Latecycle Portfolio: 2019 Year in Review

2019 marked the beginning of a new—and crazy—adventure. In March, I decided to leverage my portfolio in dividend paying stocks, borrowing $150,000 in both personal loans and margin accomplish this. At the time, the market had rebounded significantly from its December 2018 lows. In hindsight, everything is 20/20; what I should have done was go all-in back in the midst of the deep freeze. Like they say, “time in the market beats timing the market.” So, against the calls of “the market has peaked!” and “we’re months away from a recession!” I went all-in anyways. It turns out that wasn’t such a bad idea.

From March to December 31 2019, my portfolio returned 13% including dividends. I have been monitoring my capital gain/dividend performance, portfolio balance, and future income with Sharesight (see more below).

Positives: BEP, EIF, RNW + late adds

My top three investments since March 2019 are:

1) Brookfield Renewable Partners – 56% return
2) Exchange Income Corp – 40% return
3) Transalta Renewables – 33% return

We know utilities were a safe haven in 2019, which explains BEP + RNW taking off. The renewable space in general is estimated to grow, and while valuations seem high right now (and they generally are), the one thing we can’t predict is if a significant pullback will occur to allow a decent entry point. It is also possible that the push for sustainable investments by the client base of managed funds keeps these stocks propelling forwards.

EIF is a well-run industrial stock in aerospace and aviation. With a diversified operation, strong balance sheet and growing dividends, it’s a prime candidate for long-term investing in a growing sector.

I threw in late adds because in September/October, I took new positions in companies/sectors I had been following closely. So far, so good:

1) ARC Resources – 35% return
2) Whitecap Resources – 31% return
3) Canwel Building Materials – 29% return

Energy stocks were and still are undervalued. The real question to ask yourself is this: how much do you believe in the sector? Many analysts are finally seeing value in free cash flow yields and extremely cheap price/book ratios. With the price of oil up 20%+ this year alone and projected to continue rising, there is a compelling case for value in the Canadian energy sector. Looks like I’m betting on it.

Negatives: ALEF, SXP, ESI

My worst investments since March (including one late add) are:

1) Aleafia Health (-74%) return
2) Ensign Energy Services (-26%) return
3) Supremex (-19%) return

No surprise here: weed stocks were crushed, and thankfully I only took a small position in Aleafia. This was mostly a speculative buy; prior to my shift to leveraged dividend investing, I made—and lost— a lot on weed stocks. Lesson learned. The weed sector continues to underperform and is only advisable for day trades, if that.

In September I purchased Ensign based on, what I believed to be, a calculated risk/reward purchase. ESI had been growing dividends for almost a decade up until this point. Literally the day after I bought this stock (and no small position either, $25,000 worth), the stock cratered AND the company cut the dividend in half. Not good. However, the saving grace here is Ensign should partake in the oil recovery if projections hold true that we will see one in 2020 and beyond. I will continue to hold.

Supremex is an envelope/paper company transitioning into packaging. Its profit margins are growing in the packaging sector and shrinking in the envelope business. It is definitely a speculative play at its current 11% yield.

Lessons Learned

  1. Research. Research. Research. Follow the stocks you wish to buy closely and conduct a thorough analysis before taking a position.
  2. Make a plan and take action. Stick to it—you really don’t know what the next day/week/month/year will hold.
  3. Spread out investments in speculative/higher risk businesses: If you‘ve decided to allocate 10k for higher risk plays, buy three stocks for 3k each instead of all in one for 10k. Preserving capital should be your #1 priority.

One thought on “Latecycle Portfolio: 2019 Year in Review

  1. I commend your bravery, the so called “experts” were definitely consistently wrong. I have major regrets over 2018 myself when the “experts” told me that 20% dip was the start of a bear market.

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