Category Archives: Portfolio Performance

Energy Services Bets – Postmortem

So I made some bets on energy services company’s over the last 18-24 months or so. I thought now might be a time to do some sort of postmortem on the trades and see how they have performed. Full disclosure: recently I have added to some, sold some and continue to hold some of the company’s mentioned. See the Portfolio page for current holdings.

This post will be structured in 4 parts:

  1. Was it wise to bet on Energy Services sector relative to the overall market for the given time period? This should provide an indication of whether looking at the sector from a top down standpoint was a wise decision.
  2. Within the sector, did I pick stocks that outperformed? This should help me understand my stock picking abilities on an individual company basis for the time frame.
  3. Did the stocks that I chose outperform the market?
  4. Did the stocks chosen produce a positive total return?

Before getting started, below are the 4 companies I bought shares in. The first 3 are based in Canada, with the last one being Nasdaq listed.

Ticker Purchase Price Purchase Date Dividends Current Total Return Hold Time (yr) $2.30 22/11/2016 $0.20 $3.10 43.5% 1.22 $4.75 11/05/2017 $0.12 $4.01 -13.1% 0.76
ave.v $0.49 16/10/2017 $0.00 $0.53 8.2% 0.33
pfie $1.26 20/07/2017 $0.00 $2.19 73.8% 0.57

*Note the average hold time is 0.75 years (or 9 months)

Was it wise to bet on Energy Services sector relative to the overall market for the given time period?

When grading the bet on energy services vs. the overall market I chose the (iShares S&P/TSX 60 Index Fund) and SPY (SPDR S&P 500 ETF Trust) for the overall market. For the energy services sector I chose the (iShares S&P TSX Capped Energy Index Fund) and IYE (iShares Dow Jones US Energy Sector (ETF)) for the energy services sector.

Here’s how the bets have panned out:

Date Energy Services Market
22/11/2016 -17.6% 5.0%
11/05/2017 1.9% 2.5%
16/10/2017 -7.1% -2.4%
20/07/2017 4.5% 7.8%
Average -4.6% 3.2%

The results show that buying this sector because it was depressed may not have been the wisest strategy.

Within the sector, did I pick stocks that outperformed?

Using the same dates, how did the stocks that I chose do against their peers in the sector? This is definitely a nuanced question. Especially if you look at all the names in the ETF. Not sure it’s fair to grade a 50mil market cap Canadian company against a much larger company. Regardless, the results are below:

Date Energy Sector Stocks
22/11/2016 -17.7% 43.5%
11/05/2017 1.8% -13.1%
16/10/2017 -7.2% 8.2%
20/07/2017 4.5% 72.2%
Average -4.7% 27.7%

As you can see, on average I did better than the energy services sector during the time frame.

Did the stocks that I chose outperform the market?

When you stack up my picks against the market, you get the following results.

Date Market Dean
22/11/2016 5.0% 43.5%
11/05/2017 2.5% -13.1%
16/10/2017 -2.4% 8.2%
20/07/2017 7.9% 72.2%
Average 3.2% 27.7%

This is with the most recent pullback in the markets.

Did the stocks chosen produce a positive total return?

The results showed an average return of 28% over a 9 month time frame. No complaints here. Not sure I can really draw much of a conclusion over a 9 month period and with only 4 stocks being chosen.

Regardless, I wanted to share the results and invite any feedback readers may have.




Disclosure: See portfolio tab for current holdings.

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What’s Dean been doing??

Once again I have strayed from blogging. Here (for like the 3rd time) is an attempt to rekindle my romance with Petty Cash. The ideas and feedback from readers has more than paid for the time it takes me to write a post, so I should continue to post regularly.

The Market

I don’t have any insight on the market. But it is tough to find anything meaningful to buy. As always I remain cautious, especially on residential real estate in Canada. Deny, deny, deny seems to be the theme. I don’t know if we get a “soft landing”, but things are eerie to say the least. What is the most perplexing, is that as Canadians we are quite certain that a real estate bubble won’t happen to us. I think it’s because we are so polite. I mean it’s like we believe that some sort of greater power will prevent horrible things from happening to nice people. We seem to think that “bad” things only happen to “bad” people. I think even an orangutan would learn not to do something if he seen a friend of his get hurt from doing it. I really shouldn’t say anything as I have made enough mistakes to fill a (near) million dollar house in Vancouver.

