Ryan Bushell: a fine financial expert on BNN

Ryan Bushell is the President and Portfolio Manager at Newhaven Asset Management Inc. I have followed Bushell for more than a decade and he has impressed me. He is one of the few financial experts appearing on BNN whose views I find worthwhile.

In doing the research for this post I came across a post by Michael O'Reilly. O'Reilly calls Bushell one of the best performing experts that he follows. I concur.

In the past three months, Bushell has rated the following stocks buys: Algonquin Power (AQN), CIBC (CM), Fortis (FTS), Pembina Pipeline (PPL), Telus (T), TC Energy (TRP). I mention these stocks as I have encouraged friends and relatives to buy them on recent dips. I firmly believe all these are excellent, conservative calls. One could not go too far wrong having a little of each in his/her portfolio.

BNN Bloomberg reports that Bushell believes the recent fall in AQN share price is overdone. This company is nearly two-thirds regulated utilities, including water utilities. The business is not that different from where it was in the past. Whether it sells the renewable energy business or not is of no consequence. 

Bushell see the core business having more value than the share price indicates. Even though there may be one more dividend cut, Bushell believes this is still a good time to buy. Bushell may be a bull on AQN but the bears have a fine, and very defensible, position.

Algonquin's financial performance has been underwhelming recently. It reported a loss of US$253.2 million in the quarter ended June 30, 2023. The loss was attributed to unfavourable weather conditions reducing customer demand and resulting in less energy produced at its wind facilities. And the company's earnings per share (EPS) for the trailing twelve months (TTM) was -$0.38.

I am overexposed when it comes to AQN. I am not going to add to that exposure in the near term but I may add to my holdings in the future.

The TD Bank is a buy

The TD Bank is at $79.80 right now with a resulting yield of 4.8%. A little over a year ago, BMO stock was selling in the range of $109. 

Technically, the bank is only suffering a correction but it feels like its in bear market territory nevertheless.

Banks are not the investment of choice right now but they will be back in vogue someday and prices will recover. Meanwhile, I'd like to point out that the TD Bank has gone almost almost as long as the Bank of Montreal without once cutting its dividend. I cannot forecast a bottom but it is clear that the TD Bank is a fine buy right now and as you hold it you will be paid for your patience.

Bank of Montreal looking like a buy

The Bank of Montreal is at $109.26 and yielding more than five percent today. A little over a year ago, BMO stock was selling for more than $150. I cannot forecast a bottom but I can say, with some confidence, that BMO is a damn fine buy right now. And I'd like to point out that the Bank of Montreal has gone almost 200 years without once cutting its dividend.

Enbridge looks like a buy, at least to me.

My Enbridge dance card is full. I like putting a ceiling on how much I own of any one stock. I think of this as risk management through diversification. But, if you don't have a lot of Enbridge eggs in your basket, today might be a good time to consider some increased exposure to the Canadian pipeline operator.

Enbridge was in the news last month when it announced the proposed purchase of three utilities from Dominion Energy (D.N) for $14 billion including debt, creating North America's largest natural gas provider and doubling its gas distribution business.

The deal is for East Ohio Gas, Questar Gas, and Public Service Co of North Carolina and will consist of $9.4 billion in cash and $4.6 billion of assumed debt.

Enbridge is branching out. It is no longer simply a pipeline provider. Previously it was in the news for the windmill farms it is constructing in the Atlantic Ocean off the coast of France. Clearly, Enbridge wants to be a company with a future and it is ensuring that future today.

At $43.34, the stock price at this moment shouts "Buy me!" and folk acquiring the stock will enjoy a dividend of 8.233% as they wait for the capital appreciation to kick-in.

If I didn't own as much as I do, I would be a buyer. Who knows, I may yet yield to temptation and add just a little to my holdings. It is hard to resist.

If analysts are right, the future is bright. A big "if".

I am surprised by my losses. Oh, I saw some of the losses coming but I was blind-sided by others such as Telus. I had great faith in Telus. Very foolish. Never put too much faith in any stock. Stocks are fickle. Stocks are famous for constantly going up and then down and surprising us with both moves. It is the reason why many folk steer clear of the stock market. 

If you are like me and have recently suffered massive paper losses and are realizing that these losses could double before the market turns around, you need some cheering up. I found a bright light shining in the dark shadow of the falling market - the analysts featured on TD WebBroker.

Take Quebecor. Its high for the past year was $35.61. Today it is at $28.25. If you check the Analysts page for the stock, you will find the analysts see an upside price of $39.33. There is one fly in the ointment; analysts are known to be wrong a lot of the time. Few are right even 70% of the time. Flipping a coin is often as good an indicator of future stock prices as the musings of a professional analyst. Sadly, three of the seven analysts were not even able to best a flipped coin.

