12.6%
ANOTHER GAIN FOR BUY AND HOLD
By Gordon Pape, Editor and Publisher
My Buy and Hold Portfolio was launched nine years ago, in June 2012. It was designed for people who don’t want to do a lot of trading and waste money on commissions. We have one simple goal – invest in great stocks and then hold on to them, no matter what the market is doing. Over the long term, the strategy works. There are ups and downs, of course, but the underlying thesis is that the long-term trend of the markets is up. If you own good stocks, they’ll move with it.
This portfolio consists mainly of 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, 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 June 24.
iShares Canadian Universe Bond Index ETF (TSX: XBB). It’s a rough time for bonds so it’s no surprise we have seen a drop in the unit value since the last update. This is likely to continue as rates rise, but bonds should remain an essential part of a Buy and Hold Portfolio. We received six distributions totalling $0.412 per unit.
BCE Inc. (TSX, NYSE: BCE). BCE shares have strengthened recently, rising $4.42 since the last update. Because of timing we received three dividends totalling $2.583.
Brookfield Asset Management (TSX: BAM.A, NYSE: BAM). Brookfield continued its strong performance with a gain of $10.82 in the latest period. We also received two dividends for a total of $0.321 a share.
CN Rail (TSX: CNR, NYSE: CNI). The battle with CP over Kansas City Southern took some of the steam out of CN’s recent rebound and we dropped about $7 per share. Because of timing we received three dividend payments of $1.805.
Enbridge (TSX, NYSE: ENB). We added 10 shares of Enbridge in the December update and it turned out to be good timing. The stock is up $7.84 since then so we have a good return on our latest investment. We received two payments for a total of $1.67 per share during the latest period.
Toronto Dominion Bank (TSX, NYSE: TD). All the banks have been rallying on the prospect that higher interest rates will improve net interest margins. Loan loss provisions are also down. TD’s stock is up $16.39 since the last review. We received two dividend payments totalling $1.58 per share. The dividend will be raised once government controls are lifted.
Alphabet (NDQ: GOOGL). Despite the recent pull back in tech stocks, Alphabet (Google) has gained $625 since the last review. That’s an amazing 32%. This is the only stock in the group that does not pay a dividend but at that rate of growth, who cares?
UnitedHealth Group (NYSE: UNH). This is the top health insurer in the U.S. and the shares continue to climb. They are up over US$56 since our last review. The quarterly dividend was increased by US$0.20 to US$1.45 a share effective with the June payment. We received three distributions due to timing, totalling US$3.95.
Walmart (NYSE: WMT). Walmart benefitted from increased business during the pandemic, but the shares pulled back recently despite big gains in its eCommerce revenue. The stock is down US$13.61 from the last review. We received three quarterly dividends totalling US$1.64 per share. The pay-out was increased by a penny a share in March.
Cash. At the time of the last review, we had cash and retained earnings totaling $3,202.88. We moved the money to a Motive Savvy Savings Account, which was paying 1.55%. We earned interest of $24.82.
Here is the status of the portfolio as June 24. For consistency, the Canadian and U.S. dollars are shown at par. 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 June 24/21)
| Symbol | Weight
% |
Shares | Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Earnings |
Gain/
Loss % |
| XBB | 11.1 | 490 | $31.42 | $15,397.70 | $31.91 | $15,635.90 | $445.19 | + 4.4 |
| BCE | 7.3 | 170 | $45.29 | $7,698.85 | $60.69 | $10,317.30 | $935.79 | +46.2 |
| BAM.A | 16.2 | 360 | $15.63 | $5,635.15 | $63.66 | $22,917.60 | $513.96 | +313.8 |
| CNR | 10.2 | 110 | $43.34 | $4,767.35 | $130.55 | $14,360.50 | $493.80 | +212.9 |
| ENB | 6.7 | 190 | $41.81 | $7,944.55 | $49.40 | $9,386.00 | $320.40 | +22.2 |
| TD | 10.5 | 170 | $44.10 | $7,055.60 | $87.17 | $14,818.90 | $537.20 | +117.4 |
| GOOGL | 13.9 | 8 | $794.49 | $6,355.92 | $2,450.00 | $19,600.00 | $0 | +208.4 |
| UNH | 12.7 | 45 | $112.47 | $5,061.15 | $398.87 | $17,949.15 | $992.04 | +274.2 |
| WMT | 11.1 | 115 | $108.82 | $12,514.30 | $136.91 | $15,744.65 | $496.80 | +29.8 |
| Cash | 0.3 | $375.05 | $399.87 | |||||
| Total | 100.0 | $72,805.62 | $141,129.87 | $4,735.18 | +100.3 | |||
| Inception | $49,945.40 | +192.0 |
Comments: The new portfolio value (market price plus retained dividends/distributions) is $145,865.05, compared to $130,698.94 at the time of the last review. That represents a gain of 11.6% over the period.
The big gainers during the period were Alphabet, UnitedHealth, Brookfield Asset Management, and TD Bank.
Since inception, we have a total return of 192%. That represents an average annual compound growth rate over nine years of 12.63%, which is well ahead of our 8% target.
Changes: This is a Buy and Hold portfolio, so I am not making any changes to our holdings. All are doing relatively well, except for the bond ETF, and the overall asset mix is sound.
We will use some cash to add to two holdings, as follows.
XBB – We will buy 10 units at $31.91 for a total of $319.10. That will give us 500 units and reduce retained income to $126.09.
BCE – We’ll buy 10 more shares of BCE at $60.69 for a total of $606.90. That will give us 180 shares. The retained earnings will drop to $328.89.
We have cash and retained earnings of $4,209.05. We will keep the money in a Motive Savvy Savings Account, which currently pays 1.25%.
Here is a look at the revised portfolio. I will update it again in December.
IWB Buy and Hold Portfolio
Revised June 24/21
| Symbol | Weight
% |
Shares | Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Earnings |
| XBB | 11.3 | 500 | $31.43 | $15,716.80 | $31.91 | $15,955.00 | $126.09 |
| BCE | 7.7 | 180 | $46.14 | $8,305.75 | $60.69 | $10,924.20 | $328.89 |
| BAM.A | 16.1 | 360 | $15.63 | $5,635.15 | $63.66 | $22,917.60 | $513.96 |
| CNR | 10.1 | 110 | $43.34 | $4,767.35 | $130.55 | $14,360.50 | $493.80 |
| ENB | 6.6 | 190 | $41.81 | $7,944.55 | $49.40 | $9,386.00 | $320.40 |
| TD | 10.4 | 170 | $44.10 | $7,055.60 | $87.17 | $14,818.90 | $537.20 |
| GOOGL | 13.8 | 8 | $794.49 | $6,355.92 | $2,450.00 | $19,600.00 | $0 |
| UNH | 12.6 | 45 | $112.47 | $5,061.15 | $398.87 | $17,949.15 | $992.04 |
| WMT | 11.1 | 115 | $108.82 | $12,514.30 | $136.91 | $15,744.65 | $496.80 |
| Cash | 0.3 | $399.87 | $399.87 | ||||
| Total | 100.0 | $73,756.44 | $142,055.87 | $3,809.18 | |||
| Inception | $49,945.40 |
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