Market Overview
It was certainly a volatile month as June saw several up and down days. Despite this, the TSX Index managed to end up by 1.83% on the month. The Bull List was equally as strong, finishing the month with gains of 3.34%. Year to date, the Bull list is outperforming the TSX Index by 166 basis points.
Since the start of 2019 however is when our Bull list really shines. Our individual growth picks have returned 25.31% over that time frame, while the TSX has returned 2.64% (weighted average).
It was mostly green across the board for our bull list stocks in June. Some notable monthly gainers include Canada Goose (TSX:GOOS), TFI International (TSX:TFII), and recent addition Polaris Infrastructure (TSX:PIF). They posted monthly gains of 11.97%, 14.98% and 17.21% respectively.
Notable news in the month centered around acquisitions. Polaris Infrastructure announced plans to acquire a 100% interest in the Chupsa run of river project in Panama. The deal is a positive one as the company continues to diversify operations outside of Ecuador.
As for TFI International, the company received several upgrades by analysts after improving macro-economic conditions. Likewise, the company announced its intentions to pick up essentially all of the outstanding assets of MCT Transportation in bankruptcy proceedings.
The deal is a prime example of how TFII can be a leading consolidator in these times. It is now in predatory mode – picking up strong assets on the cheap from competitors which have overextended themselves and are struggling amidst the current economic downtrend.
In terms of stocks struggling, WSP Global (TSX:WSP) and Lightspeed POS (TSX:LSPD) were two of the outliers. In June they lost 6.27% and 5.15% respectively. Neither of which released any news of note. The investment thesis for both companies remain intact, and are strong long term investments.
The important takeaway from the past month, is that the markets have not yet stabilized. Uncertainty reigns supreme and investors must remain cautious.
*Mat Litalien and Daniel Kent are long Canada Goose, TFI International and Lightspeed POS.
Portfolio reviews
This month, we are beginning our semi-annual portfolio reviews. We start with our set of portfolios geared towards millennials. As these are written, there may be fluctuations in stock prices, so there may be small differences in price.
Keep in mind, these portfolios are just the Canadian equities portion. An example of how this works? A portfolio containing 57% equities would have, out of a $10,000 initial investment, $5700 invested in the original stocks.
We left the other portion of the portfolio up to the individual investor to buy things like fixed income, hold cash, purchase US stocks, or purchase international ETFs for diversity.
So it’s key to understand that Shopify makes up 26% of the equities portion of our millennial conservative portfolio, not the complete portfolio. A quick example: If you have $10,000 and want to go 57% equities, Shopify would make up $1491.69 of that portfolio (26% of $5700). If you wanted to go 80% equities, Shopify would make up $2080 of that portfolio (26% of $8000).
A note outside of these millennial portfolios: Shopify’s rise has caused us to take action within our GenX and Boomer portfolios immediately besides waiting for the mid month review. As of publication, we will be trimming down our positions in Shopify in the following portfolios:
Genx Moderate:
Sell 2 shares of Shopify (@1397.61)
Genx and Boomer Aggressive:
Sell 1 share of Shopify (@1397.61)
The proceeds from this will be in cash that we will deploy when we do the Genx and Boomer portfolio reviews!
Millennial Conservative (MC)
The image above reflects the newly balanced portfolio.
Geared towards millennials which have a lower risk profile, the MC portfolio was still built with an eye towards growth.
Year to date, the portfolio has crushed the TSX Index. In 2020, the MC portfolio has gained 32.24% as compared to the approximate 8.58% loss posted by the TSX Index.
A good portion of those gains were thanks to Shopify’s meteoric rise. By the same account, Shopify now accounts for a large portion of portfolio assets. Thus, it is time to lighten the load on the company and redistribute accordingly.
We’re going to be selling 2 shares of Shopify, resulting in a cash position of $2,795.22 (@$1397.61)
With the proceeds, we are adding two new positions in Open Text and Kirkland Lake Gold.
Open Text is one of the more conservative tech plays on the TSX Index, and is attractively priced. The stock is a recent Bull list addition and we found it to be the perfect tech substitution from the sale of half of our position in Shopify.
Also, in this environment, it is important to have exposure to gold, and one of our favorites is Bull List candidate Kirkland Lake Gold, especially for a conservative style portfolio.
Buy – Kirkland Lake Gold
19 shares – $1072.17 (@$56.43)
Buy – Open Text
17 shares – $992.13 (@$58.36)
Finally, we are going to take advantage of the Parkland Fuel’s depressed share price to add to the portfolio’s position
Buy – Parkland Fuel
22 shares – $738.10 (@$33.35)
Other Portfolio Notes
In terms of performance from the other stocks within the portfolio, there isn’t much not to like.
This portfolio has a very nice blend of growth and stability. Utility stocks like Fortis (TSX:FTS) should be able to take advantage of lower interest rates moving forward and consumer defensive stocks like Alimentation Couche-Tard (TSX:ATD.B) and Dollarama (TSX:DOL) have been crucial in maintaining its significant outperformance.
The portfolio also has US exposure already with its High Dividend Equity Index ETF (TSX:XHD), which is hedged to the Canadian dollar and is currently outperforming the S&P 500.
If you’re looking to model this portfolio but want to avoid Shopify due to its overvaluation, a strong strategy would be to allocate more funds to stocks at historically depressed levels like TD Bank (TSX:TD), Brookfield Asset Management (TSX:BAM.A) and Parkland Fuel (TSX:PKI).
