Recent changes to my Tax Free Savings Account
I sold all 175 units of my BMO Long Corporate Bond Index ETF (TSE:ZCM)
I don’t think long term bonds are a good place to be over the next 5 to 10 years.
Bond yields are so low right now. And if interest rates move higher, existing bond prices will fall.
People also seem to gain weight after a Fed increase. 😀
Next, I sold all 152 units of Brookfield Renewable Partners (TSE:BEP.UN)
I blogged about buying this company back in 2015.
It has performed well. I’m up about 150% total return including new units added via DRIPs.
Thankfully the returns are tax free. 🙂 But I feel like BEP.UN is way overvalued now.
The latest Return on Equity is -5.8%. And it has a forward PE ratio of 83 times, which seems very expensive.
The proceeds from selling these 2 holdings is about $13,000.
I normally don’t sell my stocks, but I think there are better opportunities out there.
My new purchases for October
I have used part of this new cash to buy one share of Constellation, and 50 shares of Copperleaf.
Constellation Software (TSE:CSU) is an international vertical market company and offers services to governments, as well as commercial customers. It’s trading at 35 times forward PE which isn’t cheap. But this stock never is, lol. It has about 125,000 customers in over 100 countries and a proven track record of solid growth. I think Constellation is in a strong position to provide shareholders with great returns over time. 🙂
Copperleaf Technologies (TSE:CPLF) provides asset investment planning and management solutions. For example, BC Hydro uses Copperleaf’s decision analytics software to determine where the best place is to spend money, and locate inefficiencies. This stock just went public last week so not much is known about its financials. But its revenue is growing at 62% a year, and the company boasts a 100% client retention rate. 🙂 It’s certainly a more speculative pick, but it appears management knows what they’re doing. Copperleaf is a business worth keeping an eye on.
This still leaves me with about $10,000 in cash sitting in my Tax Free Savings Account. I haven’t decided what I will do with this money just yet. Holding cash short term isn’t always a bad idea if you want to hedge against stock market risk. 🙂 I do want to buy some Blackrock (BLK) but I plan to do that in my margin account.
Is the correction over?
Earlier this year I mentioned on Twitter that stocks would fall 5 to 10 percent.
The S&P 500 did fall 5% last month, for the reason I mentioned. What I didn’t expect however, was how quickly it rebounded. I do think we’re going to see another dip in the markets before the end of the year. But it will probably be short lived also. There’s simply too many people with too much money right now. An extended period of high CPI will force people to invest their money into the stock market. I still maintain that hard assets, commodity stocks, and fast growing technology companies are the best place to invest right now.
Emerging market stocks and US value stocks are also worth considering, which is why I sold put options on ETFs that track these sector indexes. For example, If the Vanguard Emerging Markets ETF, (VWO) falls about 10%, I’ll have no choice but to buy 200 units to start. 🙂
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Random Useless Fact:
You might be overleveraged if you find yourself using one type of credit to cover another.
I also hold CSU.TO in my TFSA and it has done very well for a vertially integrated software company. I not sure about CPLF – too speculative for my TFSA so I have OTEX, GIB-A.TO instead.
Nice job on your blog appreciate your prospective.
Thank you.
That’s awesome. I also hold some OTEX in my TFSA. 🙂 It appears relative cheap compared to how fast it’s growing. There are a lot of Canadian based tech companies doing incredible things around the world, haha. Thanks for your comment.
I am a long time fan of Brookfield, I’ve been an owner since 2009.. I almost trimmed my position back in January, however, I still really like the long term and the dividends are piling on.. I may revisit this one to sell some off as this single position has become very large in my portfolio.
Wow, you’ve been investing for over a decade. I agree that Brookfield is still a good long term investment. I know green energy has gotten very popular recently. I just feel BEP.UN’s valuation this year is stretched more than other stocks for some reason.
I was also considering just buying BAM instead, which owns BEP.UN and other Brookfield limited partnerships. 🙂 But BAM also looks to be overvalued right now, lol. It’s an interesting time we live in.
What is the motivation for investing in bond or a bond ETF ? Im not trying to be critical because every investment type or strategy would have a reason. Given that returns are going to be in just low single digits and hardly covering inflation? Would it not be better to instead invest in an index ETF or REIT which can give decent return and also preserve ones principal ? If the idea is merely to keep money on the side for short term needs a savings account or checking account would help. Or is a bond considered as a parking place for medium term (1-2 years) period just for safety not so much for returns.
Holding short term bonds can be a strategic advantage. When interest rates go up, bond yield rises, and short term bonds will refresh with higher coupons. Any short term bond ETFs should see price appreciation in a rising interest rate environment.
In the meantime stocks should move lower as fixed income becomes more attractive relative to equities. During this time investors can rebalance by selling bonds to buying stocks. 🙂
Putting money into a savings account can help you do the same thing, but short duration bonds go up more.
Thanks for clarifying. What is the approx. range of returns one can expect from bond ETF?
No problem. The US based Vanguard short term bond index (VCSH) has a current yield of 1.89%. Depending on interest rates I expect somewhere between 1% to 3% annual returns over time.
Longer duration bonds can give you a higher return across a long period of time. But that’s a different investment to consider. 🙂
Have you ever looked in to topicus TOI ? almost an early stage CSU
I have. 🙂 Very interesting company. I do like the stock. It seems a bit overvalued right now, even more so than CSU. So I will likely wait until it falls to below $100/share before buy some. Or I can get into the stock through options if that avenue becomes available in the future.