Tuesday, December 27, 2016

December Transactions & January Watchlist

Although I have always felt obligated to report my monthly transactions here so as to hold myself accountable and clearly identify my investment holdings, I question the value add to my readers of reporting this information. Similarly, as helpful as I find it to have a watchlist heading a new month in order to focus my attention on a handful of companies, I wonder how my list of prospective companies is of any great importance to a reader. Therefore, in an effort to maximize my efficiency blogging, while halving the number of potentially useless entries for you to read, my experiment this month is to combine these two entries.

December Transactions

Buy #1 - Enercare Inc. (TSE: ECI)

After initiating a half-position in Enercare last month, I added more shares on the first of December that resulted in an "almost-full position" in my unregistered account.  I was able to bring my average cost down on this Canadian company that is successfully integrating a US acquisition that should provide further stability to their cashflows gained from renting, servicing, and selling hot water tanks and air conditioning units. With a dividend yield over 5% and having grown their dividend by 10% early last summer, I remain open to adding more shares of this company as indicated below in my January 2017 watchlist.

Buy #2 - Life Storage Inc. (NYSE: LSI)

Although the selloff in US REITs that I anticipated after the federal reserve bank increased rates by 25 basis points never materially to the extent I hoped, I was able to add a couple more shares to my position in Life Storage at a 7% discount to my initial purchase price. With a P/FFO of approximately 19X, Life Storage is one of the more reasonably priced REITs in the self-storage space. The December 21st purchase completed my position in this company.

Donation - RioCan REIT (TSE: REI.UN)

Effective December 23rd, I made a donation of some of my RioCan shares to Food Banks Canada. By donating some shares of  RioCan from my unregistered account, I accomplished four objectives:
1. Supported a worthy cause that I care deeply about.
2. Avoided paying a capital gain on shares on which I could not have accurately calculated my adjusted cost base due to shotty record keeping in my early investing days (the early 2000s).
3. Lowered my 2016 tax bill via a donation to a registered charity and my future tax bills due to the higher taxation of REIT distributions vs dividends.
4. Started to decrease my position in a company whose management seems more interested in empire building than acting in the best interest of their shareholders.

January 2017 Watchlist

I remain very open to adding to my investments in Enercare Inc. (TSE: ECI) and Emera Inc. (TSE: EMA) in my unregistered account. Some of the reasons I enjoy Enercare are outlined in my justification of my recent buy, and I will add that I would like to close my position in the company before pausing to consider if I would choose to go overweight. Emera is interesting to me since it provides additionally exposure to the utility sector at a fair P/E multiple of ~18X. Although I'm not crazy about their recent $300M+ secondary issue, I realize that they need to fund an aggressive capital investing schedule while keeping their targeted capital structure in place.

Part of my 2017 contribution to my tax-free savings account (TFSA) will be used to complete my position in Canadian Apartment Properties REIT (TSE: CAR.UN). Holding this REIT in my TFSA allows me to be a passive landlord in a growing portfolio of apartment rentals across Canada and collect monthly distributions tax-free equaling approximately 4% per year.  Although I would like to add to my position in Toronto-Dominion Bank (TSE: TD) with another part of my 2017 TFSA contribution, I'm not crazy about paying a 52-week high price for this bank. I'll likely hold-off and wait for a chance to pick it up on a dip.

With the excess cash inside my RRSP, I would consider adding to my position in the Keg Royalties Income Fund (TSE: KEG.UN). Their three cent per share special dividend in December further demonstrates to me that unlike at RioCan, management of the Keg Royalties Income Fund takes their duty seriously to act in the best interest of the shareholders. Since I have yet to formally mention it in a watchlist, I am also interested in Brookfield Infrastructure Partners (TSE: BIP.UN) for possible investment in my TFSA or RRSP. I think the Brookfield empire is exceptionally well-managed, I would enjoy adding exposure in the infrastructure space for diversification purposes, and BIP tends to overachieve their dividend growth guidance of 8% per year. That said, I have a difficult time estimating a fair price for this company and find it frustrating that every time shares inch toward a 4% distribution yield, they inevitably bounce up 10% before I have sufficient conviction to act. BIP could very well end up in my "too complicated" pile of discarded opportunities.


My investment holdings page has been updated to reflect my three December transactions and I will keep it updated until my next transaction/watchlist entry. Since this will likely be my last post for 2016, I wanted to wish everyone a restful holiday season and a prosperous 2017!


What stocks are you considering heading into 2017???

2 comments:

  1. I bought TD (along with Royal and Scotia) in early 2012 and plan to hold them until people are (hopefully) saying good things about me at my memorial service!

    Enercare is a more recent purchase. Bought it under $15 in May of 2015, and added to it in smaller quantities on four occasions since then. It is a simple business, and I am not sure investors are appreciating the potential of their sub-metering business.

    I bought Brookfield Infrastructure around $33 in 2012, and added to it in October 2015 at a little higher price than it is now. I like the whole Brookfield group, and also own Brookfield Property Partners.

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    1. Always great to get an informed comment from a long-term investor. I'll have to kick around your blog to get your take on BIP and BPP.

      Thanks for stopping by!

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