As well there seems to be renewed vigor for stocks again. Though my portfolio often goes in the opposite of the market, I remain skeptical of a liquidity fueled stock market that is now priced at greater than 18 times earnings. I have been hearing “pro-forma” and “adjusted” more than ever and analysts have been reaching up to 18-24 months into the future to justify valuation. Not a market call, but I doubt you can see anywhere near 10% returns over the next 10 years.

2013 Performance

Umm. Well, fine. I guess. I have done better than the market and made up much of the losses I had relative to the market when I questioned if I should be running my own portfolio. Having said that, I could do a 180 in no time flat. I constantly reassess holdings and position sizes. Currently north of 35% cash.

New Position

As per Chip’s suggestion in a previous post (see comments), I researched and added to the portfolio.

The company is really cheap (less than 3.o ev/ebitda) and pays a monthly dividend. Management admitted that growth is limited and elected to pay a monthly dividend. A large shareholder is looking to liquidate, so we could see a depressed share price for awhile yet. 65% of revenue is from Papua New Guinea. The 3 rigs there are now under contract for a few years, so earnings and cash flow should be pretty certain.

Other Position Changes

I have been adding to OML.v and I have a few other positions that haven’t been blogged about. I think I will do a post with a quick thesis/summary on all unmentioned positions in the near future. I want to emphasize how many of my ideas are robbed/borrowed from others.

Thanks for reading,


Disclosure: long


Filed under Portfolio Performance, Random Thoughts

Queue the top…

Pretty dramatic headline. I mentioned in a previous post that I would be doing something to minimize my exposure to the Edmonton housing market. I have already slowed down the pace of making extra mortgage payments in favour of investing in my RSP and TFSA. The only reason I post this publicly is because I wanted to allow for feedback and experiences to help be get a better understanding of what can go wrong.

I have decided to try the Smith Manoeuvre. It is really risky if you don’t understand the potential outcomes to your thesis. What I am essentially doing is borrowing against my house to invest. It is really a function of cost to borrow vs. total return. Right now the cost to borrow is 3.5% FOR NOW. We all now that it will move up. If I invest in a Canadian dividend paying company that pays a 3.5% dividend then I will have enough dividend income to cover my interest expense. This factors in tax deduction on the interest expense as well as the dividend tax credit at my marginal tax rate (36%).

Though this sounds simple enough, there are huge risks to employing leverage. For one thing my cost of borrowing can (and most certainly will) go up. I could also buy at a market top and suffer a significant decrease in my holdings paper value.

The biggest advantage I have is that my outstanding mortgage is only 20% of the appraised value of my house. Secondly the household income will cover the outstanding mortgage balance more than 2x in one year. A rise in interest rates won’t affect my debt load too much.

I have the following rules for my Smith Manoeuvre:

  • Outstanding balance will remain small relative to money that can be readily accessed (liquid securities).
  • Negative net value (LOC – securities) will not be allowed for more than a few months. If I have to stop putting money in an RSP and pay down some HELOC balance, then I will.
  • Dividend yields must be 4% or larger.
  • Companies must employ minimum debt and have a history of raising dividends.
  • An assumption that borrowing costs will be 5% in 3 years has be factored in to the model.
  • All purchases will be tracked against an index to monitor the author’s ability to pick stocks. The Smith Manoeuvre stocks will the their own separate portfolio that will be different from the “growth” names and bench marked accordingly.

I only plan on doing this while it makes sense. I doubt that it will make sense to do this for more than a few years. I have essentially planned a 4 year timeline where dividend income covers interest expense and I get the capital appreciation as a bonus.

I have read a ton of blogs (like this one) and articles on the fallacies of this type of investment. From what I can figure, most people lose on this investment because they bet the farm on it. They get a 350k house,  it goes up and then they maximize leverage at the wrong part of the cycle. Then they panic and sell at the worst time.

There are 2 things that give me confidence in this decision.

1) I feel that a methodical approach to picking stocks will give me enough margin  of safety to employ this strategy.

2) I haven’t changed my lifestyle even though my income has risen dramatically over the last 5 years. I mean value investing doesn’t just happen in the stock market. It transcends into the rest of your life.

Any feedback is welcome.



Filed under Portfolio Performance

Q1 2012 Performance and thoughts on benchmarking

For a busy guy like myself I track my portfolio performance a little different than most. I compare my “active” self to my “passive” self. The biggest constraint to my performance (I feel) is time. It takes a long time to thoroughly look at a company and even longer to keep up with the ones I have. I wish I had more time to turn over more rocks, but I don’t. Though I can measure relative to the TSX or S&P, I built a passive portfolio to track myself against. I think of it as racing my ghost in MarioCart.

