Tuesday, December 1, 2015

December Stock Watch List

With the exception of my quarterly goal updates, monthly watch list posts have quickly become my favorite recurring entry. These posts help me focus my research and monitoring efforts on a handful of companies. With the North American markets still trending sideways heading into 2016, there are several companies that I’ll be keeping a close eye on this month.

Royal Bank (TSE = RY): Target Price = $72 (vs $72 last month)

The main reason that Royal Bank continues to be on my watch list is that I need to pick-up some shares in my unregistered account so that I can sell the corresponding position in my RRSP (after waiting a month to avoid tax penalties) in order to complete my portfolio transformation. Although I’m currently overweight Royal Bank, I continue to think it’s reasonably priced (P/E ~ 12X). I don’t mind collecting quarterly dividends (yield over 4%) while I wait for an opportunity to pick up shares on a dip.  On the flip side, if the share price climbs over $80, I’d likely sell my position in my RRSP as I feel Canadian banks’ results will suffer in 2016 due to the prolonged slump in the price of oil.

Bank of Montreal (TSE = BMO): Target Price = $72

After starting my position in BMO late in 2008, adding more shares during March 2013, I’m looking to complete my position in this bank on weakness in share price. After announcing a dividend increase today (the second this year), the shares are up over 1.5%. However, the shares are still reasonably priced (P/E just over 12X) and yielding 4.2%. 

Enbridge Income Fund (TSE = ENF): Target Price = $28

After trading into and out of Enbridge Income Fund three times in November, I’m considering keeping a position in my RRSP over the winter. Each time I sold my temporary position in my RRSP last month, I felt sad about getting rid of this fairly price (P/E ~16X) pipeline asset play yielding almost 6%, with a likely 10% dividend hike coming this Thursday. Part of the reason I’d like to keep this in my RRSP over the winter is the fact I pay my monthly gas bill to an Enbridge subsidiary, and the monthly dividends would help hedge my gas bill if this winter turns out to be another cold one. At the very least, I plan to be a shareholder in my RRSP this Thursday when I anticipate an announcement of the previously telegraphed dividend hike.

Digital Realty Trust (NYSE = DLR): Target Price = $68

Although I put Digital Realty Trust on the list, generally what I’m looking to do is to take advantage of an expected US interest rate hike in December to add some diversification to my current US REIT holdings of Realty Income and Omega Healthcare. Ideally, I’d like to invest in a type of REIT that I can’t buy on the Toronto Stock Exchange. Other options include Tanger (discount shopping centers), Chatham Lodging (hotels), or Extra Space Storage (storage). I admire Digital Realty Trust due to their strong balance sheet (BBB/Baa2 credit ratings), history of dividend growth, and the wide moat management has created with their business model.

As with other months, I always keep some cash aside to take advantage of great opportunities that might occur as market sentiment shifts. That said, with the exception of possibly adding a bit more to my overweight Alaris position, my bet is that any buys this month will come from the above list. Here’s wishing all my readers fruitful pickings in the last month of 2015 :)

What companies are on your watch list this December? 

4 comments:

  1. I really need to start doing my own monthly watch list posts to solidify my plan for each month. Obviously it can change if the market sentiment changes for other companies but I think it'd be worth it in the long run.

    I'd love to add DLR to my portfolio for REIT diversification. Thanks for reminding me to take a look at it. Happy shopping!

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    1. You hit the nail on the head; the big benefit for the watch list is setting a plan for the month. Totally agree that the plan needs to be flexible, but it sure helps to have a plan regardless.

      Congratulations on your 4 year blogging anniversary! It's always an ego boost when a blogger of your caliber stops by :) I appreciate your comment.

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  2. I'm still a big fan of the large Canadian banks. Starting in 2016 I'll be looking to add to my TD, BNS and RY. 2015 has been a very rough year for those names and the value and yield they are selling at is pretty compelling at these levels.

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    1. I remain a big fan of the three banks you mentioned, as well as Laurentian Bank, National Bank, and Bank of Montreal. Given my current sector concentration on Canadian banks, I'll probably add selectively to my holdings in 2016.

      All the best in 2016 Keith!

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