Investment Activity Review - June 2016

In June, the Canadian dollar popped back up over $0.78/US level so I decided to take the opportunity to add to some existing US positions to average down the costs in the early part of the month.

June saw more rumblings about imminent hikes in interst rates in June and/or July. The Federal Reserve Chairwoman Janet Yellen spoke saying essentially rates are going up, but didn’t give a timeline. The stock market reacted that interest rates are never going to go up and stock prices continued to rise and was closing in again on record highs.

Added to Position in Tiffany (Ticker: TIF)

I actually bought Tiffany twice. After hanging around the $70 mark the stock started inching downward.  I first bought at $64.25 and again when it went down to $61.15 after the Brexit vote (more on this in a minute) on really nothing materially new. After the purchases, my cost position went down to $62.04. Luxury retail stocks are continuing to be out of favour by the broader market and so I'm applying the "buy low" mantra philosophy.

Added to position in Guggenheim Water ETF (Ticker: CGW)

With the Canadian dollar stronger, I bought some more shares of this water ETF. My cost position has gone up a bit and is now just over $28.

Added to short position in S&P500 Via HSD

Before the Brexit vote, the market was pricing for the Remain side to win. The prices on the short position was so low I decided to add to my already large position to further average down. It turned out to be a good move in the aftermath as we’ll discuss shortly.

Added to position in iShares India ETF (Ticker: INDY)

More of the same. I've been wanting to add to the position for awhile so again added a few more shares to build it up. Fundamentals for me haven't changed much.

Sold position in General Electric for 24.6% gain (Ticker: GE)

I decided to sell the GE position primarily on valuation in my personal account (Disclosure: I still have a very small position in my son’s RESP account as a long term holding which is up 5 percent to date). I was up almost 25 percent which is beyond my threshold of 20 percent. For those who are new to following this blog, I setup this threshold to give me some discipline in selling. I believe it is harder to sell a stock than buy because emotion, aka greed, can creep into your decision making pretty fast. It’s pretty easy to keep holding on trying to get an extra couple of percent out of the holding however the market has a funny way of smacking you in the face when you get a little too greedy. By setting a threshold, it forces me to review the company and stock price without outside forces influencing me. It allows me to make a more thoughtful decision instead of an emotional one. Every stock I buy, I have an expectation of making at least 20 percent return. This is a level I’m personally comfortable with given my experience. Everyone has a different acceptable return based on their comfort with risk.  I’ve been debating with myself on whether to hold on further or sell for awhile. I finally decided to sell to lock in the profit which was pretty healthy. I’m not sour on the company as I think it is a long-term best of breed company. It feeds into my premise that stocks are overpriced and at at some point, there will be a pullback. No idea when, but when it does, I’ll be happy to buy GE on the dips for myself and for my son’s account. If the Brexit aftermath continues to wane on markets then an opportunity to jump back in may present itself sooner rather than later.

And then came Brexit...

The decision by Britain to separate from the European Union sent stocks around the world into a bit of tailspin (No media people a 5 percent drop is not a crash. See exhibit A – October 1987 for a more accurate description). The pullback forced me to dig up my "List" of stocks to see if there are discounts on companies I’d really like to own.  Fear had returned to the market with vengeance for 2 days after the vote. When there is fear in the market, I really start to pay attention.  While nothing jumped out as screaming buys, I did use the opportunity to add to some existing positions to take advantage of the falling prices. Unfortunately during market swoons like we saw in June, there is a flight to quality, specifically US dollars so alas even though stock prices were cheaper, the weaker Canadian dollar took some of shine off.

Added to position in Tiffany

The stock was down more than 5 percent at just under $60 so I used the drop to average down further.

Added to position in Imperial Oil (IMO)

The stock was down 2.5% the day after the vote. The flight to quality in the US dollar took down oil prices about 5 percent. I thought that at that point the Federal Reserve had lost any incentive to increase interest rates. Given this my thought process was that if this were to occur the US$ would go down and conversely commodities like oil would go up and take the oil stocks up with it. I used the pull back to average down my costs to $43.98. With oil at $50 at that time, I thought that companies like Imperial could fall into a healthier economic profit position.

Added to position in William Sonoma (WSM)

The stock fell below $50 after hanging around in the mid to high $50's. No fundamental changes in the company's story. It was getting thrown out with the bathwater so I decided to buy in to average my cost down to $51.40.

Added to Position in Nordstrom (Ticker: JWN)

The day after the vote, the stock was down 3 percent to near $37. Same play. Bought some more stock to average down the cost to $39.

Sure enough after the shock of vote result set in, Central Banks around the world start talking up the prospect of lowering interest rates and printing more money to soothe the markets. Like clockwork investors bought in and a week after the vote, stock prices were back to Pre-Brexit levels. At the same time if you did nothing and slept through the last week in June you would have missed nothing. The next few months will be very interesting and it wouldn't surprise me if we see some more periods of hysteria, which is great because I'll be ready to pick up the pieces of great companies that are getting pitched for no good reason.

The activities of the month highlighted a classic tenant of investing which is to not panic and make emotional decisions during times of market hysteria. The decision I made before the Brexit vote and after were about execution of decisions I had already made in terms of the stocks I wanted to buy and also the level at which I was comfortable to sell. After the Brexit vote where there was definitely some panic happening, I was reviewing my list of stocks to buy. Nothing really jumped out and so I decided to not buy anything new. I didn't do something on a whim. I saw the pullbacks as an opportunity to build positions in companies and ETF's that I feel are high quality investments. Again following the classic "buy low" tenant of investing. Unfortunately as humans we're wired to do something in periods of duress and it often makes things worse.