Fiscal Update – July – Tale of 2 Industries

Oil Producers Languish as Airlines Fly High ✈️

Oil executives sometimes use crude language, especially to describe their disappointment of low oil prices. With the WTI price at around $48 a barrel it’s very difficult for North American oil producers to make a profit. ⛽ The 50% decline in crude price over the last year forced Husky Energy (HSE) to trim capital spending by $400 million earlier this year. Husky’s 2nd quarter profit in 2015 fell to just $120 million, compared to $628 million from the same quarter last year. The entire oil and gas industry is in quite the shemozzle right now.

But not everyone is complaining. The cheap cost of oil has actually provided a lift for airlines. 😀 Companies like Westjet (WJA) use a lot of fuel. In fact about 33% of Westjet’s operating cost is aviation fuel for its planes. In the 2nd quarter Westjet announced its profit was 19% higher than the same quarter in 2014.

Over the long run airlines usually underperform oil companies. However in the last 5 years Westjet shares have increased by about 85%, while Husky shares have been pretty much flat. Does this mean we should dump oil stocks and buy airlines? I think the best plan right now is to continue investing in growing companies and wait it out. That’s pretty much what I’ve done this past month. My biggest winner in July was Amazon.com. $AMZN shares rose 22% over the past 31 days due to higher than expected earnings, and my net worth increased $1,000 via this one company alone. 🙂

*Side Income:

  • Part-Time Work = $1100
  • Dividends = $500
  • Interest = $200
*Discretionary Spending:
  • Fun = $100
  • Debt Interest = $1500

*Net Worth: (MoM)chart_15july

  • Assets: = $903,600 total (+6200)
  • Cash = $3,500 (+1000)
  • Stocks CDN =$92,500 (-1100)
  • Stocks US = $70,800 (+5700)
  • RRSP = $51,800 (+600)
  • MICs = $15,000
  • Home = $259,000
  • Farms = $411,000
  • Debts: = $507,100 total (-1000)
  • Mortgage = $193,000 (-500)
  • Farm Loans = $200,200 (-500)
  • Margin Loan CDN = $29,900 (+300)
  • Margin Loan US = $26,700 (+900)
  • TD Line of Credit = $25,500  (-500)
  • CIBC Line of Credit = $10,000
  • HELOC = $18,200
  • RRSP Loans = $3,600 (-700)

*Total Net Worth = $396,500 (+$7,200 / +1.85%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.77 USD

Asset Breakdown:

Cash: $3,500 – This is the total I have in my checking and savings accounts. I don’t have an emergency fund because I think it will hinder my financial progress.
Canadian Stocks: $92,500 – Includes all the stocks I have in my TFSA, and margin Canadian account. I started buying blue-chip, large cap dividend paying stocks in 2009 and have consistently been adding to my portfolio. The Canadian stock market has had a great run since.
U.S. Stocks: $70,800 – Includes all my stocks in my U.S. margin account.
RRSP: $51,800 – Stocks and bonds in my retirement account.
MICs: $15,000 – Mortgage investment corporation units I hold. MICs are fixed income securities that pay better than bonds, but are relatively less risky than stocks.
Home: $259,000 – The condo I purchased in 2009 and currently live in. It’s value has increased every year thanks to the vibrant Vancouver real estate market.
Farmland: $411,000 – One of my best purchases. Double digit annual return every year since I bought my farmland.

The best cure for low oil prices, is low oil prices. Energy companies have already pulled back capital investments in further oil production due to the diminishing profitability of selling oil right now. This will ultimately lead to a shortage of supply as demand catches up some time in the future. And when that happens crude price will go back up and oil companies like Husky will once again experience high earnings, and Westjet will once again feel the pinch of high fuel costs.

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Random Useless Fact

Last year a programmer spend 2 years worth of his salary to buy 99 iPhone 6s. He arranged them in the shape of a heart and proposed to his girlfriend in the middle of it.

15-07-iphone-proposal-she-said-no

She said no.

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RICARDO
RICARDO
07/31/2015 11:34 am

Eandom Useless Fact
Small lady. If the guy is going to blow that kind of money she is beter off without him.

Aside from that, is there not a way to roll you rlines of credit in to your HELOC? As long as they are all for investment purposes.

RICARDO

RICARDO
RICARDO
07/31/2015 11:37 am

i NEED SPELL CHECK
“smart” Lady in the Random Useless fact

Tawcan
07/31/2015 12:05 pm

Poor guy lol. Did he sell those iPhones after?

PC
PC
07/31/2015 7:52 pm

Nice one on $AMZN… I never touch this stock cuz of negative earnings report but they always seem to surprize me with their growth in the stock market. Wow you are almost at $400k. You are gaining fast and moving up in the world!

Anon
Anon
08/01/2015 7:01 am

Don’t be fooled, Amazon is not a “digital age” company; the company is bricks and mortar with a digital front end. Warehouses, trucks, drones, robots, boxes, containers, ships, fuel, etc., etc.
(Does THIS look digital to you?!
http://ak-hdl.buzzfed.com/static/2014-11/26/8/enhanced/webdr09/enhanced-buzz-wide-10564-1417008855-13.jpg — 100 of these just in the U.S. alone.)

The Amazon business model is built on two things: the laziness and impatience of modern man. But that doesn’t mean it’s a well-run company, it just means the irrational behaviour continues.

Speaking of transportation and oil, I’d rather invest in a drone company which supplies Amazon. Or find out which oil company UPS and FedEx (Amazon’s shippers) have fuel contracts with and buy their stock.

Stephen
Stephen
08/01/2015 4:54 pm
Reply to  Anon

Another nice month! Congrats on the gains! Just make sure you dont waste it all on several iphones…that blows my mind.

Kapitalust
Kapitalust
08/02/2015 1:15 pm
Reply to  Anon

Anon, when it comes to Wal Mart vs. Amazon, I quote you Peter Griffin:

“A box is a box but the mystery box could be ANYTHING?”

😉

Anon
Anon
07/31/2015 10:12 pm

I have a two stock equal weight portfolio: transport + oil. The 50% oil drop has given me a 60% total gain…so far.

It might take a good 5 years before oil hits $100 again, but I’m sure Husky (aka the richest man in China) can weather the storm.

Wouldn’t touch Amazon for a lot of reasons. But as they say, the market can stay irrational…

Keep on truckin’.

My Road to Wealth and Freedom
08/03/2015 3:40 am

A nice increase on the net worth. I’ve been staying away from the oil companies, although I was watching Suncor in the $32 range. I have been buying some banks on the dip though. Keep up the great work Liquid and I look forward to your next update!