North American Buy-and-Hold Portfolio
07/19/2013 6:00 am EST
Focus: MONEY MANAGEMENT
Just over a year ago, we launched a buy-and-hold model portfolio, specifically designed for investors who don't want to spend a lot of time reviewing their positions and are not interesting in active trading, notes Gordon Pape of Internet Wealth Builder.
For this portfolio, we’ve focused on individual blue-chip stocks that we felt offered both long-term growth potential and regular dividend payments.
We included both Canadian and US issues and each stock was given a 10% weighting. We also added a 20% weighting in a bond ETF to provide some downside protection in the event of a stock-market plunge.
At the time, we stated that the objective was to generate decent cash flow and slow but steady growth. Given the nature of the portfolio, the intention was to make changes only when absolutely necessary. These are the securities we selected.
BCE Inc. (BCE): We wanted to include one Canadian telecommunications company in the mix. It came down to a choice between BCE and Telus but we decided on BCE because of the more attractive yield.
Brookfield Asset Management (BAM): This conglomerate has been a highly successful investment for us over the years and we believe the company is well-positioned to take advantage of the US economic recovery.
CN Rail (CNI): The railroads are enjoying a boom period and we believe that CN has the best fundamentals in the industry.
Enbridge (ENB): The pipeline sector has come under pressure recently from a combination of rising interest rates and environmental concerns, but Enbridge is a rock-solid company with an excellent dividend record.
Toronto Dominion Bank (TD): You'll hear a lot of arguments over which is the best bank stock in Canada but if TD isn't number one, it's not far off.
AT&T (T): This US telecom has a somewhat different business model than BCE in that it is not heavily into broadcasting. But like BCE, it offers a good dividend and modest growth potential.
McDonald’s (MCD): The share price has been more volatile than normal but it's well above our going-in price and the long-term outlook for this fast-food giant remains positive.
Walt Disney Corp. (DIS): Despite the recent pullback in the share price, we have a nice profit here and the company continues to go from strength to strength. Opening value: $4,947.60.
After one year, our buy-and-hold portfolio is looking pretty good, with a total return of 12.8%. All our stocks are in profit territory with six of the eight registering double-digit profits.
Shares in Disney led the way with an impressive total return of 36.5%. We also enjoyed big advances from CN Rail (+24%), Brookfield Asset Management (+17.4%), Enbridge (+15.5%), and McDonald's (+13.5%).
BCE Inc. had been faring well until recently, when it took a big hit over interest rate concerns; it was then really rocked by reports that US telecom giant Verizon is looking to gain a foothold in Canada. Nonetheless, we still managed to show a 6.8% profit for the year. At the current price the yield on the shares is up to 5.6%.
Because of the nature and the objectives of this buy-and-hold strategy, we are not making any changes and continue to recommend all of the positions in this portfolio.
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