Friday, June 29, 2012

I'm liking Gibson Energy and Trinidad Drilling

I've notice Gibson Energy Inc. (GEI) in the Canadian Income Plus Portfolio assembled and posted by ScotiaMcLeod. Today I heard a chap on BNN extolling the virtues of having a little GEI in one's portfolio. He said it was an especially good investment for the conservative investor looking for a low risk, dividend-paying spot to park money.

I did a little research. GEI looks good. It is now on my watch list. I also learned why I hadn't followed it in the past. It seems that Gibson was held privately until going public in June, 2011 with an IPO priced at $16 per share.

Gibson Energy Inc. (GEI) is at $20.51 at the moment and offers a yield of 4.9 percent.

If I notice GEI drop below $20, I'm in.

I've owned Trinidad Drilling (TDG) in the past. My entry point was just above $5. Recently I've watched the price dropping and considered jumping back in. Today I notice that TDG climbed 43-cents for an 8.19 percent gain.

I've put TDG back on my watch list and if it drops again, I may well buy a little. I like to wait until the yield is closing in on four percent. If it hits the magic four, I'm in.

I'm surprised my Cathedral Energy holdings haven't shown more life. Oh well, I'm patient and I'm getting a yield of almost six percent while I wait.

Whining won't make it better

Note date on this receipt. I was 14 when I bought this stock.

When I wrote this post, I was fuming. I had just read an editorial in The London Free Press. It was another one of those woe-is-me pieces about retirement. It is not just the Baby Boomers Who Have Pension Worries the headline told us. I sat down and penned this blog but then I sat on it. I thought I'd wait until I calmed down before posting my response. A day after posting my response I took it down for a serious rewrite. I wanted to get this right.

First: whenever I see a reference to the baby boomers, like the one in this editorial, I prepare myself for some off-the-shelf thinking. Media folk have a lot of axiomatic beliefs. The mythical baby boomer, a member of a remarkably homogeneous generation spanning almost two full decades, is one of these myths.

The people facing retirement with dread are real folk with ages spanning many generations. What they all share is that they have all, for the most part, been given a lot of bad advice on investing and on saving for retirement.

The London Free Press tells us:

"Financial planners who used to tell clients to expect yearly growth of 8% in their RRSPs without breaking a sweat have turned less optimistic, suggesting a far more conservative 5% return over the lifetime of the plan is more realistic."

O.K., let's put our thinking caps on: If financial advisers were promising 8 percent annual growth but are now only promising 5 percent, what does this tell us? It says that the financial advisers consulted by the paper are not to be trusted. These financial wizards have cut their annual growth projections by 37.5 percent. Since they were so wrong in the recent past, why is the paper so sure that they are dead on the mark today?

Let's say, just for the sake of argument that the 5 percent number is correct. Working folk give their RSP money to a financial adviser for managing. The adviser charges a fee equal from two percent to three percent of the fund's value. This leaves only 3 percent growth, possibly less. Factor in inflation and these RSPs are not growing at all.

Now, put back those thinking caps back on: What does the above tells us? Answer: At five percent annual growth, most folk saving for retirement cannot afford a financial adviser.

Once a month I try to attend the Blackburn Group retiree breakfast. There are very few baby boomers in the group. Baby boomers have just starting to hit the magic age of 65. (Heck, I am one of the first of the so-called baby boomers and I am not yet 65.)

Many retirees at the breakfasts were born before the Second World war. Many folk in this group have a good grasp of personal finance. I believe being raised by parents who experienced the Great Depression gave many of these retirees a deep respect for money and personal finance.

I don't hear these people whining about living their golden years "doing without." This group did without during their working lives. They understood the concept of living within their means.

Our editorial writer has a good job. Yet this person confesses, "We’re still borrowing more money." If the writer is talking about much more than a mortgage and a car loan, we have found one big drain on the writer's financial worth.

I had parents who struggled through the Great Depression. After my father's death, my mother took in her aging parents, both in their 80s. My mother and I loved these two dearly but make no mistake, this was a necessary arrangement for my mother. (After her parents died, my mom sold her home and moved in with my sister. She spent her last years living with me. My mother was not one those born with a silver spoon.)

I admired my grandfather and loved talking with him. He shared books, magazines and newspapers with me and later we would chat about what I had read. One paper he gave me to read was the weekly Financial Post.

Before I was even in my teens, I realized that earning money, saving a chunk of that money, paying one's bills and not running up debt were all good goals. While I was still in grade school, I had flyers printed advertising my lawn cutting service and I plastered the entire neighbourhood. I distributed about a thousand flyers. I encouraged people who were going on vacation to contact me and I'd cut their lawn while they were away. I paid for the flyers by cutting the lawn of the printing company president.

