Monday, April 24, 2017

Why Diversification Is Important?

         When most of us started to think about investing, we are told to diversify our assets.  New investors tend to gravitate towards mutual funds as they provide instant diversification. A mutual fund is where money from investors is invested by professional money managers according to the mandate, also know as the objective, of the fund.  If you are like me, you try to buy individual stocks.

         Over the past year or so, a company is Canada has been under hot water. This particular company is called Home Capital Group Inc  (ticker symbol HCG ) and trades on the Toronto Stock Exchange. 

      
Home Capital Group Inc. is a holding Company and operates through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposit, mortgage lending, retail credit and credit card issuing services. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Qu├ębec, Nova Scotia and Manitoba. (Source : Home Capital Website

    HCG has had a lot of negative events over the last year or so. Some of these are as follows:
  • On Feb 10, HCG discloses that the Ontario Securities Commission sent an enforcement notice after the market closed on Feb 9, 2017
  • On March 14, HCG discloses that legal and regulatory matters in regards to the issue immediately above.
  • On March 27, HCG announces the departure of their CEO which occurred over night. This CEO was in the position less than a year.
  • On April 19, 2017 HCG releases a statement on the Ontario Securities Commission intention to pursue an administrative proceeding against the company and 3 individuals. These 3 individuals are Martin K Reid, former President and CEO, Gerald M. Soloway, former President and CEO and currently a director of the Company, and Robert Morton, the Company's Chief Financial Officer.
  • On April 24, HCG annouces the pending retirement of Gerald M. Soloway and appoints Robert Blowes as interim CFO.

Click to Enlarge


        The above chart is a one year chart.  The stock as dropped over 50% in value over the past 365 days.  The dividend was increased over this time span.


Click to Enlarge

      
     HCG is down 44.16% since the start of the calendar year.  I recently sold puts at $25 strike price and bought to close for loss of $353.90, which you can read about here.  On April 24, you can see the stock dropped 9.09% during which they announced the pending retirement of the current director Gerald M. Soloway.  

     This stock over the last year  shows why stock market investors need to diversify.  An investor would be out a lot of money if they bought the stock 6 weeks ago or before 6 weeks.  I do believe HCG has to do more to lessen the fears of investors and to right the ship once again. 

    Diversification helps you sleep at night.  I am sure a lot of investors are worried about where the stock price is heading.  Canadian investors can diversify in Canada, although the degree of diversification does not compare to the US Market. 

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.


Saturday, April 22, 2017

Trading Account Update

As previously stated on this blog, that I have started a trading account with a balance below $1000.00.   I started to add $50.00 every two weeks but that has stopped due to a recent job loss.  The following table shows my stats from the start of 2016:

                                 # of trades :                34
                               Total Capital added:    $250.00
                               Trading Acct Balance:  $3732.82
                               Average Drawdown:   $49.97
                               Average Loss:             $52.02
                               Average Accuracy:    85.29%
                               Average Risk:              $61.02
                               Average Reward:         $105.96
                               Average R/R :             1: 1.736



        I have been trading penny stocks, stocks, REITS and options.  Any dividends that will be received from this account will stay within the account. The accuracy rate is high. Does this mean that I am a super trader? No it does not.  The risk to reward ratio states of every $1.00 of risk there is reward of  $1.736.  Ideally, a trader should aim for a 1:2  risk to reward ratio which causes the accuracy rate to be lower.

      The drawdown above is inter-trade drawdown.  This type of draw down is the dollar amount the trade moves against you.  Why is it important to keep track of inter-trade drawdown?  It helps you know if you are picking good entry points.  It is normal for trades to have inter-trade drawdown. 

Note:  The trades are listed under the Trading Tab above with all the trades listed as of April 21, 2017.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Thursday, April 13, 2017

Option Trade - Trade Closing.

    Last month., Home Capital Group Inc. fired their CEO over night.  The stock price fell after markets opened the following morning.  I decided to sell put options. These 2 put option contracts had a strike price of $25.00 and an April 21 2017 expiration date.

    The stock rallied upwards for a bit, but has fallen.  The issues surrounding this company are causing investors to back off from buying and sellers getting worried about their investment.  Today the stock closed at $21.70 per share, which is an 8.63% decline from yesterday's closing price. 

   Earlier in the day when I was able to be at my computer, I closed my trade by putting in a Buy to Close order.  My order was filled at $2.35 per contract.  The stock was trading  at $22.80 per share when my order was filled.  So how much money did I lose on this trade?

