Our GenX Aggressive portfolio has generally performed on par with the TSX, and in 2019 is actually beating the TSX by nearly 700 basis points. But since October, the portfolio has lagged the TSX by about 100 basis points.
I like the overall makeup of the portfolio, but much like most of our portfolios a rapid increase in the price of Shopify has left the portfolio heavily unbalanced. The tech sector makes up 28 percent of this portfolio, so some changes will be needed.
The portfolio contains a lot of growth stocks that have somewhat underwhelmed (PBH,PKI, GOOS), but also contains a lot of strong income stocks that have somewhat surprised (FTS, T.)
The Canadian banks are severely undervalued right now, and this portfolio has some room to add to the financial services sector.
**Daniel Kent and Mathieu Litalien are long T.TO
Telus is a mainstay in a lot of Canadian investment portfolios, and for good reason. The company is excellent at continually growing its wireless network and increasing their dividend. The company has posted revenue higher than analyst estimates for the last 5 quarters, and earnings have either hit the mark or exceeded in 3 straight.
Telus pays an exceptional dividend. One of the best in the country in my opinion. With a yield of 4.41% and a payout ratio of 78%, they should have a place in every low risk portfolio. Telus has done quite well in this portfolio, with a 9.71% return on top of its dividend.
**Daniel Kent and Mathieu Litalien are long SHOP.TO
Shopify has been quite the revelation over the last while. The stock has brought the bulk of the performance in this portfolio, gaining 75.5% since October.
The company continues to grow at a rapid pace, hitting double digit sales growth every year. Its growth is slowing yes, but it’s still extremely strong. The stock is prone to some heavy volatility, especially if the company posts a sub-par earnings period.
Half of our position in Shopify will be sold in this portfolio to maintain balance. As of right now, it is simply too risky to leave this large of an allocation towards the Canadian tech industry, particularly in an individual tech stock.
GoEasy Ltd (GSY.TO)
**Mathieu Litalien is long GSY.TO
GoEasy is in a very interesting position. The company is an alternative lender, and if you haven’t noticed recently, alternative lenders are all the rage. Although GoEasy doesn’t offer mortgages like Equitable Bank (EQB) does, the company still offers alternative ways to get money to fund your goals that isn’t coming from a big 5 bank.
Banks have extremely tight guidelines and regulations they have to follow in order to give out loans. Alternative lenders are not regulated by the same bodies, and in a way define their own rules. GoEasy is one of the strongest growth stocks in the country right now, and the stock has increased 42% in value from late December of 2018.
I strongly believe the alternative lending industry is going to do nothing but grow in the next while, and analysts are just as bullish. Analysts predict GoEasy will achieve 21.60% in annual earnings growth this year, and we’ll be sticking around for the ride.
Canada Goose (GOOS.TO)
**Daniel Kent is long GOOS.TO
Canada Goose has somewhat stalled since a very successful IPO in 2017. Since hitting highs of over $90 in late 2018, it seems there may have been a little too much growth priced into this stock.
The company hit earnings projections and then some on their last quarterly report, yet the stock has fallen over 10% since. As such, we sit here with a below average 7.66% gain in the company since October inception. However, we aren’t even close to giving up on this stock yet.
The company has beat on both top and bottom lines every quarter since its IPO. In my eyes, this is a stock you regret giving up on when you see a sideways stock price. Be patient with this one, and let the company do what it does best, perform. The stock has been recovering somewhat as of late.
**Mathieu Litalien is long OTEX.TO
OpenText has provided some strong returns for investors in this portfolio since October. Another company in the rapidly growing Canadian tech industry, Opentext has returned 18.52% at the time of writing and provides a solid dividend of 1.58% and a 60.56% payout ratio. The yield is low, but we’ve got to remember we’re dealing with a solid growth stock here.
Analysts are pegging the company at an 11.40% annual growth rate over the next 5 years. That, coupled with the company’s dividend should provide some confidence for investors with a position in OTEX.
I don’t consider OTEX overvalued, whereas Shopify is. That is why the trimming of exposure to the Canadian tech industry will come from our position in Shopify, and OTEX will remain the same.
Premium Brand Holdings (PBH.TO)
Premium Brands has lost 15 % since we purchased the stock for the portfolio back in October, and if anything, this represents a strong buying opportunity for those looking to get into a true triple threat.