Flush with wealth for a boy of about 12 I didn't know what to do with all my cash. Letting it sit in the bank didn't seem like the answer. I knew money should be put to work. I got on my bike, a used but solid two-wheeler, and rode to the James Richardson and Sons brokerage office. I was going to buy some stock.

You need not be rich to save. Put your money into stock not pop and chips.
I think the stockbroker may have broken the law doing business with me. I don't think he should have sold me stock. I was just a child --- not even in my teens.Surely there were laws against entering into financial agreements with a child. But, he did. Every time I had enough money to buy another couple of shares, I saw my stockbroker.

I was buying Bell stock and I don't think he saw that as risky. It was the classic widows and orphans investment.

Then one day I wanted to sell all my Bell stock and buy something called Pacific Pete, I believe. It was a small, junior oil company. I was acting on a stock tip from my uncle who lived in Detroit and who played the market.

My stockbroker was noticeably uncomfortable but reluctantly sold my Bell and bought the oil stock. The small oil play took off. I sold my holdings for a tidy profit. I bought back my Bell stock and lots more. My stockbroker relaxed.

When I read all the stuff about baby boomers and their silver financial spoon, I want to scream. I was born into a family with a dad who never earned more than $5000 in any given year and a stay-at-home mom. Until my early teens, we lived in what was known as Wartime Housing, a government subsidized neighbourhood. I most certainly was not born with a silver spoon.

It is now almost 65 years since my birth. I'm retired. I still have no silver spoon. My company pension after thirty some years did not deliver even $20,000 annually. I took about a 24 percent cut in my CPP in order to start drawing early. My wife took an even bigger cut. We needed both CPP payments if we were to get by in retirement. But, we are getting by.

Our editorial writer whines that "It’s becoming clearer that only those who are prepared for the worst . . . are facing a secure old age." And continues, "That’s a small group. And the rest of us need to be included . . . "

Get out those thinking caps again. If only those prepared for the worst are secure, what does that tell you? Answer: prepare for the worst. Join the small group. And don't whine about needing "to be included." If you are not a member of this group, it is by choice.

I have been preparing for my retirement since I was in my twenties. I can assure the editorial writer that it is not possible to foresee the future. The retirement life I envisioned in the '70s is but a hollow dream today. No surprise here. Four intervening decades have a way of doing that to dreams almost every time. Prepare for the worst as life has a way of tossing curves.

I have some advice for the editorial writer: Instead of worrying about buying your dinner coming from the "cat food aisle" (another media myth --- click on link) in your senior years, stop thinking about your RRSP as an "income tax dodge" and stop relying on others to guide you into a successful retirement plan. Get yourself up to speed on investing and take charge of your financial life.

The editorial writer should take her own advice. She should become one of those preparing for the worst. It is always a good approach to take when investing.

Addendum: It is early December and I am well on my way to seeing a return of about 8.75 percent for the year, 2012. Even after taking out a little more than four percent to live, I should end the year with more money than I started. Trust me, there's no cat food on the horizon.

Thursday, June 28, 2012

Progress Energy and Risk


I've blogged about Progress Energy (PRQ) in the past. I owned the natural gas producer for years and even as the value of natural gas tanked, so to speak, I upped my holdings of this natural gas producer. A very gassy energy play, many argued PRQ was a very risky investment. They would have been right -- on paper in a general sense. But, as I pointed out in one of my earlier posts:

"I've got the money to buy some PRQ. The yield is something that I can live with, at least for awhile. The stock offers the potential of offering an exit point that recoups all my investment and then some." 

I noted in my old post that "PRQ has proven to be amazingly resistant to the downward pull of the bear." When a stock has strong legs and holds its own as its sector crashes around it, one has to think that something is adding support to this story. It was no secret that a lot of this strength was coming from a link between Petronas and the excellently run Canadian gas producer.

Today my faith was vindicated. Petronas, Malaysia’s state-owned energy company, struck a $5.5-billion takeover deal with Progress Energy Resources Corp. It was time to sell. I sold almost all my shares at $20.07 and some more at $20.06.

I was not too concerned with owning Progress Energy. I did not feel the risk was all that great. A good dividend, a solid company and a good chance of something very good happening in the near future.

I almost wish that I had held more PRQ but I didn't and that's O.K. Too much money in any one place, no matter what the place, is risky.
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One thing about blogging, you put your ideas down for all to see. Later you can go back and say, "See! I was right!" (Or, damn! Was I ever wrong.") Here is what I wrote about PRQ back in January of this year.

