My Portfolio

Portfolio Update

October 4, 2005

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It occurred to me that though I track the performance of my portfolio, I never wrote about its actual composition. Currently, it is 94% equities, 4% cash and 2% other. I don’t have any exposure to bonds or REITs.

Top 5 holdings are:
Altria Group (NYSE: MO): 8.7%
TD Bank (TSX: TD): 7.5%
E*Trade (NYSE: ET): 6.4%
Canadian Natural Resources (TSX: CNQ): 6.3%
Anheuser-Busch (BUD): 6.3%

Buying (More) Home Depot

September 30, 2005

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I am buying some more Home Depot (NYSE: HD) for my retirement account. The company needs no introduction. It is a Dow component and most home owners spend a good chunk of their home maintenance budget at their stores. I am planning on making the stock a core holding at roughly 6% of my portfolio and I hope to hold it forever.

At its current price of $38, Home Depot is trading at a reasonable 15 times its estimated (from ValueLine) 2005 EPS of $2.56. The company has been growing sales at 16%, earnings at 20% and dividends at a 25% annualized clip over the past five years. It is also buying back its shares (note the decreasing share count).

Home Depot is also growing aggressively by expanding its services business (like roofing, countertops etc.), making strategic acquisitions to supply merchandize to builders and professionals and gearing up to open stores in China. Looking ahead, ValueLine expects the company to grow earnings at double digits over the next five years.

Selling Sears Canada; Buying AGF Funds

June 25, 2005

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I bought Sears Canada (TSX: SCC) about a year ago for around $17, for much of the same reasons described here. Recently, Sears announced that it is looking into strategic alternatives, including a possible sale of its financial services division. In response, the stock has strengthened considerably. I have sold my entire position, as Sears will now be left with a weak merchandising franchise and a lot of value in the stock has been realized.

With the proceeds, I am investing in a high-dividend paying financial company: AGF Management Inc. (TSX: AGF.NV). AGF is a well-known mutual fund and wealth management company with $32 billion in assets under management. However, AGF has been operating under a very challenging environment, with the trend of negative net sales (new sales less redemptions) continuing in 2005. Partly, the negative trend is due to strong demand for high-yield products, where AGF’s offerings have been traditionally weak. The company has introduced new income-generating funds.

On the positive side, the company is a strong cash-flow generator, has strong brand recognition, earned $0.85 per share in 2004 and pays an annual dividend of $0.60. I believe AGF has the potential to deliver strong total returns over the long-term.