June 24 Update - Canada's Big Bank Preferreds

Jun. 26, 2016 12:40 PM ETBNS, RY, CM, NTIOF, BMO

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Long Only, Value, Growth At A Reasonable Price, Long-Term Horizon

Seeking Alpha Analyst 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.

It was a less volatile week this past week, although that is not to say volatility disappeared. National Bank's (OTCPK:NTIOF) NA.PR.Q shares rallied 1.5% on Friday despite the general market volatility caused by the Brexit vote. Overall, the preferred shares tracked below shrugged off the results, with nine of 21 issues closing up on the day, another nine closing down and three unchanged.

On the week, most series were up, which reduced the IRRs. Rate reset IRRs were generally down 0.5%-1.0%, while floating rate IRRs were down ~0.3%.

There was no movement in the top three rate reset issues (ranked by IRR 1), while Scotia's (BNS) BNS.PR.D shares end the week as the highest-IRR floating shares, just below the 10% mark.

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

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