Rate of Return: 11.8%
Initial Value $49945.40
June 15, 2012
Update Value $194790.15
December 16, 2024
BUY AND HOLD POSTS BIG GAIN
By Gordon Pape, Editor and Publisher
A buy and hold portfolio should be exactly that. The core components remain in place, through good times and bad. Invest it and forget it.
But there are times when the rules should be broken because one of your picks has hit a wall. That’s what we’re faced with in this review. Both TD Bank and BCE have suffered serious and potentially long-lasting damage. It’s time to replace one of them and put the other on a short leash.
Despite the problems with those two stocks, the portfolio gained almost 20% in the latest six-month period.
The IWB Buy and Hold Portfolio was launched 12-1/2 years ago, in June 2012. 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 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 afternoon of Dec. 12.
iShares Canadian Universe Bond Index ETF (TSX: XBB). The Bank of Canada delivered another 50 bp rate cut this month but signalled that future cuts would come at a slower pace. The unit price is up $0.57 since our last review in June, and we received monthly distributions that totalled $0.469 per unit.
BCE Inc. (TSX, NYSE: BCE). BCE shares continue to lose ground, as investors worry over the company’s new direction (expansion into the US) and the sustainability of the dividend. . The stock is down $7.80 since the last review and is trading at its lowest level since 2011. Because of timing, we received one dividend during the period for a total of $0.9975 per share.
Brookfield Corporation (TSX. NYSE: BN). Brookfield shares continued their strong rally, gaining $28.72 since the last review. BN pays a quarterly dividend of US$0.08 a share.
Proctor & Gamble (NYSE: PG). We added a small position in P&G to this portfolio in mid-2023. We like the stock because of its steady business profile and long-term growth. The shares gained a modest $1.58 in the latest period, and we also received two dividends for a total of $2.02 per share.
CN Rail (TSX: CNR, NYSE: CNI). CN shares took a hit in the latest period, dropping $16.19. We received two dividend payments totalling $1.70 a share.
Enbridge (TSX, NYSE: ENB). Enbridge shares posted a strong gain, up $12.24 for the period. We received two quarterly dividends for a total of $1.84.
Toronto Dominion Bank (TSX, NYSE: TD). The stock has staged a modest rally of $2.12 since the last review but the on-going problems created by the money-laundering scandal in its US operation will continue to limit the company’s growth potential for years to come. We received two dividend payments of $1.02 each for a total of $2.04 per share.
Alphabet (NDQ: GOOGL). Tech stocks continue to perform well. Alphabet shares are up by over US$16.87 since our last review. The company now pays a small dividend of US$0.20 per quarter.
UnitedHealth Group (NYSE: UNH). The shares took a hit following the murder of the CEO of the company’s insurance arm. But they are still up $34.71 from the last review. We received two quarterly dividends for a total of US$4.20 per share.
Walmart (NYSE: WMT). Walmart stock split 3 for 1 in February, increasing our position to 360 shares. The stock has been on a strong run since, gaining US$26.49 in the latest period. We received one dividend payment of $0.21 a share.
Cash. The portfolio had cash and retained earnings of $4,520.10 at the time of the last review. EQ Bank was offering 5% on its 30-day notice savings account, so we moved the money there. We earned interest of $113.
Here is the status of the portfolio as of the afternoon of Dec. 12. 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.
