After a little bit more than 3 months on the stock market in 2017, we have already experienced our fair share of emotions. While the U.S. market peaked at +7.02% on March 1st, investors’ enthusiasm is fading away as the market is now up only +4.03% as at April 16th (yes, I’m writing this on Easter, a man has to work sometimes!). We are seeing a similar phenomenon on the Canadian market as it peaked at +4.15% on February 21st to drop to just +1.62% at the moment of writing this article.
We went through Trump’s inauguration and promises of solidarity among oil producers. While both promises fueled the market for a few months, it seems they both starting to lose steam. As always, keeping a close eye on the stock market is enough to lose sight on the bigger picture as stocks bounce up and down like bunnies. It is never time to forget about your long term investing goal. If your portfolio was good for you 4 months ago, it likely still is today!
At the beginning of each year, I select 30 companies (20 U.S. and 10 Canadian) among a wide selection of dividend paying stocks. The purpose is to create a 1 year life span portfolio that would beat the market along with my main benchmark; the VIG (Vanguard Dividend Appreciation ETF) and the XDV (iShares Dow Jones Canadian Select Dividend ETF). I started this tradition back in 2012 and I was wrong only twice over my 10 predictions (5 U.S. and 5 Canadian). Both 2016 portfolios… This is somewhat a perilous exercise as each year, I’m putting my credibility to the test. I’m well aware that the odds of beating my benchmark are statistically against individual investors. And yet, I’m ready to defy gravity once again! Let’s take a look at how my predictions have done so far in the year!
US: Trailing by 1.19% due to 2 picks
Oh doh! Only 2 picks are showing on this table, right? Yeah, that’s because those who were able to select companies showing double-digit return so far paid for the book… but don’t worry, I still have an offer for you at the end of this article, it’s not too late!
13 selections out of 20 beat my benchmark. But where it hurts are the 2 worst picks showing -30.37% and -19.03%. Maiden Holdings (MHLD) and Qualcomm (QCOM) stain my great results. It’s funny how only 2 picks could impact your return from +1.89% to -1.19% vs your benchmark, huh?
What happened with MHLD? Well, the worst thing that could happen to any company; earnings plummeted:
Here’s what happened: The latest quarter includes a reserve charge of $120.4 million, which is primarily derived from the commercial auto line of business in both of its reported operating segments. The charge includes both a provision for adverse development realized during the fourth quarter, as well as a more conservative view of the ultimate exposures on commercial auto liability throughout the portfolio.
In other words; they were wrong and they have to pay for it…. Bad news… MHLD is the perfect case scenario of a company that has been showing very strong numbers for a few years and rewarded their shareholders until their misstep put a hole in their results. It’s not game over for them, but it is definitely not good for 2017!
As for Qualcomm, bad results also killed their stock in the beginning of the year:
When I made that selection in late 2016, I thought the company was back on track after their problems in China. It seems QCOM is still going to navigate through troubled water this year. They recently agreed to pay $814.9 million to BlackBerry (BBRY) and they are not done with their lawsuit coming from all mighty Apple (AAPL). QCOM’s business model is all about royalties from their highly-used technology in smartphones. While this looks like a very strong business model, lawsuits are hurting their balance sheet of late. I still think it’s a good time (probably even better now) to pick-up some shares but you must be ready to go through the storm in the meantime.
Canadian: Well ahead! +3.67%
6 selections out of 10 beat my benchmark and some of them with serious upside. One of them was Canadian Tire (CTC.A). As was the case with both MHLD and QCOM, latest quarterly results were responsible for their stock performance, it was the same thing with Canada’s largest retail store chain. However, Canadian Tire reported a strong quarter and year-end and pushed expectations higher. With a high dividend growth rate for sales and 15% EPS growth in Q4, CTC.A shares rose to the top.
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As I wrote in the beginning of this post, it’s not too late to grab your complete analysis of 30 best stocks for 2017. Instead of just buying my top picks, you can buy both The Dividend Toolkit, a master-class in dividend stock analysis, and the Best 2017 Stocks for 2017 for the price of one book: $19!
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We own MHLD in our DSR portfolios
All returns mentioned in this article are as at April 16th 2017.