"PRQ (Progress Energy) - This would be a big drag on my portfolio performance if it were not for the fact that I have less than two percent of my money invested in this natural gas producer. As the prices have come down, I have averaged down, and I believe an exit point will open up near the end of this year or sometime next year. I may be down thousands but I'm not worried over the long term and it pays enough of a dividend to ease the pain while I wait. If it declines in value anymore, I may buy a few hundred more shares. Yield is 3.6%."
And yes, I did buy more.

Wednesday, June 27, 2012

The shine is off the WisdonTree DRW ETF


I dumped all of my DRW and most of my wife's. I kept 100 shares. It was more of an oversight than a plan. Yesterday I learned that the WisdomTree Global ex-U.S. Real Estate Fund had declared a dividend of .30398  (US) to be paid at the end of the month.

DRW is $25.90 at the moment. It has only paid two dividends in the past 12 months for a total dividend yield of about 61.4-cents or a percentage yield of about 2.4. Last June, DRW paid something in the order of 98-cents. Now, that is more in line with why I originally bought DRW.

If DRW recovers a little more of it value, say climbs to $30, I will probably dump the last 100 shares. I need dividend money and DRW is not delivering. I can put this money to better use.

A quick look at my recent purchases:

Cathedral Energy Services Ltd. (CET) has lost almost 14 percent since I first became interested. Ouch. When it entered personal bear market territory, I bought another block. This second investment is now down about 3 percent. If it drops another full 10 percent, I'm buying more. I've kept, as they say, some powder dry. Oh well, as the cost of a share has declined the dividend has climbed. It is now in the six percent range. I can live with that.

Sun Life Financial Inc. (SLF) is up 3.57 percent since my purchase. Nice. Not great but still nice.

The Royal Bank of Canada (RY) added to my position a few months ago at about $45 is up more than 14 percent, plus it has paid one dividend. With all the unrest in Europe, RY may yet get tangled in the turmoil, and if it does my smile may get wiped from my face.

iShares Tr FTSE NAReit Mtg Plus Capped Index (REM) was a bold move when I made it after following REM literally for years. It just looked too good to pass up. It is now up 8.67 percent plus it has been paying a fantastic dividend --- 11.32 percent. This is an example of a risky buy, I would have bought more if I'd have had more confidence. Now, it has climbed to the point that I can handle a rather large pullback without losing any sleep.

My BMO Equal Weight Utilities Index ETF (ZUT) is up 5.8 percent plus it is yielding 5.35 percent .

I am disappointed by my WisdomTree Trust Australia Dividend Fund (AUSE). It has lost 7.15 percent of it value since its purchase. Another ouch! The yield of 5.13 percent today helps to sooth the pain (this was the yield the last time I checked --- this may change if the June dividend is not as expected.)

So, what am I watching today. First, I'm watching the price of oil drop. I've heard some analysts claim that if Europe goes into a financial meltdown, oil could hit $65 a barrel. If that happens, I'd look at Crescent Point (CPG) and PennWest (PWT) and Inter Pipeline (IPL.UN). I like both CPG and IPL.UN and can see as much as 2 percent of my portfolio in each of these investments.

With PWT it is a different story. I'm averaging down my share cost. I paid too much for this stock; I'd like out; I don't want to take a big loss. I'm averaging down and enjoying the yield. Even if the dividend gets cut, I'll survive nicely. I'm not too worried. I've got a few years before I simply must dump this investment.

One other company that I am watching closely is ARC Resources Ltd. (ARX) This one made the ScotiaBanks's Canadian Core Portfolio list. It it going for about $22 today and yielding about 5.4 percent.

With the price having been under attack for months, I might buy some iShares Inc MSCI Hong Kong Index Fund (EWH) if the price drops to $15.50 or lower. This one meets my need to diversify and my need for yield. Based on the present unit price, the yield is very good. (Do your own research on this and see what you think.) I'd also research the Asian economy in total and make my decision based on what I discovered.

It's funny. My Hong Kong ETF is down about ten percent while my Singapore one is up almost 21 percent and my China ETF is in the black but barely. Oh well, the world is still in balance. In fact, it is still weighted in my favour. I'm happy.

Friday, June 15, 2012

With markets weak, strengthen the portfolio

There are questions that I must get around to answering but I'm retired. I do this mostly for friends and to force myself to address certain investment topics. With the market dropping, now is not the time to waste important moments blogging when one should be giving some thought to one's own investments. I'd like to get my income up by at least three and a half percent. With the market down, this seems a dream that is now within my grasp.
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The world financial system is still shaky. This is not a time to put all of one's money to work. Crystal balls are simply not to be trusted. That said, I like Cathedral Energy Services Ltd. (CET-T). It is a high risk investment, according to some sources, with the potential to outperform in its sector. A report from the ScotiaBank sees a possible target price of $10.50. The same report calls the dividend a "stable 5.1% yield.