 Summary:

# of contract = 2
Premium Received = $128.05 including commissions
Premium Paid = $481.95 including commissions

Total Loss = $481.95 - $128.05
                  = $353.90


       The lesson to learn here is when you sell a put for option premium income, buy a put option of lesser premium as insurance. Basically, your protecting yourself  if the trade goes against you which means the option was assigned. This will lower your net premium received, but will limit your loss.

      If an investor is willing to buy the stock at the strike price and wants to keep the stock as a long term hold, then buying a put option as insurance would be a matter of choice. 


DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Saturday, April 8, 2017

Trading Account - Update

      I started a trading account in January 2015.  Trading can consist of going long or short. Trading can be down with options, futures, futures options,  stocks, bonds, ETFs or mutual funds. Each of these types of instruments come with different levels of risks and a trader can lose more than their initial investment.

      A lot of people will not trade, because they believe trading involves have their eyes glued to the charts when a trade is in progress.  A trader will have to look at the charts all the time if the instrument they are trading is highly leveraged or the position can move against them really quick.

   My performance in 2016 morphs my performance of 2017.







      If any of the trades I put on with stocks, REITS, or ETFs, the dividend and distribution stay in the account.  Currently in 2017, I am in the middle of a trade in PZA.TO. This stock has paid a dividend March 15 and will pay a dividend around April 15. 

     Why the difference between 2015 and 2016?  In 2016, I traded penny stocks a lot whereas this past year I only completed 2 trades and in the middle of the third. Penny stocks are very high risk as the trade can move against you in a hurry. I was not planning on trading penny stocks so much in 2016 due to their really high risk.  PZA.TO is Pizza Pizza Royalties Corporation, and trades around  $17 per share. 


    To see all my trades except the last completed one and the one that I have on currently, click here.

DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.




Tuesday, April 4, 2017

Dividend Income Update - March 2017




      The month of March is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.

        The price of barrel of crude oil continues to trade over $50.00 per barrel and is currently around $50.00 per barrel.  With the price of oil seeming to remain above $50.00,  the drilling activity in western Canada has begun to pick up. Other major things to happen in Canada was the Government of Alberta releasing it's budget just ahead of the federal government releasing their budget. The Alberta Government is forecasting the price per barrel of WTI crude oil to remain below $60.00 until 2021. The recovery in Alberta is going very slow.

      One thing for sure, is that I was paid dividends and distributions for being a shareholder or unit holder in  various companies or funds. In  Sept 2016, the Dream Office REIT in the margin account will be counted as dividend income  for the first time.

 Non-registered Account

  • Enbridge (ENB) - $9.32
  • Enerplus (ERF)  -$ 5.58
  • Dream Office REIT   (D.UN)  - $ 76.75
  • High Liner Foods (HLF) - $7.00
  • Shaw Communications (SJR.B)    - $19.75
  • WestJet Airlines Ltd. (WJA) - $19.60
    TFSA
    • A&W Royalties Income Fund (AW.UN) - $5.05
    • Boston Pizza Royalties Income Fund   (BPF.UN) - $26.91
    • Canadian National Railway (CNR) - $15.68
    • iShares 1-5 yr Laddered Canadian Corporate Bond ETF (CBO) - $0.62
    • Cominar REIT (CUF.UN) - $20.95
    • Dream Office REIT   (D.UN)  - $ 17.63
    • Enbridge (ENB) - $19.24
    • Horizons Natural Gas Yield ETF (HNY)  - $4.67
    • Killam Properties REIT (KMP.UN) - $  15.10

    Total = $263.85
        
        As the amount of distribution from D.UN inside my margin account, will have a large impact on the comparison of dividend income from 12 months ago. This dividend income total of $263.85 represents an decrease of 3.32% from 3 months ago.  This decrease is attributed to the fact CUF.UN.TO paid distributions twice in December which results in no payment in January.  This decrease is lessened to do DRIPs and new distribution from AW.UN.

       I currently own 100 shares of High Liner Foods, but 50 shares were bought after the ex-dividend date.

     Dream REIT has reduced the amount of distribution they pay monthly which was announced in February 2016.  Recently, I wrote about purchasing more units of D.UN inside a margin account.  Starting in September, the distribution from this D.UN inside the margin account will be included in my dividend income.

        I received $245.15 in options premiums in March.

         I will update my dividend income tab with the new amount I will include my option premium income also.  It is great to see money from passive income sources deposited into my brokerage account every single month.

    How was your dividend income for March?

    Disclosure : Long all securities above.

    Photo Credit: www.mipaq,co.za

    DISCLAIMER
    I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

    Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.





