Q: Hi 5i,
My CM holding in my RRIF has appreciated in value by approximately 125% (not including dividends) and my dividend yield on the invested funds brings a healthy return of 7.5%.
Without consideration for CM's weight in my portfolio, do you think it would it be wise to capitalize on some of the appreciation in value though offloading some and putting the money to work elsewhere?
The factors to consider in thinking about this question that I'm aware of are:
1.) whether CM is currently overvalued to the extent that de-risking is advisable (i.e.: is it in danger of a significant decrease that would deprive me of some of the nice profit I've made so far);
2.) whether there are suitable alternatives for deployment of the funds that will provide sufficient yield and capital appreciation over time to justify the reduction in risk that selling some CM would bring; and
3.) what those alternatives might be. (I'm well invested in O&G, pipelines, tech and financial names other than CM, but light in industrials, materials, consumer discretionary and just about everything else.)
I would greatly appreciate your thoughts regarding my CM conundrum and what to do about it.
Thanks 5i !
Peter
My CM holding in my RRIF has appreciated in value by approximately 125% (not including dividends) and my dividend yield on the invested funds brings a healthy return of 7.5%.
Without consideration for CM's weight in my portfolio, do you think it would it be wise to capitalize on some of the appreciation in value though offloading some and putting the money to work elsewhere?
The factors to consider in thinking about this question that I'm aware of are:
1.) whether CM is currently overvalued to the extent that de-risking is advisable (i.e.: is it in danger of a significant decrease that would deprive me of some of the nice profit I've made so far);
2.) whether there are suitable alternatives for deployment of the funds that will provide sufficient yield and capital appreciation over time to justify the reduction in risk that selling some CM would bring; and
3.) what those alternatives might be. (I'm well invested in O&G, pipelines, tech and financial names other than CM, but light in industrials, materials, consumer discretionary and just about everything else.)
I would greatly appreciate your thoughts regarding my CM conundrum and what to do about it.
Thanks 5i !
Peter
5i Research Answer:
CM AT 13X earnings is a bit higher than historical averages, but not really significantly so. Considering strong credit quality, the dividend potential and lower interest rates ahead, we would not consider it over valued and primed for a significant decrease. 2) Some utilities such as H and FTS would be less risky. FTS has a slightly higher yield than CM. But both likely have less upside potential longer term. 3) In materials, we like NTR (3.11% yield). But it can be cyclical and not really comparable to a bank. Still, we would focus on one's portfolio. Instead of seeking perfection in trading on CM, we would look to other sectors that may need representation, in order to properly diversify a portfolio.