IWB Buy and Hold Portfolio (a/o Dec. 12/24)
| Symbol | Weight
% |
Shares | Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Earnings |
Gain/
Loss % |
| XBB | 7.9 | 540 | $31.22 | $16,859.80 | $28.57 | $15,427.80 | $526.45 | -5.4 |
| BCE | 4.1 | 220 | $47.87 | $10,530.59 | $36.61 | $8,054.20 | $480.27 | -19.0 |
| BN | 15.9 | 370 | $12.75 | $4,716.94 | $84.01 | $31,038.70 | $555.69 | +569.8 |
| PG | 2.6 | 30 | $148.45 | $4,453.50 | $170.14 | $5,104.20 | $175.50 | +18.6 |
| CNR | 9.2 | 120 | $52.32 | $6,278.20 | $148.82 | $17,858.40 | $300.71 | +189.2 |
| ENB | 7.1 | 230 | $43.23 | $9,943.35 | $59.81 | $13,756.30 | $821.65 | +46.6 |
| TD | 7.8 | 200 | $47.80 | $9,559.70 | $76.09 | $15,218.00 | $449.20 | +63.9 |
| GOOGL | 15.8 | 160 | $39.72 | $6,355.92 | $191.96 | $30,716.60 | $98.00 | +384.8 |
| UNH | 11.9 | 45 | $112.47 | $5,061.15 | $515.76 | $23,209.20 | $1,927.55 | +396.7 |
| WMT | 17.4 | 360 | $36.48 | $13,132.40 | $94.09 | $33,872.40 | $616.80 | +163.2 |
| Cash | 0.3 | $421.39 | $534.35 | |||||
| Total | 100.0 | $97,312.94 | $194,790.15 | $5,951.82 | +106.3 | |||
| Inception | $49,945.40 | +301.9 |
Comments: The new portfolio value (market price plus retained dividends/distributions) is $200,741.97. That compares to $167,442.39 at the time of the last review, for a gain of 19.8%.
The major contributions came from Brookfield, Enbridge, Alphabet, and Walmart. We also had positive results from Proctor & Gamble, UnitedHealth Group, Proctor & Gamble, and TD. The losers were BCE and CN Rail.
Since inception, we have a total return of 301.9%. That represents an average annual compound growth rate over 12.5 years of 11.77%. That is well ahead of our 8% target.
Changes: This is a Buy and Hold Portfolio so we should always resist making changes. But I think we can do better by replacing one stock now and putting another on watch.
TD Bank has been seriously compromised and not in a short-term way. Therefore, we will sell our position for $15,667.20. We’ll replace it with Royal Bank (TSX, NYSE: RY). It is trading at $177.42 so we will buy 90 shares at a cost of $15,967.80. We’ll take $300.60 from cash to make up the difference.
BCE continues to be a major concern, but it may have hit bottom. The yield is over 10% and the market appears to have priced in a dividend cut. If so, the stock should stabilize and perhaps gradually move up. We’ll hold our position for now and see what happens in the next six months.
We will use some of our retained earnings, as follows.
XBB – We’ll buy another 10 units for a total cost of $285.70. We now own 550 units and have $240.75 in retained earnings.
ENB – We’ll purchase another 10 shares at $59.81, for a cost of $598.10. We now own 240 shares and have retained earnings of $223.55.
The portfolio has cash and retained earnings of $4,852.57. We can get 6% for the first five months on a Simplii Financial high interest savings account, 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 Dec. 12/24)
| Symbol | Weight
% |
Shares | Average
Price |
Book
Value |
Current
Price |
Market
Value |
Retained
Earnings |
| XBB | 8.1 | 550 | $31.17 | $17,145.50 | $28.57 | $15,713.50 | $240.75 |
| BCE | 4.1 | 220 | $47.87 | $10,530.59 | $36.61 | $8,054.20 | $480.27 |
| BN | 15.8 | 370 | $12.75 | $4,716.94 | $84.01 | $31,038.70 | $555.69 |
| PG | 2.6 | 30 | $148.45 | $4,453.50 | $170.14 | $5,104.20 | $175.50 |
| CNR | 9.1 | 120 | $52.32 | $6,278.20 | $148.82 | $17,858.40 | $300.71 |
| ENB | 7.3 | 240 | $43.92 | $10,541.45 | $59.81 | $14,354.40 | $223.55 |
| RY | 8.2 | 90 | $177.42 | $15,967.80 | $177.42 | $15,967.80 | $0 |
| GOOGL | 15.7 | 160 | $39.72 | $6,355.92 | $191.96 | $30,716.60 | $98.00 |
| UNH | 11.6 | 45 | $112.47 | $5,061.15 | $515.76 | $23,209.20 | $1,927.55 |
| WMT | 17.3 | 360 | $36.48 | $13,132.40 | $94.09 | $33,872.40 | $616.80 |
| Cash | 0.2 | $233.75 | $233.75 | ||||
| Total | 100.0 | $94,417.20 | $195,853.15 | $4,618.82 | |||
| Inception | $49,945.40 |
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