It’s been awhile since I posted my last portfolio update where I discussed buying TD bank for my LIRA account. This is actually a good thing as markets have been performing well lately so there hasn’t been a need to tweak anything, until now.
I have a couple poor performers in my portfolio (Atmel, Baidu) and a couple of names that just don’t seem to go anywhere (Shoppers and Cenovus) so I decided to do a little pruning. I am also becoming more cautious these days as the current bull market has been going for 4 years. According to various estimates, the average lifespan of a bull market is either 4 years and 8 months or 5 years and 6 months.
This bull market won’t last forever
If we take the 4 years and 8 months estimate, the current bull run is starting to show it’s age. While doing my research for this post I came across this article from Business Week. Like the previous stories, this article discusses the length of bull markets as well except this story was written on October 9th, 2007. The author concluded the article with this:
“So there you have it. S&P equity analysts are projecting a favorable 12-month period. And if history serves as a guide, we just may get it.”
Do you recall what happened to markets in 2007?? The Great Recession hit in December, just two months later! So much for another 12 months of upward movement.
Given this fact, I decided to set a couple of stop losses on some of my stocks. In the event that share prices drop significantly, these stops would kick in to lock in my profits and prevent a loss of capital.
This is how I ended up selling RioCan, I had set a stop loss relatively close to the stock’s current trading price (as it had already dropped 3-4%) because if it dropped further, I wanted to get out with my profit. Interestingly, the stock declined suddenly, my stop was triggered and then in the next few days it continued it’s climb.
While this is a bit frustrating it was good practice for setting stop losses and changing my mindset. Up until now, I had never set stop losses. This is a key tactic that I should have used in the past.
This change of mindset is also what led me to sell 50% of my Apple shares right near the peak to lock in profits.
I sold shoppers simply because it hasn’t done much recently. This isn’t overly surprising as the stock is a fairly defensive play, however it is lagging the market by a substantial margin.
Here is how I did:
|Stock||Shoppers Drug Mart (SC)||RioCan (REI.UN)|
|Holding Period||10 Months||17 Months|
This is decent performance but not stellar however it far eclipses the returns on bonds, term deposits or savings accounts!
On the tax front, both of these purchases were held within a TFSA so all the dividends and capital gains are tax free.
What am I doing with the proceeds?
Right now, absolutely nothing. In the past I might have rushed out to buy another stock however this time I will wait and observe the market. Timing can make all the difference in the world so we won’t be rushing into anything. All the funds will remain earmarked for re-investment.
I still think the market has more upside to go but I will be cautious with future purchases.