LateCycle Porfolio: August 2019 Purchases and Reflection

Let me start off with a small reflection: I am feeling bearish. And with good reason. The Trump/China affair is putting serious downward pressure on global stocks, coupled with sentiment that global growth is slowing and a recession is imminent within the next 12 months. What does this mean for my leveraged portfolio?

First, it means the losses I have been anticipating should begin to rear their ugly head. As of right now (August 25th), I’m still about even:

As you can see, the dividends help keep the portfolio afloat. I am still debating whether to exit certain positions in the margin account to re-buy at potentially lower levels (EIF, RNW, IPL, CU to name them). I will ride out the next month and a half and see how things play out – if it’s anything like last winter, selling might be the way to go.

In the meantime, I’ve decided to make some changes to my TFSA.

First, I sold positions in Dividend 15 Split Corp and Alaris Royalty.

Alaris – I reduced my position from 30k to 20k as I felt overweight and uncertain about stability in the commercial loans business in general. I am still holding the 20k in margin, but not adding more.

Dividend 15 Split Corp – I sold my TFSA position (10k) but maintain my margin position. I am looking to re-enter this stock should it take another nosedive to the $6ish range.

Second, I started a position in Vermilion Energy. Looking to also add Chemtrade Logistics and CanWel Building Materials.

Vermilion – I entered a position at $18.90. This is a volatile stock with a chart that screams “SELL” and a dividend that most everyone thinks should be cut. This is definitely a risky move, knowing full well the share price can see another 30% dip – it’s hard to call the bottom here, but I’m taking a one year shot.

Chemtrade Logistics – I am looking to add in the mid $9 range. Their latest earnings report was better than expected (though still facing headwinds) and the dividend appears safe.

CanWel Building Materials – This is a small-cap stock hitting 52-week lows with a 13%+ quarterly dividend. The insider ownership for this company is fairly high (20%+) and the CEO is continually purchasing shares, which means both nothing and something at the same time. A building materials stock is a risky play in a recessionary environment, but at around $4 and 14% dividend yield I’m comfortable sitting back and riding out the storm.

Word to the wise – Dividend cuts are more likely in a recessionary environment and can happen to any of the stocks mentioned in this post. Do your due diligence.

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