The company has an excellent dividend with a yield of 2.55% and a payout ratio of 62.91%, excellent growth prospects with a 24% annual expected growth rate over the next 5 years, and very strong value with a 5 year PEG of 0.75, a price to sales of 0.75 and a forward price to earnings of 15.35.
There’s no sense in budging on PBH right now in this portfolio, and as such it will be staying put.
Dollarama has one of the smallest portfolio allocations in this portfolio, and it was partly because I was hesitant with the direction the company was going, but still felt it was worth taking a chance on them.
My main issue with Dollarama is their lack of same store sales, and their lack of overall store growth. The company is raising prices, and many people really don’t feel this company is a dollar chain anymore. Unfortunately, if they keep raising prices the store won’t be competing with other dollar chains, it will be competing with massive retailers like Wal-Mart, which as we have seen is near impossible.
Dollarama will continue to be held in this portfolio over the next quarter, but this will be a stock I keep a very, very close eye on moving forward. Investors will need to see some steps in the right direction from the company in 2019 to reassure shareholder confidence.
TD Bank (TD.TO)
**Daniel Kent and Mathieu Litalien are long TD.TO
In my opinion, TD Bank is one of the best dividend stocks in the country. If you’re looking for a bank with some strong North American exposure, they are a good bet. The company has a history of consistently outperforming expectations (only one earnings miss in the last 5 quarters, and no sales misses) and pays a very healthy 3.99% yield with a payout ratio of only 44.37%.
With the threat of lower or at least stalling interest rates, I could see the Canadian banks facing some volatility in the future. However, there is absolutely no reason to lose confidence in TD over the long term. For that reason, the stock isn’t going anywhere in this portfolio.
**Daniel Kent is long FTS.TO**
If you’re looking for stability, Fortis is probably one of the best companies to look at. The company has a dividend streak that spans over decades (40+ years) and its 3.66% dividend with a 66% payout ratio is about as strong as it gets. The company does business in a highly regulated industry where cash flows are often consistent. The fact the stock has returned over 14% to investors since its purchase in October is just icing on the cake. Make no mistake, Fortis is the type of stock that often gets bought and sticks in an investors portfolio for a long time.
Suncor Energy (SU.TO)
**Daniel Kent and Mathieu Litalien are long SU.TO
Suncor provides one of the most reliable dividends in the country with a 3.82% yield and a 71.29% payout ratio. And although the company has remained relatively stagnant growth wise (a 3.70% gain since October,) there are a number of reasons to stay positive.
For one, the Alberta election has come to a close, and a United Conservative victory will likely bode well for the oil and gas industry. Although changes wouldn’t happen overnight, the UCP’s platform is heavily weighted towards making big corporations, particularly those in oil and gas, happy again.
The reduction in corporate taxes and the urgency to get shovels in the ground for pipeline projects could spark some investor urgency in the oil and gas sector. And if changes do come, in time we may see a little life breathed in to a struggling industry. As such, we will continue to hold Suncor in this portfolio.
Parkland Fuels (PKI.TO)
**Daniel Kent is long PKI.TO
Parkland is a company in this portfolio that we’re going to need a little bit of patience with. The stock was purchased at the high end of things back in October and is finally getting back to that price 6 months later. However, the growth prospects of the company are quite possibly the brightest within the portfolio. A 2.92% dividend yield (albeit a high payout ratio of 76.50%) is a huge bonus. The company has topped estimates in sales over the last 5 quarters, yet struggled with earnings, missing in the last two.
With earnings growth over the last year of 151% and five year earnings growth of 20.9% on average, the company has proven it is capable of strong growth. So for that reason, we’re holding strong.
New Stock (BNS.TO)
**Mathieu Litalien is long BNS.TO
Bank of Nova Scotia in my mind is one of the cheapest bank stocks you can own right now. The stock doesn’t bring with it amazing growth numbers (nowhere near something like Shopify, who’s position is being sold to cover for this stock) but the fact it trades at a P/E of under 10 with a near 5% yield is simply too good to pass up.
This portfolio contains TD Bank and GoEasy Limited, but I felt like we could add more in the financial services area. Scotiabank has missed both earnings and revenue estimates over the last two quarters, but I’m not too worried.
The stock according to analysts has about 10% upside in 2019. Combine that with a very strong 4.75% dividend yield, and you’ve got a near 15% projected yearly return in one of the most stable stocks and industries in the world.