Investing Pursuits: July 2014

Saturday, July 26, 2014

Trade Update

This past month I sold a naked put in Roger's Communications Class B (RCI.B). The strike price was $42.00 and the premium I received was $68.00 before commissions. The premium was $57.0 after commissions. The expiry date was July 19, 2014. You can read about that here.

The option expired worthless, as RCI.B closed at $42.07 on Saturday July 19. I first entered this position on July 8, 2014.

Total Profit = $57.05

I can calculate my Return on Capital, or ROC, which is the ratio of the maximum potential profit (for a short position) to the amount of total capital used for that position. The total amount of capital used is approximately 20% of my break even. The break even for options is Strike price minus the Premium This money is tied up while this trade is on.

Strike Price = $42.00
Premium = $57.05 after commissions
Break Even = $42.00*100-$57.05 = $4142.95

ROC= $57.05 / (0.20*$4142.95) = 6.89%

This ROC is for 11 days.

Annualized ROC = 6.89%*365.25/11
= 228.78%

The amount of capital required is less for an option than for a stock. If I was to purchase 100 shares of RCI.B at $42.00, the amount of capital required would be approximately $2100.00. So with selling the naked put option, my ROC is higher as less capital is tied up.

Disclosure : Long RCI.B

Image Credit : www.techvibes.com

DISCLAIMER:

Tuesday, July 22, 2014

Tim Hortons - Minor Company Review

Tim Hortons opened it first restaurant in 1964. The site of the first Tim Horton's was in an old gas station as shown in the image below. It served coffee and donuts. The store is named after it founder, Tim Horton. Tim Horton played NHL hockey for the Toronto Maple Leafs. During the 1960s, NHL players were not making a lot of money relative to other jobs like nowadays. Tim Horton started a coffee and donut shop to make extra money.

Cortesy of Tim Horton's Online Annual Report - The first Restaurant

In 2014, Tim Hortons celebrated it 50 year in business, which all started in the first restaurant above in Hamilton, Ontario. Tim Horton died in a car crash in 1974, but he partnered with a guy named Ron Joyce early on in the business in 1967. Ron Joyce continued to building the company one restaurant at a time.

Some important mile stones for Tim Hortons.

In 1984, the first US restaurant opened in Tonawanda, New York.
1991, 500th Canadian restaurant opened in Aylmer, Quebec.
1995- Tim Horton's is purchased by Wendy's International Inc.
2000 - 2000th restaurant opens in Toronto, Ontario.
2006 Tim Hortons is completely spun off from Wendy's International and completes an IPO

Some stats on the company as per Yahoo Finance Key Statistics as of July 22, 2014.

Market Cap (intraday)	8.06B
Enterprise Value (2014-07-23)	9.28B
Trailing P/E (ttm ; intraday)	20.50
Forward P/E (FYE 2015-12-29)	16.59
PEG Ratio (5 yr expected)	1.92
Price/Sales (ttm)	2.43
Price/Book (mrq)	15.67

Tim Horton's current pays a dividend of $1.28 CDN annually. At today's share price, this represents a yield of near 2%. Over the last couple of years, Tim Hortons has been under pressure from activist shareholders who want investors to be rewarded with larger dividends. Th. e most recent dividend raise was 23%. Tim Hortons revamps its menu from time to time to compete with their main competitors. The main competitors are McDonald's and Starbucks. Currently, 8 out of every 10 cups of coffee is sold at Tim Hortons.

Conclusion: I believe this company will continue to do well over time. When you go to a Tim Horton's restaurant or through the drive thru, there are usually large lines of people or a lot of people sitting in their restaurants. These long line ups represent and ever increasing revenue stream day after day. The dividend is likely to increase, which will mean my money will be working harder for me year after year.

I currently own this in my margin account.
Disclosure: Long THI

DISCLAIMER

Saturday, July 12, 2014

Week End Reading - July 12

The work week has come to an end for the most of us this past Friday. It is also a time for catch up on some reading of posts from fellow bloggers.

Liquid Independence posted and article about the Richest Canadians People or Families. It is interesting to see the percentage of how much their wealth grew.

Dividend Mantra recently published a post on Why Dividend Growth Investing is a Good Strategy. In this post, that Dividend Mantra talks about things such as Dividend Growth Investing is more passive then other forms of income such as rental properties. Although there is research that has to be done up front, there is little work to be done after the initial purchase. The investor will have to pay attention to news on the company and listen to conference calls roughly every 3 months.

Pulling Ourselves Up Financially posted a monthly update for June 2014.

