,416.80. That leaves $85.75 in cash.
I would like to eliminate all the fractional shares in this portfolio so we will make the following small trades. These are not recommended for individual investors because the commissions would be prohibitive; the best way to acquire small additional amounts of stock is through dividend reinvestment plans (DRIPs).
ATD.B – We’ll buy .28 of a share for $13.30, bringing the total to 91 and leaving $16.25 in retained dividends.
Here’s a look at the revised portfolio. I’ll revisit it again in August.
IWB Growth Portfolio (revised Feb. 19/15)
|Symbol||Weight per cent||TotalShares||AveragePrice||BookValue||CurrentPrice||MarketValue||DividendsRetained|