Friday, November 12, 2021

My Three Largest Stock Holdings

 When looking at the position sizes of your portfolio holdings, do your largest positions represent your highest convictions? Philosophically, at least for me, I think this should be the case. At the very least, my largest holdings should be companies I’m very comfortable holding through good times and bad. In that spirit, I thought I’d take a peek at my three largest positions, to ensure my capital was well allocated.

Largest position: Microsoft (using USD / CAD exchange rate of 1.25)

Despite initiating a position in Microsoft in October of 2013, and not adding to it since, it has grown to be my largest holding. Considering the company’s top and bottom line growth, perfect ‘AAA’ credit rating, and the fact they currently have the largest market capitalization of any North American company, I feel secure holding onto my shares. The explosive stock price gain in recent years means dividend yield is currently a paltry 0.7%, but on the flip side, the company continues to boost dividend payouts annually at a rate far greater than inflation. Lately, I’ve even considered adding a small number of shares to this flower that seems poised to continue to grow to the sun.


Second largest position: A&W Revenue Royalties Income Fund

As easy as it has been to hold Microsoft over the past couple years as the company’s share price kept rising, A&W experienced a rockier road. When the pandemic started in March 2020, A&W’s share price plunged to under $18, down from about $39. When public health measures entailed shutting down restaurants and cutting indoor dining, the company was forced to cut their monthly distribution from 15.9 cents, to 10 cents. However, due to the return to in person dining at many restaurants, more locations being added to the royalty pool, and higher same store sales, the company has steadily increased their distribution back to an impressive 15.5 cents per month. The company’s share price has also rebounded from the ~$18 lows to over $41 today. After not only holding my shares during the difficult period for A&W, but adding to them, I might look to expand my holdings in this company if pandemic restrictions continue to loosen in Canada.


Third largest Holding: Telus Corporation

My comfort at holding Telus is probably best demonstrated by my buying shares in the company in 2013 (twice), 2014 (twice), 2015 (twice), 2020 and 2021. Simply, Telus’s management team has been clear and consistent about their intentions to reward shareholders with semi-annual dividend raises in the 7% -10% range. These increases in payouts are supported by generating growing revenue and free cash flows. Although some might argue Bell or Rogers would be better situated for future growth given Telus’ focus on western Canada, I think the fact that Telus has the best rated customer service of the big three Canadian telecommunications companies bodes well for their growth prospects over the long-term. Although I’m not planning to add to my position anytime soon, and would likely add to my relatively smaller position in Bell instead, I’m perfectly comfortable with Telus being my third largest holding.


My next largest positions in my portfolio are Granite REIT and Brookfield Infrastructure Partners, both of which I’m considering adding to before year end. In summary, I’m comfortable with my largest three holdings, and hope all my readers feel the same way about their most valuable positions. 

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