The Markets Have Been Humbling

Haven't blogged much about investing lately 'cause at the moment, the markets are kicking my butt.  And who wants to admit that? 

Our portfolio hit an all time high back in April, but six months later it's down 23%. 

Our dividend income has hung in there (roughly $50,000/year tax free) but we lost a fair bit of capital.  Hard pill to swallow since I'm a very bad loser. Not in a John McEnroe throw your tennis racket and whine like a five year old kinda way ...but I do really beat myself up over mistakes. Like most INTJ personality types I am by far my own worst critic.  

We'll probably regain that capital by years end, but let's face it - losing sucks.

Our current holdings still include names I first bought back in the 2008 sell-off:

• Alaris Royalty
• Student Transportation
• Pembina Pipeline
• Inter Pipeline
• Avenex Energy (formerly Avenir Income Fund)

And some higher yielding names I regularly trade:

• Just Energy
• Data Group Income Fund
• Chorus Aviation
• BTB Reit
• Superior Plus

Just Energy sent out a press release last week, reassuring investors that the monthly dividend is safe. I really like this management team and will be adding to our holdings as we get more cash.

Data Group has stated that while they are converting to a corporation before years end, they've already cut their distribution to a payout ratio they're comfy with and have no intention of further cuts.  During the Q2 conference call, CEO Michael Suksi said:

"...regarding our unitholder distribution policy going forward. Obviously investors want to understand our intention and our ability to sustain our distribution... During our annual general meeting last May our unitholders voted to approve our plan to convert the Fund to a corporation at the end of 2011. And this upcoming conversion may be creating some confusion regarding how it will impact our distributions. So I want to clarify this point.

We already reduced our distributions in January of 2011, and that was as a result of our becoming taxable at the beginning of 2011. Also it was a result of our anticipated financial performance and our intent to invest in our strategic plan. Therefore since we have already done that in January of 2011, we do not expect the conversion to a corporation at the end of 2011 to have any further impact on our distribution policy. Our intention is to maintain our annual distributions at the current level of .65 per unit as long as our financial performance continues to justify it as it has in the first half of 2011."

Data Group is a printing company with steady clients (banks, fed government, etc.) and they're expanding into digital services as well. Guess we'll find out more when third quarter earnings are released November 15th. 

Chorus Aviation - man, I just don't know about this one.  I've never liked the air industry, but this company has more positives than negatives. Scotia Capital recently upgraded the stock to an outperform with a target price of $5.50. They called it 'the best risk-return on their list'.  And TD and RBC both have a 12 month target price of $6.  Course the analysts could be way off base, as they were with YLO, BXI, ARF, etc. etc.

BTB Reit is a teeny weeny real estate investment trust and we only hold a teeny weeny position.  I'd be surprised if they cut the distribution, but if they did we wouldn't even notice it in our passive income. I like this name more everyday and will probably buy more on dips.

Superior Plus is our riskiest holding. The share price has dropped so much that the yield is stupidly high. I took a small loss on this one a couple months ago and recently bought in again at $7. The company is heading into its busy season, but if our economy stays sour and revenue drops, I'm sure they'll reduce the dividend.  If they cut by a third it would be $0.80/share; still a huge 11% yield at current prices. Guess we'll find out more when third quarter earnings come out November 2. 

We're fully invested but with the overall market drop last quarter, some of the stocks we own are paying out ridiculously high yields.  I call them Fairy Tale yields.

Hope they have a happy ending.

Then again, as economist David Rosenberg (from Gluskin Sheff) says "hope is not an investment strategy".   :) 

Comments

[Croft]

A huge amount of our holdings are in gold. Gold stocks actually, not the kind of gold you can store in the safe and then take out to roll around on the floor in.

These stocks have taken a pretty good hit lately like everything else, enough to get Norma telling me we should have sold some a couple months ago. I thought of it back then but didn't because of the huge capital gains we would have been exposed to.

Hindsight is a wonderful thing but, like you say, it will recover.

[kelsi]

Mexi-Croft,
So if you can't roll around on your physical gold, why not gather all your trade confirmations, toss them on the bed and roll around on those :)
I re-balance the portfolio often because the other half of our annual income comes from cap gains. We're in a very low tax bracket so this works in our favor.
But I agree - it's hard to sell a winner.
I usually sell a third of any stock that's really run up and then buy back on dips. And lately there's been a lot of dips.

[Anon]

Have you ever considered starting another blog strictly for this subject? I'd read it.

[kelsi]

Nah, no plans for an investing blog. I'm pretty sure that everything I write about has already been covered (much better) by someone else.

[Don]

Over the last 25 years we had a lot of investments that we thought were 100% safe and secure lose money for us. It is just the nature of the investing game.