Wednesday, June 29, 2016

3 Recent Buys - GRT.UN, CSCO and BMO

There has been a lot written about last week's "Brexit" vote, and since I have no idea how the drama will ultimately play out, I decided to take advantage of the market volatility to complete a couple of my positions: Cisco Systems and the Bank of Montreal. Those two recent buys came after I re-initiated a position in Granite Real Estate Investment Trust inside my Tax Free Savings Account ("TFSA") in early June. Since the last month in which I bought shares in three companies was January 2016 due to an all-too-short market correction,  I will share what made me decide to pull the Buy trigger three times in June. In addition to the company specific reasons for buying shares outlined below, the volatility caused by the Brexit vote and the fact my portfolio contained over 10% cash mid-month (currently down to ~7%) both played into my buying decisions.

Granite REIT (TSE= GRT.UN): Bought at $39.10

After identifying Granite REIT as an attractively priced distribution grower in March 2016, initiating a position in my RRSP in early April, then stupidly selling the full position at a profit in late April (common mistake #2 - selling too early), I was happy to re-initiate my position in Granite in early June. One of the reasons why Granite is now in my TFSA is that I am determined to minimize trading in my TFSA so as not to attract the attention of the Canadian Revenue Agency, who have taken an aggressive approach to pursuing investors who use their TFSA for short-term trading. I continue to think that Granite's management team has the best interests of their unit holders in mind as they have reviewed a full range of strategic options in the last year including selling the company, going private, and paying special dividends. Buying Granite at a P/FFO of 11.4X, at a slight discount to their book value, and yielding 6.2%, seems like a no-brainer to me.

Cisco System (NASDAQ = CSCO): Bought at $28.00 (USD)

After first buying shares of Cisco in November 2013, I waited two and half years to complete my position with a small purchase last Friday. Instead of focusing on how I could have bought the shares to complete my position in early 2016 in the $23 range, I took a fresh look at the company and realized that paying the slightly higher price still translated into a fair P/E of 14X and a 3.7% dividend yield. The fact management boosted the company's dividend by 24% earlier this year also played into my decision. As interesting as I find some lower yield, higher dividend growth companies, it's hard to argue against a global industry leader with AA-/Stable and A1/Stable credit ratings who boosted their already significant dividend by almost a quarter. After completing my position, I'm now considering going overweight on Cisco as I feel it offers exception dividend growth at a reasonable valuation.

Bank of Montreal (TSE = BMO): Bought at $79.95

After buying some shares of BMO in my unregistered account in November 2008 (remember the financial crisis?), I waited a mere seven and a half years before completing my position this past Monday. Much like Cisco, I was stuck kicking myself for not buying BMO earlier in 2016 when it traded around $70. Un-anchoring myself from that unrealistic target price allowed me to see that the fourth largest Canadian bank was trading with a P/E less than 12X, yielding north of 4.3%. After waiting seven and a half years, completing my position in my sixth Canadian bank felt fantastic.

My three recent purchases are all reflected in my Investment Holdings page. Here's hoping that the Brexit fallout was beneficial to your portfolio.


Did the Brexit vote cause you to make any changes to your investment plan for 2016?



2 comments:

  1. I having been eyeing Cisco for many years. However I still having bought into them. I will have to take another look now that you mention them. Thanks for the update.
    Cheers,
    DFG

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    Replies
    1. I am interested in knowing how you feel after taking another look at Cisco. Many in the DGI blogging community shy away from technology stocks, but CSCO has so much going for it.

      Thanks for the comment.

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