Tuesday, November 27, 2012

Love the one you're with

Stephen Stills may be an odd fellow to consult for investment advice but as I looked over my portfolio this morning an old song by Stephen Stills played in my head: "If you're down and confused . . . love the one you're with . . . "

When the market takes a drubbing, that is the time to buy. Buy low and sell high, right? But, the big question is "What to buy?"

Over the years I've noticed I grow attached to some of my investments. These are the ones that perform well year after year and attract very positive attention in the investment community as a whole.

A good example of one of these rather well admired stocks is Crescent Point Energy. When it dropped to about $19 in the middle of the stock market crash a few years back, it looked awfully good. I'd owned it for years. It had performed admirably. It was now down but everything was down. Everything was telling me that this was a time to buy, an opportunity of a lifetime, but what to buy.

Among the stocks I bought were Crescent Point (CPG), Inter Pipeline (IPL.UN) and Bank of Nova Scotia (BNS). Later, I sold some of my excess CPG and IPL.UN. Both were represented in my portfolio by an out-of-balance allocation. When IPL.UN climbed above $20, I moved on, but I still hold CPG (up 71 percent) and BNS (90 percent). I believe IPL.UN was up more than a hundred percent when I moved on.

I should note: Today both CPG and IPL.UN are included in the ScotiaMcLeod Canadian Income Plus Portfolio. IPL.UN is still on my radar and if it every gets dragged down by a market wide correction, I'll be and owner of that stock again.

Today, I have some stocks that may be working their way into my heart. Cathedral Energy (CET) immediately comes to mind. If the WisdomTree ETF AUSE ever has a solid correction, I would pick up some more units.

I am sure your portfolio is different than mine. Still, you must have some investments that you love, that you have great confidence in, confidence that comes from years of ownership and a solid understanding of the stock involved. If you wish you owned more, when the next large correction hits give some thought to adding to your position.

Addendum:

After posting this, I heard from a reader who told me they have an investment that meets the "love the one you're with" criteria: Dundee REIT.

I gave a quick check using my ScotiaBank account and read: "Maintain 2-SP rating; one-year target up modestly to $40.25 per unit. Down 8.6% from its YTD high, we believe valuation is looking more interesting at 15.1x 2013E AFFO and 6.5% implied cap. We think Dundee offers good capital upside,
along with modest distribution-per-unit growth potential."

I like that D.UN.TSX is down 8.6% from its YTD high. I agree with my reader, this one is worth watching.

I've heard from another reader. This person suggests that the U.S. ETF PEY would be a good addition to this list. (I wasn't posting a list, but I'll let that pass.)

PEY's full name is Powershares Exchange Traded Fund Trust High Yield Equite Dividend Achievers Portfolio. Wow! Quite the mouthful.

I know a little about PEY as I own a little but I haven't given this holding much attention in more than a year. (I blush.) PEY is well off its former highs - down a good 33 percent at least. That said, at its present price PEY is yielding just more than four percent. Considering its present price, it may not drop all that much more if hit by another downturn in the economy. It has had the stuffing kicked out of it. (My holdings are down about 17 percent.)

That 17 percent loss translates, for me, into a loss of about $2000. Softening the blow is the monthly dividend of about $33. The monthly yield varies a little. If the stock doesn't budge from its present position, in five years I'll have reclaimed my loss. Taking inflation into account, let's say six years to break even.

If I was younger I would not be seeing those numbers as positive. But I am retired. I need four percent from my money to live. PEY is paying four percent. I'm content, not happy, but content. But those numbers are why I didn't add PEY to my list. Now I think if PEY were to drop below my original entry point, my reader is right, it would be an investment to consider.

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