Stock Smarts: An Update On Gordon Pape’s Growth Portfolio
In August 2012, we created a Growth Portfolio for readers of Gordon Pape’s Internet Wealth Builder newsletter. It is the riskiest of all his portfolios, with 100 per cent exposure to the stock market. It also continues to be the most successful in terms of returns…
The portfolio was valued at $10,000 when it was launched, with the assets distributed among eight stocks. Three were U.S. companies while the rest were Canadian. We have switched some of the stocks over the four and a half years since but we have retained the original mix of five Canadian and three U.S. securities. Our target average annual compound rate of return is in the 12 per cent range.
Here are the securities that make up the portfolio, with an update on how they have performed since our last review in February. Prices are as of midday on Feb. 16.
Simon Property Group (NYSE: SPG)
SPG is the largest retail property group in the United States, with interests in shopping malls across the country. The stock hit an all-time high around the time of our last review but went into a slump shortly after on concern over rising interest rates and is now trading at about the same price as when we added it to the portfolio. However, the shares offer a good yield (dividend of US$1.75 per quarter) and analysts remain positive on the shares so we will ride this for another six months.
Alimentation Couche-Tard (TSX: ATD.B, OTC: ANCUF)
After marking time for the past year or so, Couche-Tard has started to move higher again. The shares are up $3.16 since our last review in August and the quarterly dividend has been increased to $0.09 per share.
WSP Global Inc. (TSX: WSP, OTC: WSPOF)
WSP Global is one of the world’s leading professional services companies, providing technical expertise and strategic advice to clients in the property and buildings, transportation and infrastructure, environment, industry, resources, and power and energy sectors. The share price has moved higher over the past year, and gained $4.74 since our last review in August. We received two dividends totaling $0.75 per share.
Stella-Jones (TSX: SJ, OTC: STLJF)
The company makes railroad ties and utility poles and had been doing very well for us until the past year or so. However, the stock has been sliding lately and dropped $5.78 per share since our last review. The dividend is a tiny $0.10 per quarter. We are going to drop this stock, see the changes section below.
TFI International (TSX: TFII, OTC: TFIFF)
This was originally recommended as TransForce Inc. The company changed its name last year and the trading symbol on Toronto is now TFII. The stock has been a very strong performer in recent months, having gained almost $10 per share since our last review. The quarterly dividend was increased by almost 12 per cent to $0.19, effective with the December payment.
New Flyer Industries (TSX: NFI, OTC: NFYEF)
This Winnipeg-based heavy-duty bus manufacturer has been benefiting from the growing demand for clean energy vehicles. The shares continue to rise, albeit at a slower rate than in the early part of 2016. The gain over the latest six-month period was $3.64 (9 per cent). We received two dividends totaling $0.475 per share. This is the number one performer in the portfolio with a gain since inception of 480 per cent.
Apple Inc. (NDQ: AAPL)
Apple shares sagged after they were added to the portfolio a year ago but the stock has recovered and recently hit an all-time high. The company is the largest in the U.S. by market capitalization and analysts are expecting some major new innovations to mark this year’s tenth anniversary of the iPhone.
UnitedHealth Group (NYSE: UNH)
This U.S. health insurance provider hit an all-time high last week and the shares have gained $20 since our last review. We received two quarterly dividends of US$0.625.
We received interest of $9.09 on our cash holdings.
Here is how the portfolio stood at noon on Feb. 16. 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 significant exchange rate differential.
Weak performances by Simon Property Group and Stella-Jones dragged down our overall returns. However, the rest of the portfolio did well, lead by big gains from TFI International, Apple, and UnitedHealth Group. Overall, our gain over the latest six months was a respectable 9.1 per cent. Since inception, the Growth Portfolio is up 178.3 per cent, which works out to an average annual compound rate of return of 25.54 per cent. This is clearly well in excess of our target and should not be expected to last forever, but we’ll enjoy it while we can.
As mentioned above, it appears that Stella-Jones has lost momentum and can no longer be considered a growth stock. Therefore, we will sell our shares for a total of $2,932.33, included retained dividends.
We will invest the money in shares of Shopify (TSX, NYSE: SHOP), which in the past few years has become one of Canada’s leading software companies. The Ottawa-based firm provides cloud-based, multi-channel commerce platforms, mainly for small and medium-sized businesses although large companies like GE and Nestle are also clients.
Shopify was originally recommended in the Internet Wealth Builder in February 2016 at $28.34. It was trading at the time of writing at $78.71, for a gain of 178 per cent.
We will buy 37 shares at a total cost of $2,912.27. We have $20.06 left over which will be added to the cash account.
As well, we will buy five more shares of WSP Global for $233.80. That will bring our total to 85 shares and leave $25.48 in retained dividends.
Remember, do not to execute small trades unless you have a fee-based account because of the high commissions. Use dividend reinvestment plans wherever possible.
We will keep our cash of $807.30 in the EQ Bank account, which now pays 2 per cent.
Here is the revised portfolio. I will review it again on the fifth anniversary in August.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to www.buildingwealth.ca.