Rate of Return: 10.7%

Initial Value $49945.40

June 15, 2012

Original Issue

Update Value $161256.71

December 4, 2023

Update Issue

BUY AND HOLD POSTS GAIN

By Gordon Pape

Our IWB Buy and Hold Portfolio was launched eleven and a half years ago. It invests in high-quality stocks, with the intention of holding them through bull and bear markets. The core premise is that the long-term trend of the markets is up and if you own good stocks, they’ll move with it.

The portfolio consists mainly of Canadian and US blue-chip stocks that offer long-term growth potential. It also has a bond ETF holding. The original weighting was 10% for each stock with the bond ETF starting with a 20% position. That has now been reduced because equity increases have outpaced the bond market.

I used several criteria to choose the stocks. These included a superior long-term growth profile, industry leadership, a good balance sheet, a history of dividend increases, and relative strength in down markets.

The objective is to generate decent cash flow (all the stocks but one pay dividends), minimize downside potential, and provide slow but steady growth. The target rate of return was originally set at 8% annually.

These are the securities we hold with comments on how they performed since my last review in June. Prices are as of the close of trading on Nov. 29.

iShares Canadian Universe Bond Index ETF (TSX: XBB).

Finally, the bond market appears to be stabilizing. Although Bank of Canada Chair Tiff Macklem continues to warn of the possibility of more interest rate hikes, the markets don’t believe it. The same is true in the US, where investors are actually pricing in rate cuts in 2024. The XBB units are off by only a penny since the time of our last review in June and that was more than offset by monthly distributions that totalled $0.432 per unit.

BCE Inc. (TSX, NYSE: BCE). BCE shares continued to be weak, lagging the rebound in the telecom sector. The shares are down $6.88 since the last review, although they have bounced off their 52-week low of $49.57, reached in late October. The company pays a quarterly dividend of $0.9875.

Brookfield Corporation (TSX. NYSE: BN). After falling to a low in the $40 range during the October market slump, Brookfield shares have rallied and are up $4.19 since the June review. BN pays a quarterly dividend of US$0.07.

Proctor & Gamble (NYSE: PG). We added a small position in P&G to this portfolio last June. We like the stock because of its steady business profile and long-term growth. The stock gained $2.68 since it was added to the portfolio, and we also received two dividends for a total of $1.882 per share.

CN Rail (TSX: CNR, NYSE: CNI). CN shares held their ground in the latest period, losing only $0.36. We received two dividend payments totalling $1.58 a share.

Enbridge (TSX, NYSE: ENB). Enbridge shares continued to be hit by rising interest rates and weaker energy prices. The shares are down $2.31 since the June update. We received two quarterly dividends for a total of $1.775.

Toronto Dominion Bank (TSX, NYSE: TD). The banks have been under pressure due to fears of a possible recession, but that appears to be easing. The stock has rallied since our June review, gaining $2.72. We received two dividend payments of $0.96 each for a total of $1.92 per share. 

Alphabet (NDQ: GOOGL). Tech stocks did well in 2023. Alphabet shares are up by almost $10 since our last review. This is the only stock in the portfolio that does not pay a dividend.

 UnitedHealth Group (NYSE: UNH). UNH is the top health insurer in the US, and our top performer. The shares were weak in the early part of the year but staged a huge comeback in the last six months with a gain of $69.05 since our last review. We received two quarterly dividends for a total of $3.76 per share.

Walmart (NYSE: WMT). Walmart shares posted a loss of $1.65 during the review period. Due to timing, we received only one quarterly dividend of $0.57 per share.

Cash. We moved our cash and retained earnings of $3,756.28 to Manulife Bank, which was offering a special rate of 5% on new e savings accounts. We received $93.91 in interest.

Here is the status of the portfolio as of Nov. 29. The Canadian and US dollars are shown at par, but obviously the US holdings are doing better thanks to the strength of the greenback. Trading commissions are not factored in, although in a buy and hold portfolio they are not significant in any event.

