It has been a while since I last sent out an update on my model portfolios here at Stocktrades Premium.
It’s not that I’m not updating these portfolios and making transactions inside them consistently. It’s just that we’ve had so much to talk about in this crazy market, I haven’t had the room to dedicate an entire newsletter to speaking about the model portfolios overall.
I would argue that the model portfolios here at Premium are underutilized. I would also argue that the reasoning behind this is likely a misunderstanding about how to use the models.
My model portfolios are not meant to be directly copied or mimicked. They’re designed to show you how an experienced investor would think about building and maintaining a portfolio – the structure, risk balance, and decision-making process, etc.
Investing is way too complex and individualized to ever take a model and directly copy it. But, where investment models have extensive value is in seeing the portfolio construction in action, understanding particular strategy shifts, discovering new ideas, and potentially learning about risk management.
My model portfolios primarily show you what I’m thinking, not what you must own. They’re a guide to help you build and maintain a smarter, more resilient portfolio that fits you.
I’d love some feedback on this newsletter. Let me know if you want to see more newsletters focusing on the actions/results/commentary on the models. I’m happy to do it!
Let’s quickly get into my moves on the week before we start.
My portfolio moves
I ended up establishing a position in Waste Connections (TSE:WCN) over the last few weeks. This shouldn’t really come as a surprise to too many members, as I have been wanting to add it for quite some time.
I also added to my positions in Constellation Software and Topicus. If you missed my newsletter last week digesting the news on Constellation, I got a ton of feedback on how good of a newsletter it was, so click here to read that.
Defensive stocks have taken a back seat in this market due to the large-scale runup in growth plays, primarily around artificial intelligence. I’ve been digging deep to try and identify some AI plays that have a reasonable margin of safety in this market, but I’m finding it nearly impossible.
I’m more so looking to the “picks and shovels” plays of artificial intelligence. The ones that will get paid regardless of whether or not any of this large-scale AI spend ends up being profitable. I already highlighted one of those plays at Premium, that being ASML Holdings, which has gone on a torrent run over the last while here, up more than 40% in a month.
The markets are frothy. There is no doubt about that. However, my time horizon is long enough that I’m still comfortable remaining 100% equity. But as you can tell, my recent purchases have been more along the lines of taking advantage of stocks going through drawdowns, primarily because of AI.
In the case of Waste Collections, nobody wants a trash collector compounding free cash flow at a 10%~ pace when growth stocks are going through the roof. And in the case of Constellation Software, AI uncertainty is causing depressed price levels.
But, when you extend your thought process out to a period of 5, 10, 15 years etc., instead of the next 6 months, it becomes easier to avoid hot momentum names and instead accumulate quality businesses.
Model Portfolio Updates
Before I begin, I would like to note that you can download the complete model portfolio reports directly on the website.
Early Stage Growth
The Early Stage Growth portfolio has put up some exceptional returns since its inception in 2019. Yes, it is trailing the S&P 500 by around 1%~ annually; however, this is a portfolio primarily composed of Canadian names, so a direct comparison to the S&P 500 isn’t the best way to judge its performance.
I ended up making quite a few shifts inside of this portfolio in the recent update.
Sales:
- Sold Savaria (TSE:SIS)
- Sold Equitable Bank (TSE:EQB)
- Sold Goeasy (TSE:GSY)
- Sold Brookfield Renewables (TSE:BEP.UN)
Additions:
- Added TMX Group (TSE:X)
- Added Cargojet (TSE:CJT)
- Added Uber (UBER)
- Added WSP Global (TSE:WSP)
As you’ll notice, a lot of my sales were from recent companies removed from the Bull List. I had lost a bit of faith in Equitable Bank due to a lack of results over the last while, and ended up selling the holding in my own portfolio. For Savaria, I felt the company was fully valued at this point in time and found more opportunity in other items like Cargojet and Uber.
For Goeasy, even though I removed this stock from the Bull List a year ago, I kept it in this portfolio as a long-term hold. However, the short report and Goeasy’s response to it made me a bit uneasy. Because this portfolio is quite aggressive, I toned it back a bit and took a position in what I believe could easily be a Foundational Stock in WSP Global.
I’m liking the results of this one. We’re now getting to the point where we have a reasonable sample size (nearly 6 years) of performance. And although this portfolio would certainly be the highest risk model I have, with a Sharpe ratio of 1.3 and a standard deviation of 12%, it has provided relatively solid risk-adjusted returns.
Keep in mind that if you’re looking at this model, be certain that you have the risk tolerance to stomach the volatility.
Mid-Stage Growth
Unfortunately, the Mid Stage Growth portfolio experienced a data error over at Ycharts that caused the portfolio’s returns from 2019-2021 to be unavailable. This is why this chart is a little shorter than the others.
In addition to this, the portfolio’s performance seems relatively lackluster compared to its benchmark because it didn’t capture the performance during the 2020/2021 bull market.
There is no doubt that this portfolio has not performed as well as the Early Stage. There are more conservative names in this portfolio that have not delivered the best returns over the last 3-4 years. However, there are also ones that I’m still quite bullish on. I’m speaking on names like TELUS, Fortis, and Alimentation Couche-Tard.
