My Portfolio

Portfolio Spring Cleaning

June 10, 2005

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The shaky minority government has put my portfolio spring-cleaning efforts on hold. In May, the federal budget (Bill C-43) passed the second reading narrowly and avoided the fall of the government. When the budget bill is finally passed into law, I plan to sell the following losers in my portfolio:

  • JDS-Uniphase (TSX: JDU) – Very small portion of portfolio. Better to sell at a loss and move on. Even if the stock quadruples from here, the effect on the portfolio would be really small.
  • Nortel (TSX: NT) – The Nortel saga provides entertainment value in the business section and little else. Again, it is such a small part of the portfolio that it is better to sell.
  • Millenium Pharmaceuticals (NASDAQ: MLNM) – An excellent example of buying money losing, pie-in-the-sky companies being speculation, not investing. I am planning to sell this stock only because I just don’t have the time to follow the company closely anymore.
  • Labour-Sponsored Mutual Fund – I believe these mutual funds are a bad idea for most investors. They invest in small, illiquid start-up companies and charge outrageous fees for the privilege. Unfortunately, these funds have a mandatory eight-year holding period, so I will be stuck with this loser for a while.

Buying BCE

June 5, 2005

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Last week, I bought Bell Canada Enterprises (TSX, NYSE: BCE) for my spouse’s retirement account. BCE and its subsidiaries offer a wide range of services including telecom (fixed line, long distance and wireless), data (dial-up and high-speed internet access) and video (Bell ExpressVu satellite TV). BCE also has significant stakes in Bell Globemedia (CTV and The Globe and Mail media properties), Aliant Inc. (TSX: AIT), Telesat and CGI Group Inc. (TSX: GIB.SV.A).

BCE is expected to earn $2.16 in 2005 and $2.28 in 2006. At its recent price of $28.50, it has a P/E ratio of 13. The stock also pays a dividend an annual dividend of $1.32, which yields about 4.6%. At the end of 2004, BCE had 12.9 million local phone service, 5.3 million wireless, 1.8 million DSL and 1.5 million video customers. Wireless, high-speed internet and video are showing growth, but local telephone declined about 1.1% in 2004 and 0.8% in 2003.

My rationale for investment is that earnings growth could come from BCE’s growing service offerings and cost reductions. Risks include competitive pressures in the local telephone business and unfavourable CRTC rulings like this recent one.

AIG Dodges a Bullet

May 26, 2005

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I bought AIG for my retirement account last month, when New York Attorney General Eliot Spitzer indicated that he expects to reach a civil settlement with the company. Today, Mr. Spitzer filed a civil complaint against the company and AIG’s stock rallied 3% on optimism that former management seems to be the main target of the lawsuit. AIG still has a lot of headline-risk associated with it as it faces charges from other regulators. However, it is very encouraging that AIG seems to be fully co-operating with authorities and current management has taken steps to restore the company’s credibility. My original thesis for the investment still holds and I’m betting that AIG will turn out to be a winner over the long-term.