IWB Buy and Hold Portfolio (a/o Nov. 29/23)

Symbol Weight

%

Shares Average

Price

Book

Value

Current

Price

Market

Value

Retained

Earnings

Gain/

Loss

%

XBB 9.3 530 $31.29 $16,586.10 $27.37 $14,506.10 $304.43 -10.7
BCE 6.8 200 $47.78 $9,555.29 $53.12 $10,624.00 $647.62 +18.0
BN 11.5 370 $12.75 $4,716.94 $48.36 $17,893.20 $466.89 +289.2
PG 2.9 30 $148.45 $4,453.50 $151.13 $4,533.90 $56.46 +2.9
CNR 11.5 115 $47.64 $5,478.15 $155.53 $17,885.95 $611.56 +237.7
ENB 6.3 210 $42.85 $8,998.45 $46.92 $9,853.20 $745.50 +17.8
TD 10.1 190 $46.42 $8,820.00 $83.30 $15,827.00 $393.30 +83.9
GOOGL 13.9 160 $39.72 $6,355.92 $134.99 $21,598.40 $0 +239.8
UNH 15.5 45 $112.47 $5,061.15 $534.98 $24,074.10 $1,738.55 +410.0
WMT 12.0 120 $109.44 $13,132.40 $156.08 $18,729.60 $473.70 +46.2
Cash 0.2     $199.34   $293.25    
Total 100.0     $83,357.24   $155,818.70 $5,438.01 +93.5
Inception       $49,945.40       +222.9

 Comments: The new portfolio value (market price plus retained dividends/distributions) is $161,256.71. That compares to $154,545.38 at the time of the last review, for a gain of 4.3%.

The gain was mainly due to a huge contribution from UnitedHealth Group. We also had positive contributions from TD Bank, Brookfield, Proctor & Gamble, and Alphabet.

Since inception, we have a total return of 222.9%. That represents an average annual compound growth rate over 11.5 years of 10.73%. That is well ahead of our 8% target.

Changes: We will use some of our retained earnings, as follows.

XBB – We will add ten units at a cost of $273.70. We now own 540 units, and our retained income is reduced to $30.73.

BCE – We’ll buy 10 shares for $531.20. Our total position is now 210 shares and we have retained earnings of $116.42.

ENB – We’ll purchase another 10 shares at $46.92, for a cost of $469.20. We now own 220 shares and have retained earnings of $276.30.

The portfolio has cash and retained earnings of $4,457.16. Duca Credit Union is currently offering a 5.75% return, so we’ll move our money there.

Here is the revised portfolio. I will update it again in June.

IWB Buy and Hold Portfolio (revised Nov. 29/23)

Symbol Weight

%

Shares Average

Price

Book

Value

Current

Price

Market

Value

Retained

Earnings

XBB 9.4 540 $31.22 $16,859.80 $27.37 $14,779.80 $30.73
BCE 7.1 210 $48.03 $10,086.49 $53.12 $11,155.20 $116.42
BN 11.4 370 $12.75 $4,716.94 $48.36 $17,893.20 $466.89
PG 2.9 30 $148.45 $4,453.50 $151.13 $4,533.90 $56.46
CNR 11.4 115 $47.64 $5,478.15 $155.53 $17,885.95 $611.56
ENB 6.6 220 $43.03 $9,467.65 $46.92 $10,322.40 $276.30
TD 10.1 190 $46.42 $8,820.00 $83.30 $15,827.00 $393.30
GOOGL 13.7 160 $39.72 $6,355.92 $134.99 $21,598.40 $0
UNH 15.3 45 $112.47 $5,061.15 $534.98 $24,074.10 $1,738.55
WMT 11.9 120 $109.44 $13,132.40 $156.08 $18,729.60 $473.70
Cash 0.2     $293.25   $293.25  
Total 100.0     $84,725.25   $157,092.80 $4,163.91
Inception       $49,945.40      

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