23.7%
SETBACK FOR GROWTH PORTFOLIO
By Gordon Pape
Nothing goes straight up forever. After a strong nine-year run, our model Growth Portfolio hit a brick wall in the latest six-month period. Two of our largest positions, Shopify and ARK Innovation ETF, were hammered badly. Even a decent performance from the rest of our holdings couldn’t overcome the losses inflicted by those two.
I said at the time we added the ARK fund that it was high-risk/high-reward choice. Unfortunately, all we saw was the risk part. We’re down 59% on this position and we aren’t going to wait around to lose more.
As for Shopify, it is still a big winner since we added it. But it’s off a gut-churning 62% since our last review as investors took profits and fled.
We created the IWB Growth Portfolio in August 2012 with an initial value of $10,000 and a target annual growth rate of 12%. As we have consistently pointed out, this is a high-risk portfolio, with 100% exposure to the equity markets. It’s not a place for cautious investors.
Here are the securities that make up the current portfolio, with an update on how they have performed since our last review in August. Prices are as of the afternoon of March 10.
ARK Innovation ETF (NYSE: ARKK). This pandemic-era high- flyer is now the wrong fund at the wrong time. The stocks in the portfolio will eventually rebound but we can’t wait around.
Alimentation Couche-Tard (TSX: ATD, OTC: ANCUF). Alimentation is one of the companies that has suspended operations in Russia because of sanctions imposed in response to the invasion of Ukraine. The stock price has held reasonably firm, however, losing only $1.67 (3.3%) in the latest period. The company raised its dividend by 25% effective with the December payment.
WSP Global Inc. (TSX: WSP, OTC: WSPOF). This stock has bucked the market trend and is up $3.67 (2.2%) since the last review. That’s not a lot but it’s proof of the company’s strength even in difficult times. We received two dividends totaling $0.75 per share.
Shopify (TSX, NYSE: SHOP). There’s no sugar-coating this. Shopify shares were slaughtered in the latest quarter, losing 62% of their value. We still have a good profit on the stock, and it will eventually recover, but we’re not going to wait for that to happen. We’ll take our gains and move on.
Amazon.com (NDQ: AMZN). Amazon shares lost ground in the latest period, but nothing on the scale of Shopify. The stock is off 10.7% in the latest six months. It could have been worse. The stock was buoyed by the March 9 announcement of a 20-1 share split, which will take affect in June assuming shareholder approval.
Apple Inc. (NDQ: AAPL). Most tech stocks sold off, but Apple shares gained $10.64 (7.2%) in the latest period. We received two dividends of US$0.22 each.
Costco (NDQ: COST). We added Costco to the portfolio a year and a half ago. The timing was excellent. The shares were up $82.04 (18.3%) in the latest six-month period plus we received two dividends totaling US$1.58 per share. Since adding Costco to the portfolio it has earned a total return of 58.6%.
United Parcel Service (NYSE: UPS). This is the world’s largest package delivery company and is on the leading edge of new delivery technologies, especially in the healthcare sector. The shares continued to gain in the latest period, rising $14.34 (7.5%). UPS raised its dividend by 49% to $1.52 per quarter, effective with the February payment.
Cash. We received interest of $13.41on our cash holdings at Motive Financial.
Here is how the portfolio stood on the afternoon of March 10. Commissions are not considered. The US and Canadian dollars are treated as being at par but obviously gains (or losses) on the American securities are increased due to the exchange rate differential.