    Sunday, April 2, 2017

    Portfolio Update - March 2017

           The month of February March 2017 is now behind us. The price per barrel of crude oil has traded below $50 per most of the month of March.  All eyes in Canada were on the budgets for Alberta and then the federal government of Canada.  The Alberta budget is big news  in Canada due to the importance of the province to the overall economy of Canada.  People from all parts of Canada work in Alberta and fly back and forth.  These workers not only provide revenue for the airlines but also the local economies of the areas these workers call home. The NDP government of Alberta did not cut spending in their budget and forecasting the government running deficits until 2024. The NDP government of Alberta is also seeing the price of oil remaining below $60.00 until 2021.

          I wrote about purchasing more shares of High Liner Foods (HLF.TO) on March 5, which you can read about here.  This means that I own 100 shares of HLF.TO.  The 50 shares purchased in March were not eligible for the dividend on March 15. This purchase adds $28.00 to my annual dividend income base on a yearly dividend of $0.56 per share.

          On March 10, I wrote about a covered call expiring on TD Bank (TD.TO) which you can read about here. TD Bank is involved in a class action lawsuit as employees say they were pressured into sales tactics to increase business.  Banks are for profit corporations, therefore their goal is to be profitable. I do not think the lawsuit has any merit.

         I wrote about post about WestJet Airlines Ltd. (WJA.TO), which you can read about here.  WJA.TO is a profitable airline and has been profitable for many years.  Their employees do not belong to a union, but can participate in employee stock purchase plan.  On March 29, I sold all my shares of WJA.TO.  This sale decreases my annual dividend income by $78.40.   If the price of WJA.TO falls below $22.00 per share, I will strongly consider purchasing shares.

         I was watching BNN, which is the Business News Network in Canada, one morning and the topic of the day was the Home Capital Group (HCG.TO) has fired their CEO over night. Adding to the fact that HCG.TO fired their CEO, was the fact he was is the position for less than a tear.  The company also had some problems over the last few years. I decided to take advantage of the stock falling approximately 10.00% by selling a put option.  I collect the premium upfront as the seller of an put option is paid a premium for being obligated to BUY the shares at the strike price on or before expiration.

        I also decided to write a covered call in Roger's Communications Inc. (RCI.B.TO) with a strike price of $60.00.  I have owned 200 shares of RCI.B.TO for awhile. RCI.B.TO has not raised it's dividend in over 2 years.


    Shares Acquired Through DRIP


    0.170 shares of ENB.TO @ $54.71 for a total cost of $9.32 (Transfer Agent)

    4 Unit of D.UN.TO @ $18.8635 for a total cost of $75.45 (Margin Account)

    1 units  of CUF.UN @ $14.1135 for a total cost of $14.11 (TFSA)

    Please note, that the DRIPs inside my margin account and TFSA are synthetic drips which indicate the distribution or dividend must be enough to purchase whole shares. 

    As of  April 2, the value of the portfolio is $103014.50. This is a 0.226%  increase over last month's total.  The spreadsheet in the investment tab above has been updated.

     Disclosure:   Long RCI.B, TD.TO, HLF.TO

    Please Note:  All stocks are from the Toronto Stock Exchange.

    DISCLAIMER
    I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

    Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.



    Saturday, April 1, 2017

    Recent Sale

             



        On March 25th, I wrote about WestJet Airlines Ltd, which you can read about here.  In that post I stated that I might sell my shares of WestJet Airlines Ltd  (ticker symbol:  WJA.TO).  I set a trailing stop limit order on March 29 and the order got filled at $22.96.

    Click to Enlarge


         The trade summary indicates I made total gain of $68.92.  The sale of the shares occurred on March 29, so I was the owner of the shares on the record date for their most recent dividend payment on March 31.  I received 2 dividend payments from WJA.TO while I owned the 140 shares. WJA.TO currently pays a $0.14 per share quarter dividend. so I received $39.20 in dividends.

    Total Return = Total Profit / Money in
                          = ($68.29 + $39.20) / $3140.04
                          = 3.42%


        Airline stocks are very volatile as lots of factors affect their bottom line. When people choose to fly, they more than often compare ticket prices of airlines and the time of day of departures and arrivals.  WJA is based out of Calgary, Alberta which is headquarters of a lot of oil and gas companies.  With the economy of Alberta in an ongoing recession for over 2 years, the airline had to reduce the amount of flights and add more flights and destinations elsewhere to maintain their bottom line.

        WJA closed Friday March 31 at $22.80 per share. The stock is down  0.52% over the last 6 months. 



          If the stock falls below $22.00 per share, I will strongly considering buying the stock again.  WJA has a long track record of profitability and will grow their revenues as they add more destinations and more flights to their arsenal.

          I will update my investment tab spreadsheet shortly to reflect this sale.

    DISCLAIMER
    I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

    Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.