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, Québec, 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. 

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.


  1. What do you think of HCP or OHI at these levels?

    1. Dividend Mongrel,

      Thanks for dropping by. I do not follow any US stocks due to the high exchange rate. The only US stock I own is FB, which I owned since the IPO.