IWB Growth Portfolio (a/o March 10/22)
| Symbol | Weight
% |
Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Dividends
Retained |
Gain/
Loss % |
| ARKK | 6.0 | 75 | $151.93 | $11,394.75 | $59.03 | $4,427.25 | $212.03 | -59.3 |
| ATD | 9.3 | 140 | $8.32 | $1,164.10 | $49.25 | $6,895.00 | $230.39 | +512.1 |
| WSP | 20.4 | 90 | $27.00 | $2,430.29 | $167.41 | $15,066.90 | $264.11 | +530.8 |
| SHOP-T | 9.8 | 10 | $78.71 | $787.10 | $721.11 | $7,211.10 | 0 | +816.2 |
| AMZN | 8.0 | 2 | $2,042,76 | $4,085.52 | $2,960.85 | $5,921.70 | 0 | +44.9 |
| AAPL | 17.1 | 80 | $30.43 | $2,434.07 | $158.18 | $12,654.40 | $372.84 | +453.2 |
| COST | 14.4 | 20 | $344.27 | $6,885.40 | $531.35 | $10,627.00 | $291.20 | +58.6 |
| UPS | 14.1 | 50 | $118.45 | $5,922.50 | $206.70 | $10,335.00 | $479.00 | +82.6 |
| Cash | 0.9 | $643.02 | $656.43 | |||||
| Total | 100.0 | $35,746.75 | $73,794.78 | $1,849.57 | +111.6 | |||
| Inception | $10,000.00 | +656.4 |
Comments: The disappointing performance of Shopify and the ARK fund dragged the portfolio to a loss of 15.2% in the latest period. Good performances from Costco, UPS, and Apple kept it from being much worse.
The total gain over nine and a half years, based on the inception value of $10,000, stands at 656.4%. That’s an average annual compound growth rate of 23.74%. Even with the big setback we experienced, we’re still well ahead of our target.
Changes: The ARK fund holds high-quality disruptive securities that will almost certainly recover. Shopify should rebound as well, although it will be a long time before it sees $2,000 again. In our Buy-and-Hold Portfolio we might wait, but not here. We’ll sell our remaining positions in both, for a total of $11,850.38, including retained earnings. We’ll add two new positions.
iShares US Aerospace and Defense ETF (BSX: ITA). As the name suggests, this ETF invests in the US defense and aerospace industry. It’s a timely addition on the light of the conflict in Ukraine and the decisions by several countries, including Germany, to significantly increase their military spending. Although the selection was prompted by the current situation in Europe, this fund has been a solid long-term money maker with an average annual return of 14.3% over the 10 years to Feb. 28.
The units are trading at US$107.42 at the time of writing. We will buy 50 units for a cost of $5,371.
iShares North American Natural Resources ETF (BSX: IGE). Natural resource stocks are cyclical. This is their time. This fund is up over 24% so far this year and there should be a lot more upside. But when the cycle is over, the price will fall so we need to watch it closely. The units are trading at US$40.05. We will purchase 60 units for a cost of $6,408.
The balance of $71.38 will be added to our cash position.
All the rest of our holdings remain the same.
Our total cash is now $2,365.35. We will move the money to EQ Bank, which is paying 1.25% interest.
Here is the revised portfolio. I will review it again in August, on its 10th anniversary.
IWB Growth Portfolio (revised March 10/22)
| Symbol | Weight
% |
Total
Shares |
Average
Price |
Book
Value |
Current
Price |
Market
Value |
Dividends
Retained |
| ITA | 7.2 | 50 | $107.42 | $5,371.00 | $107.42 | $5,371.00 | 0 |
| ATD | 9.2 | 140 | $8.32 | $1,164.10 | $49.25 | $6,895.00 | $230.39 |
| WSP | 20.4 | 90 | $27.00 | $2,430.29 | $167.41 | $15,066.90 | $264.11 |
| IGE | 8.6 | 60 | $40.05 | $6,408.00 | $40.05 | $6,408.00 | 0 |
| AMZN | 8.0 | 2 | $2,042,76 | $4,085.52 | $2,960.85 | $5,921.70 | 0 |
| AAPL | 17.1 | 80 | $30.43 | $2,434.07 | $158.18 | $12,654.40 | $372.84 |
| COST | 14.4 | 20 | $344.27 | $6,885.40 | $531.35 | $10,627.00 | $291.20 |
| UPS | 14.1 | 50 | $118.45 | $5,922.50 | $206.70 | $10,335.00 | $479.00 |
| Cash | 1.0 | $727.81 | $727.81 | ||||
| Total | 100.0 | $35,428.69 | $74,006.81 | $1,637.54 | |||
| Inception | $10,000.00 |
Previous updates: iwb22211 | iwb22132 | iwb22108 | iwb22031 | iwb22015 | iwb21935 | iwb21708