But, hope burns eternal. My portfolio doesn't need the 38% upside the TD WebBroker-picked analysts see for Quebecor, nor does my portfolio need the 37% forecast for Telus. A 15% gain will be more than adequate. Such a modest dream may well be fulfilled.

One final caveat when it comes to analysts. As a group, their forecasts are as volatile as the stocks they follow. One day a stock will be forecast to hit $60 but a month later the same analyst may see the stock only reaching $50. To err is to be an analyst.

I'm told that this is not a bear market; oh?

The Canada Stock Market Index (TSX) reached an all time high of 22,213.07 in April of 2022. Right now, as I write, the TSX is at 18986.60. It is off it high by 3226.47 or 14.5%. This is a correction. It must suffer a dip of 20% or more before a bear market is declared. It is not unreasonable to imagine the TSX dropping to 17770 or even less. But even if it doesn't, this is a nasty pullback.

My portfolio is down a little more than the market. I'm down about 15% and it hurts. Downturns like this are not unexpected but that fact does not soothe the financial pain. The losses may be paper losses but the accent is on losses and not paper.

The worst part of this moment is that I did not see it coming. I thought the market had bottomed and was turning around. I bought some Telus, some TC Energy, some TD Bank and Bank of Montreal. All these recent purchases have lost money. Now, I must guard my remaining cash and dole it out carefully.

On the bright side, thanks to the crashing stock values, the yield on my RIF has grown to 5.85%. With RIFs the government sets the annual mandated withdrawal rate. This is a rate increases with each passing year. For instance, at retirement at 65 the withdrawal rate is 4%. Ten years later, at 75, the rate is 5.82%. My rather high dividend income means I will not have to sell any stock at fire-sale prices to meet the government withdrawal demands. See the withdrawal rate table here: RRIF Minimum Withdrawal.

The value of my stock holdings may be down but I feel confident that my dividend income will not shrink to anywhere near the same extent. For instance, income from the big Canadian banks should be safe. The Bank of Montreal has an impeccable dividend history. It has gone almost two hundred years with nary a dividend reduction. The TD Bank can make almost as remarkable a claim.

Hugo Ste-Marie, a strategist at Scotia Capital, wrote in a report published last Wednesday: "Despite a challenging environment, keep in mind that over the long run, dividends matter a lot, accounting for the lion’s share of equity returns."

To underline that point, the Scotia Capital report broke down the growth of a $100 investment in the Toronto Stock Exchange benchmark from 1956 to today. With dividends, it would have grown to $29,000. Without dividends, it would be only $3,600.

Dividends contributed nearly 90 per cent of total returns over the past seven decades. In other words, it pays to stay invested. Buy and hold pays over time.

Few investors know when a correction or a bear market will appear but both tend to only stay for a short, but painful, visit. The average bear market in Canada lasts just under a year. That said, a two year bear market is not unheard of. Bear markets are difficult to call and far more frequent that most investors believe.

But bear markets tend to be shorter than bull markets and not as frequent as corrections. The average bull market roars along for more than five years and can last much, much longer. A rule of thumb, based on the U.S. market, says a third of time the bear rules and two thirds of the time the bull runs free. Ride out the bear and ride the bull.

For a good take on bear markets, read the linked article from The Motley Fool: What is a Bear Market? In writing this piece, I found the following post very interesting and worth a read: Statistics and facts about the stock market in 2023.

Quebecor (QBR.B) may be a buy

I picked up a little Quebecor (QBR.B) some months ago. It immediately climbed into the black and never looked back until now. Late last week, my QBR.B holdings dropped into the red. By Friday close my Quebecor shares were back in the black but the Quebec-based telecom had my attention.

In an ideal world, I would own a bit more Quebecor than I do. My telecom investments are not as diversified as I would like. For instance, I have more Telus than I am comfortable owning. The excess shares will be sold when the Telus share price recovers. I look forward to the sale. I may invest for dividends but everyone benefits from pocketing some capital gains now and then.

My ideal portfolio has about 350 additional Quebecor shares. At $29.11 I can afford the purchase. The price is good but it could be better. The Morningstar Analyst Report rates QBR.B a four star stock. This means Morningstar believes appreciation beyond a fair risk-ad-
justed return is likely.

And speaking of Morningstar, the respected investment authority believes one should consider holding Quebecor as a core holding in a portfolio based on Canadian stocks. It isn't among the first tier "consider buying recommendations" but it is still listed as a stock worth holding.

The dividend yield of 4.12% is not great but it is adequate. With a payout ratio of 45.14% the dividend should be solid with very little chance of being cut in the near future. The quick ratio of 0.6X also adds to one's confidence in the company.

So, what is holding me back? QBR.B recorded a low of $23.845 in the past year. I worry that QBR.B could drop if the market were to continue to weaken. Am I being greedy? Maybe. (Oh, just to be clear, this post refers to QBR,B. Note the B. It is important.)