June 2 Update - Making 9%+ With Canada's Big Bank Preferreds

Jun. 02, 2016 8:11 PM ETRY, CM, BMO, TD, BNS, NTIOF
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Kevin Wiens's Blog
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Long Only, Value, Growth At A Reasonable Price, Long-Term Horizon

Contributor Since 2013

I have been "managing" my portfolio for the past ten years. Managing in quotes because I didn't do very much for myself. Instead, I listened to the advice of family and friends and the talking heads on TV. My wake-up call came a few years ago when I calculated my annualized return and discovered I did little better than a savings account. I decided that my process was not working. I would often swing for the fences by buying small companies, only to make paper profits and lose them. I had no buy or sell discipline and that was hurting my returns. I embarked on a journey to overhaul my investment process. I read books and online articles (a lot of Seeking Alpha) to learn about other people's processes. I made myself a model in MS Excel that at least acts as a baseline for decision-making and helps instill discipline in my process. By using this model my returns have improved considerably. Value investing is a philosophy that sits well with me, and I'll say I identify most with it. Not exclusively, but it's generally what I look for. It's funny that when I started swinging for singles and doubles instead of home runs my returns increased. My journey is still in its early stages, only three years in (and in a rising market, to boot). I will have to wait and see where the next 10 years take me. For now, I'm happy with my new process and recent results.

I have not been so active lately on writing articles; however, I have noticed that my article titled How to Make 9%+ Annually With Canada's Big Bank Preferreds still garners a lot of views three months after publication. (If you have not read the article yet, please do so - it explains a lot of background info that is useful in understanding the numbers below.)

This trade has worked out quite well for me so far, with absolute returns in the 15% range - prices have appreciated faster than I anticipated. While these returns are great for shareholders, it does mean that the figures contained in the original article are very out of date and the shares I highlighted in that article no longer provide 9%+ returns.

As such, I thought I would provide a quick update (see chart below).

My thesis on these shares remains unchanged from what was outlined in my original article. I continue to monitor for price changes that provide better return opportunities and I will do my best to provide more frequent updates in the future.

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Disclosure: I am/we are long BMO.PR.Q, BNS.PR.Y, BMO.PR.R.

Additional disclosure: This post is not intended as investment advice. You are responsible for determining whether an investment fits your portfolio and risk tolerance.

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