The underperformance over the last couple of years may lead people to believe I plan to make large-scale changes within this portfolio. But, I’m simply being patient, as I believe this portfolio has a rock-solid basket of holdings, many of which are trading at strong valuations.
We’re seeing this again in the risk-adjusted metrics, with a Sharpe ratio of 1.2 and a standard deviation of only 12%.
Sales:
- Sold Goeasy Ltd (TSE:GSY)
Additions:
- Added Waste Connections (TSE:WCN)
I won’t explain much of the thought process around these moves here, as I have previously covered inside of this newsletter.
Late Stage Growth
Out of all the model portfolios here at Premium, the Late Stage Growth is probably the most impressive (not from an absolute return basis, as some of the other portfolios have put up better annualized returns). The fact that this portfolio is approximately 30% fixed income and has shown nearly 14% annualized returns since its inception is impressive.
The portfolio has primarily achieved this through strategic plays in defensive-style companies on the TSX that have done admiringly well over the last while. I’m talking about companies like Dollarama (TSE:DOL), Waste Connections (TSE:WCN), TC Energy (TSE:TRP), and Agnico Eagle Mines (TSE:AEM).
I would be lying if I said I put these stocks in this portfolio because they had a strong chance to outperform the broader markets. Instead, they were placed in the portfolio as either industry leaders (Agnico), or strong defensive holdings (the remainder mentioned). The fact they’ve done so well is just the cherry on top.
Much like the other portfolios, over the last 3 years, this one has put up exceptional risk-adjusted returns, with a Sharpe Ratio of 1.24 and a standard deviation of only 8.4%. The more impressive number might be the fact that this portfolio, despite having as many stocks doing as strong as they are, only experienced a ~17% drawdown in the 2022 bear market.
I have made very few changes to this model over the years. As the saying goes, if it ain’t broken, don’t fix it.
High-Yielding Portfolio
This was one of the income portfolios introduced back in 2023. Although many members will know I am a total return investor, I understand that some investors are looking to prioritize income over overall returns.
The best part about this portfolio is the fact that since its inception, it has managed to provide both.
The benchmark for this portfolio is a 65/35 TSX/S&P 500 benchmark, primarily because the portfolio contains around 65% Canadian equities and 35% US equities.
Despite only ~4% yield on the portfolio, it has managed to put up around 17% annualized returns since its inception in 2023.
The one thing I would like to preface about this portfolio is that I would not expect these types of returns to continue. The portfolio was started at a convenient time, and although the 17% annualized returns looks exceptional, most of the initial holdings were purchased near the bottom of the bear market.
What I do have a lot of confidence in, however, is the portfolio’s ability to still outperform its 65/35 benchmark.
I decided not to make any changes to this portfolio. However, there are a few companies inside of it that are on a bit of “thin ice,” you could say.
I’m looking to see if we see any sort of operational turnaround from a company like Pepsi. This is a US Foundational Stock that was put on the list because of its diverse business model in terms of snack foods combined with drinks. Ironically, it is the diversity of that model that is causing it to struggle.
You will likely see some more commentary in this regard from me in the New Year as I make the new 2026 Foundational Stock list.
But for now, this portfolio has performed well enough that I’m simply going to leave it alone.
Dividend Growth
You can pretty much see the exact moment the Dividend Growth portfolio started underperforming its benchmark. That would be when the markets started recovering from the impacts of “Liberation Day” and the implementation of wide-scale tariffs.
I am not all that surprised by this. The majority of stocks that are currently propping up the S&P 500’s returns pay little dividends and do not grow their dividends all that much.
I still have a lot of confidence in this portfolio and its ability to perform well moving forward. But much like the high-yielding portfolio, I have a few question marks.
For one, Starbucks. Another US Foundational Stock (and one I own) that is going through a bit of difficulty right now. I’ve been relatively patient with this company over the last year or so as they transition to new leadership and an operational turnaround.
However, with these types of companies, they’ll pitch the turnaround story as long as investors are willing to listen. Eventually, you need to see results.
Another company is Canadian National Railway. As many know, I sold my CNR stock and purchased CP Rail due to the fact that CN Rail had made some relatively poor capital allocation decisions during the course of the pandemic. Buying back a ton of shares at inopportune times and ignoring the balance sheet.
Because this is a “dividend growth” model portfolio, I’m willing to keep CN Rail around a bit longer. It has been the more consistent dividend grower out of the two. However, CP Rail has returned to dividend growth post Kansas City Southern acquisition, and if it does string together a few years of consistent dividend growth, I could easily make the swap.
The one thing you’ll notice about these models
Outside of the Early Stage portfolio, there were relatively few moves made inside of these models.
If anything can be taken from these model portfolios over the 6+ years of their existence (3 in the case of the dividend portfolios), it’s the fact that I make long-term, methodical decisions with them.
It would be easy for me to consistently make numerous moves inside of these portfolios in an effort to chase performance or create something to talk about. However, the vast majority of them are simply sitting in the background, providing outstanding returns. And if nothing needs to be done, I’m not going to do something just for the sake of doing it. They’re valuable resources for Premium members looking to get an idea of how differently I structure a portfolio based on risk tolerance, time horizon, and even potential investing strategies (high yield, dividend growth, for example).
