Sunday, December 23, 2012

Parting ways with an old friend

It's that time of the year again when most investors take a look through their portfolios to see if their holdings are performing. I'm no different in that I tend to review my portfolio in December to see if I have any stocks that I'd like to dump to create capital losses. Capital losses are particularly desirable this year, as I realized a capital gain on the sale of some CAE (bought during my momentum investing phase) I sold last January after it had doubled.

When looking at my holdings in my taxable portfolio, I asked myself if there were stocks that I would no longer invest in. The four holdings that jumped out as possibilities for me were SNC Lavalin (due to the impact of their ethical issues on the stock), Canadian Western Bank (dividend yield lower than my required 3%, but still growing nicely), Transalta (definitely a "dog of the TSX") and Capstone Infrastructure Corporation. Just before I had planned to sell Capstone in December 2011, they gave negative revised revenue/EBITDA guidance, and indicated they were looking at establishing a new dividend policy. Their stock promptly fell almost 50%, down to $4 where it has lingered for the last year. The company cut its dividend in April 2012, and although it refinanced some debt, their stock has been going nowhere fast ever since.

Although I sold at a capital loss earlier this month, having held CSE for several years, I actually came out even when distributions/dividends were included. There's no way I want to hold a company who cuts dividends, and has questionable management. Fair well old friend...maybe some day we'll meet again if you get your financial house in order.

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