A quick search of the other investment research papers available to me through my accounts a the ScotiaBank and TD, confirms that the consensus is that CET is a buy in the top quartile of stocks being scored. Examine profitability, debt, earnings quality, and dividend and you may decide CET is a buy.

I took a look at the payout ratio published by Reuters. It shows the ratio dropping over the past three years. The number for the last full year was 32.58. This explains why the ScotiaBank sees the dividend as stable.

I own some CET. I thought I bought in at a good price. Yet today it is selling at a discount of 10.46 percent to the price I paid. I'm facing a bear market drop. Anytime something I have confidence in drops by more than ten percent, I say it is time to consider buying a little more. I stress 'a little' more. I don't want to buy a lot and then learn the market evaluation was right. I don't want to be blind sided.

So, today I bought a hundred shares of CET within  my tax free savings account. My TFSA is up more than 14 percent since I opened it less than a year ago. I can afford to take on a little more risk. I paid $5.15 a share for 100 shares of CET. Within moments I had lost .39 percent.

At times like this I like to view my other recent purchases and get an overview. My AUSE is down 5.48 percent but  my ZUT is up 7.02 percent, REM is up 10.78 percent, SLF is up 4.75 percent, RY is up almost 14 percent from the $45 range that attracted my attention. Even my PWT is up 2.7 percent from where I recently added to my position. (I was prepared for PWT to drop in the short term.)

I have a good feeling about CET. I'm not going to put a lot more money into the company. But, if it should take another big drip, I'll try and learn why and if all seems good, I'll buy another one or two hundred shares.

Thursday, June 14, 2012

Read about Jamie Dimon and U.S. banking

How Jamie Dimon's New Business Model From Hell Could Take Down Wall Street – Again

 

An "Investment" office sans licensed investment brokers is the latest deregulatory mutation on Wall Street.
 
  
The linked piece is a co-exclusive with Wall Street on Parade.

Read this piece this concerning Jamie Dimon this morning and thought I'd post a link.

Do you recall when Dimon and Canada's Mark Carney had a bit of a dust-up? Here is a link to a Globe and Mail piece on Eric Sprott siding with Carney: Eric Sprott backs Carney in Dimon spat.

Some days I read this stuff and think that as a small investor I could just get trampled someday. The financial world seems to be a far riskier place than it should be in an ideal world. At least, riskier for folks like me. Those at the top seem to walk away with their fortunes fairly intact. It is heads they wind, tails the world loses.

Friday, June 8, 2012

Looking like a good summer to buid the portfolio

I've go to get out of here in a moment. My VW Jetta TDI is ready for its 15,000 km oil change, etc. If you are interested in the diesel-burning Jetta, I  posted some comments here: Long Term Ownership Review: 2011 VW Jetta TDI.

Now, for some fast remarks on the market.

With the market down, my worst performing investment trimmed, my income is theoretically down. I say theoretically as the DRW I sold hasn't delivered a dividend in the past two quarters.

On the most recent testing of the bottom, I've done a little careful buying. I picked up a few hundred shares of Sun Life Financial (SLF). The ScotiaBank has SLF as one of its picks in its Income Portfolio. On dips the stock offers a yield of seven percent or better.

I also grabbed a bit of Cathedral Energy Services (CET). It has been offering yield of about 5.6 percent. This dividend, or so I understand, is fairly safe. At this time, CET seemed to be a good stock to own. Enjoy the yield and wait for the return of the good times in the oil patch. From what I've read, CET could double in price. If it does, I'll sell at that point and move on to something more conservative.

This bring me to Penn West. I don't particularly like this stock, and I own more than I'd like to admit. I'm not terribly worried in the short term and so I keep averaging down my costs. I got into Penn West through the back door. The large, former trust merged with Canetic in which I had stock. When PWT gets into the low $13 range, I always like to buy a little. Like CET, when the eventual oil patch turnaround arrives, I'll be ready. In the meantime, I'll have the yield. No hard reason, but I am not as confident in the PWT dividend as the CET.

Just a quick note on past picks: my REM is up today by about seven percent, my AUSE is down by about eight percent and my ZUT is up more than eight percent. Overall, my portfolio is still in the black for 2012 but barely. Soon, I'll have to remove $15,000 to live and the total value of my portfolio may drop into the red for the year.

As to questions posed recently, I must find the time to answer.

Cheers!

p.s. Forgive the typos and such, must post without proofing.