For my kin: Only buy with confidence

Look at the big picture. If overall you're up, don't let a few losses get you down.

Some months ago I started amassing cash. I was sure a correction (10% drop), or even a bear market (20% drop or more), was coming. It didn't and I finally tired of watching stocks climb while I sat on the sidelines. I bought. And the correction arrived. I'm down on a lot of money on my recent buys.

In the past, I've done very well buying Canadian banks. I felt very confident when I bought 300 shares of TD. I have now lost hundreds and I may lose even more in the coming weeks. One bright thought among the gloom: Canadian banks don't tend to cut their dividends -- ever. If the dividend isn't cut, I can hold on indefinitely. I support my wife and me in retirement thanks to the dividends.

I  owned Inter Pipeline, IPL, in the past and I was well rewarded for buying and holding it. After more than tripling my money, I sold. A big mistake. I should have taken my original investment, plus a bit of a profit, off the table and left the remainder to ride. It would have made a very nice core holding.

When IPL dropped about a third from its recent highs, I bought back in at the lower share price. I had confidence thanks to my past success with this stock. I even paid a little less per share to buy back in compared to what I was paid when selling out. I only bought a fewer shares and considered this correcting the mistake I made when I jettisoned all my IPL holdings.

IPL continued to drop. I had caught a falling knife, as they say. I am now down hundreds of dollars. Some say the dividend is safe but others are not quite so sure.

Did I buy anything else? Yes: Ontario Hydro (H), Pembina Pipeline (PPL), Shaw Communications (SJR.B), Emera (EMA) and Fortis (FTS).

I had confidence in all the stocks mentioned. Yet, all but EMA and FTS are down. Am I concerned? No. My earnings on Emera on Fortis are doing very nicely at balancing my losses suffered on my other buys. Both EMA and FTS are up in the four digits. When you look at the big picture, all is not so bleak.

But I haven't mentioned one purchase: Altagas (ALA).

I wasn't all that confident in Altagas. I had unanswered questions. I bought despite my misgivings and I got whacked. It is down massively, about $10 per share. Luckily, I didn't buy that many shares. My exposure is light even though my percentage losses are heavy.

I  expect ALA to slash its dividend by something in order of 60% and I expect it to liquidate a lot of stuff to bring its books more  inline with market demands. Will I be selling soon? No, I doubt it. After the dividend cut, I should be seeing a yield of about 4% and that new yield should be safe.

The word is that the dividend cut has already been priced in but I'm not so sure. It may drop in value again but I thing that that price may well establish a floor. I can foresee some bad endings to this story; forinstance, a buyout at much less than originally paid.

One stock picker, has ALA with a target price of $18. That's about three dollars higher than today's market price. But, I don't have a lot of faith in published target prices. The stock-picking experts miss the target all too often.

If something comes along promising a secure 4% yield paired with a promise of good future growth in stock price, I'll sell and move on. It may take some time to recoup my loss but I have confidence. (Note: there is always the chance that ALA will be that future stock. I bought Norbord in the $20s and then it dropped deep into the teens. I bought more and sold all in the mid $30s. Never lose heart.)

There's always tomorrow. In that, I have complete confidence.
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In a future post, let's examine what it is that gives one confidence.