Dividend Stock Fish (DSF) recently posted about the Risky Assets : Captain of the Titanic. Investors have to pay attention to the news regarding their companies they are currently investing in. Investors need to have adequate cash on hand to take advantage of opportunities when they arise. Investors can also put on hedging strategies as insurance to reduce their losses or protect their money.

Photo Credit : www.cafepress.com

DISCLAIMER

Wednesday, July 9, 2014

Recent Trade

On June 21, 2014, My naked put on RCI.B at $44.00 strike price was assigned. You can read about that trade here. Since them, I tried to write a cover call but the limit order did not go through.

Recently, I decided to place another limit order with a premium of $0.68 for a put option on Roger's Communications. This was a 2nd "sell to open" put option, which means if the order goes through I am paid a premium. Since 1 contract represents 100 shares, I was paid $57.05 after commissions. I am paid a premium as I make a "promise" that I will buy 100 shares of RCI.B at the strike price of $42.00 if the stock price falls below $42.00 and it is assigned.


Click to enlarge

3 possible outcomes :

            (1) If the stock goes up, I made $57.05 without putting up any money.

            (2) If the stock goes sideways and the stock doesn't fall far enough, I made $57.05.

           (3) If the stock goes down below the strike price of $42.00 and his assigned, then my cost basis is lowered.


What is my adjusted cost base if put is assigned?

ACB= # of contracts*100 shares*strike price - [option premium - option premium commission]   +commission for option being assigned.
                                  = 1*100*$42.00 -[$68.00 -$10.95]+$24.95
                                  =$4167.90

RCI.B currently pays an annual dividend of $1.83/share.   YoC=1.83/41.6790=4.391%

How is this different if I bought the shares outright without an option?
   Cost of 100 shares =$4200
   Commission = $4.95
   ACB/share = $42.05
   YoC= 1.83/42.05 = 4.352%

The yield on cost is greater where a put was sold and assigned over just buying the stock outright. This means my money is now working harder for me. Selling a put option allows me to get paid while I am waiting for the price of a stock to go down to a point that I am comfortable buying it. The other option is to put in a limit order to buy the stock at $42.00 and wait.

NOTE: Selling puts is deemed to be risky, as the stock can go to zero or decrease in value really quick.

DISCLAIMER

Thursday, July 3, 2014

Dividend Income - June 2014

The month of June 2014 is another month of increasing dividend income. 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.

Non-registered Account

Killam Properties (KMP) - $5.75
Shaw Communications (SJR.B) - $18.33
Just Energy (JE) - $47.88
Enerplus (ERF) -$ 45.63
Enbridge (ENB) - $2.41
Tim Hortons (THI) - $32.00

TFSA

Killam Properties (KMP) - $ 14.05
Dundee REIT (D.UN) - $ 16.61
Cominar REIT (C.UN) - $5.28
Boston Pizza Royalties Fund (BPF.UN) - $23.87
Enbridge (ENB) - $11.55

Total = $223.36

This total represents a 0.152% increase from 3 months ago and 27.21% year over year. This is a small increase from 3 months ago that was due to DRIP.

I also received another distribution payment of $56.00 for my swing trade in Dundee REIT in my non-registered account. This is not listed above since it is a trade, so I keep the money in the account and do not pay myself first with this payment. I have received $651.47 in distributions so far on this trade.

I will update my dividend income tab with the new amount.

Disclosure : Long all securities above and all stocks were purchased on the TSX in Toronto, Canada.

Photo Credit: www.mipaq,co.za

DISCLAIMER:

Wednesday, July 2, 2014

Portfolio Update June 2014

We have witnessed another "positive" month for the markets. The stock market keeps going higher and higher and it is getting more difficult to find stocks trading at reasonable prices.

During the month of June, the S&P 500 is up 3.27% from May 2014 to July 02, 2014. During the same time, the S&P TSX Composite Index in Toronto is up 3.755.

Account Activity:

The following stocks were DRIPPED:
Killam Properties   1 share @$10.49
Just Energy     7 shares @$6.09
Enbridge   0.048 shares @ $50.21

I recently sold a naked put in Roger's Communications Class B stock. The put was assigned on June 21, 2014. I now hold 100 shares of this stock, RCI.B. I also had bought 6 contracts on Jun 21,2014 Royal Bank Put Option at $74.00 strike price. I lost money on the Royal Bank Put Option. You can read about these 2 trades here.

I have updated my portfolio spreadsheet in the tab above. The current value of the portfolio is $70523.69 as of July 2. This is an increase of 4.055% from last month. I will take this increase all though I would prefer the market to go down, so it would be easier to choose which stocks to buy.

DISCLAIMER:

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