**Daniel Kent is long Parkland Fuel and Kirkland Lake**
Millennial Moderate (MM)
Next up on our list is the MM portfolio which is geared towards millennials which have a moderate risk profile. The MM has been equally as impressive.
Year to date, the portfolio is up by 25% and it is up by approximately 88.32% since inception. In comparison, the TSX Index is only up 9.64% over the same period.
Once again, Shopify has been a standout and now accounts for a large portion of assets. This means we are going lock in some gains, and once again redistribute the funds. Keep in mind, we purchased Kirkland Lake for gold exposure in our conservative portfolio, and will have a gold purchase in our Millennial Aggressive as well, but with this portfolio already holding Newmont Gold (TSX:NGT), it already has sufficient exposure.
We’re going to be selling one share of Shopify (@$1397.61)
We are also going to take a portion of the proceeds and top up our position in Dollarama. We believe it remains well positioned to perform quite well regardless of economic conditions. Second wave or not, we believe it is well positioned to outperform.
Buy – Dollarama
7 shares – $318.43 (@$45.49)
We’ve also decided to take a position in a utility company in this portfolio, and one that we believe provides a perfect risk/reward balance for a moderate style portfolio, and that is Algonquin Power (TSX:AQN). The utility company is actually our most recent dividend Bull List pick, and we feel there is upside potential from here. You can read our report on AQN here.
Buy – Algonquin Power and Utilities
61 shares – $1074.82 (@$17.62)
Other portfolio notes
Again, there hasn’t been much to complain about in this portfolio, and most of the transactions this review are simply due to balance issues because of Shopify’s massive rise, which is ultimately a good thing to have.
The current price of Shopify puts us in an awkward position. With one share, we feel we don’t have enough exposure while with 2, we feel it’s on the higher side. As this is a millennial portfolio and those modeling after it would have plenty of time for recovery if Shopify were to fall, we decided to leave the allocation on the high end.
Another note, this portfolio does contain a dividend cut, which is something we absolutely hate.
With the fall, the stock now makes up a very small allocation in the portfolio. Typically we would add to boost the overall position, but we’re not 100% confident in Suncor moving forward. But we don’t lack enough confidence to cut our losses just yet.
However, if you’re looking for an oil and gas position to take right now, we’d highly suggest looking to Canadian Natural Resources (TSX:CNQ) instead. They’ve managed to maintain the dividend thus far.
**Daniel Kent and Mathieu Litalien are long SU and CNQ**
Millennial Aggressive (MA)
We close with a look at our most aggressive portfolio here at Stocktrades Premium, the Millennial Aggressive. Not surprisingly, the MA portfolio has underpeformed the other two portfolios geared towards millennials. Granted, it has still done quite well with gains of 18.50% in 2020.
As we’ve discussed several times before, growth stocks tend to underperform in a bear market, correction or crash. Since inception, the portfolio has gained 78.40% far outperforming the high, single-digit gains posted by the TSX.
This is despite the fact the portfolio suffered a pretty big setback with pot stock CannTrust which has been de-listed. Granted, we did manage to get out before suffering a complete loss.
Once again, we are reducing our Shopify exposure and adding gold to the MA portfolio. Our selection here will be Alamos Gold (TSX:AGI). It has a higher risk profile than Kirkland Lake but has been a mainstay in our Top 20.
The company is about to enter a significant period of cash flow generation and at today’s gold prices, is well positioned to reward investors. Our bullish sentiment towards gold is exactly why we’re making sure all of our Millennial portfolios have exposure. It’s very likely you see additions to our other portfolios later in the month.
Sell – Shopify
2 shares – $2,795.22 (@1,397.61)
Buy – Alamos Gold
90 shares – $1,135.80 (@12.62)
Since Parkland is a mainstay in all our Millennial portfolios, we are also going to also top up our position here:
Buy – Parkland Fuel
18 shares – $603.90 (@33.55)
Finally, we are going to swap out Innergex Renewables (TSX:INE) for Brookfield Renewable Energy Partners (TSX:BEP.UN).
We’re more than happy exiting our INE position with 55% gains, as Innergex’s performance has been inconsistent and we prefer Brookfield in the space. We also want to increase our exposure to the sector, so will be adding a larger position of Brookfield.
Sell – Innergex
60 shares – $1,170 (@19.50)
Buy – Brookfield Renewable Energy Partners
18 shares – $1,210.14 (@67.23)
Other portfolio notes
This portfolio does contain some shining stars when it comes to Canadian growth stocks. Boyd Group Services (TSX:BYD) is a stock that has ran up nearly 100% despite COVID-19, and is a stock that is trading at extremely rich valuations. If you’re looking to model after this portfolio, it may be wise to put Boyd on a watch list for a potential dip.
Canada Goose has struggled because of China unrest and COVID-19, but we still have a lot of faith in the company as it remains in quite a few of our portfolios as well as our Bull list.
If you like the overall look of this portfolio but would like to reduce risk, the easiest way to go about it would be to swap Alamos Gold out with a more stable gold play (see Kirkland Lake in our conservative portfolio) and swap Canada Goose for a defensive option like Loblaws, Dollarama or Alimentation Couche-Tard.
Of note, this portfolio still contains $1036 cash. When we do decide to take a positon, we will let you know via e-mail.
**Mathieu Litalien is long Alamos Gold**