The rationale was that if I am going to spend a ton of time researching companies, I better have something to show for it. The passive portfolio is what I would pick if I was simply to buy some ETFs and continue to contribute to my retirement savings. They are, and SPY.

For the first 3 months of the year, the total return was just shy of 8% for the passive portfolio. My portfolio was up 24.5%.

Almost every stock has performed in line or above market. Though the time frame is too short to judge luck from skill.

You can see that when I stick to what I can quantify I seem to be OK. The performance YTD has erased all of my previous inept attempts at actively managing my money.

This is my portfolio’s value in dollars. What is tough is that I am constantly adding to my savings. If I fail to find an idea, I end up with a ton of cash in no time. I inadvertently time the market is a sense.

At the end of the Q1 I had a total of 10 companies in the portfolio and 20% cash. The top 3 companies make up 43% of the portfolio.

One company that I have purchased and haven’t written about is There is a great discussion here. I think the company is stupid cheap. I figure you are now paying fair value for only 2 divisions and getting 2 lucrative mills for free.



Filed under Portfolio Performance

2011 Performance and Thoughts

Another tough year.

I was down around 4%. Not too bad, but certainly not good.

Where did I go wrong?

The biggest issue was position size. I strayed too far and didn’t have any cash when the market tanked. I had to sell cheap to buy cheaper.

My ideal portfolio would have 3-5 core holdings making up 40-60% of my portfolio and 6-10 smaller positions. The core did OK in 2011. What I did was average down mindlessly. The two best examples are AEY and

AEY was kind of cheap when I first bought it around $3. Then I bought more at 2.75, 2.50, and 2.25. Not a bad idea, but I ended up overweight the company. Now I face the dilemma as to whether I should sell at this really cheap price or hang on. I still haven’t decided. Don’t get me wrong, I think AEY is a buy. But I only want 5% of my portfolio in at these prices.

MGO I also averaged down. I didn’t fully understand the risk of Chinese RTOs at first. Only after I turned my attention from operations to legitimacy did I made a mistake. Maybe is a buy, but I only have so much room in the portfolio.

In order to prevent this in the future I have decided to make harder rules for position sizes.

The other factor was just my timing of adding to my portfolio. I was quite unlucky this year. Money was tight for a while as I was on parental leave for 3 months and also had some emergency house issues that required immediate attention. I seemed to add right at the peak and ran into liquidity issues at the wrong time. For example, when went below 10 I would have bought hand over fist. But I didn’t have the cash.

I have also learned to watch comps yoy. Really understanding where the company is on the industry map is important. Many companies are growing top line numbers, but with rising commodity prices have a lag in time before they can pass on costs. This is what is happening to HPS.A. They had some margin pressure, but have passed on higher costs. This means that 2012 comps should be better than 2011 as long as the top line sticks where it is at (or improves).

Let’s hope 2012 proves to be better.


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Q2 2011 Performance

Awful. That’s probably the best way to describe my performance to date. Q2 was not kind to my portfolio as I went from around 4% behind my benchmark to 15%. That’s right 15%. I have rebounded somewhat since then, but not too much. This type of performance does raise the question as to whether I should be picking stocks myself or if I should just buy ETFs.

What Worked?

Nothing. I really do mean it. None of my companies moved up anything meaningful. GPIC was up a few percentage points for the quarter, but that’s it. I was cushioned by having around 20% cash.

What Didn’t Work?

My portfolio. The biggest losers were…

AEY – down around 15% since I first bought. I have purchased more, but am cautious on making it too large of a position.

HPS.A (tsx) – down 25%. A poor quarter combined with a questionable acquisition has led to a major sell off. The mistake I made with this one was paying full price for a fair company, when I thought it was a good company at a fair price. Lesson learned. I am reviewing this position.

MGO (tsx) – down 40%. The TRE scandal has hit all Chinese companies. MGO was hit particularly hard as there is some uncertainty over the PEC deal. I am in the process of doing a full post specific to MGO.

HCI (tsx) – down 12%. This could just be volatility. The company is having a tougher time than expected implementing their ERP. More recently the company purchased shares in a small start-up. This shows that management is more inclined to attempt to build an empire not return cash to shareholders (not a good sign). I am currently reviewing this one as well.

URB.A – down around 10%. The NAV of the company fell and so did the share price. Some shares have been repurchased. The margin of safety is still there and I continue to hold.


Sold I couldn’t quite get comfortable with some of the accounting and returns on the company. I took at 10-15% loss.

Adding to on dips. I also added to

Though NTRI was flat for the quarter, it has taken a beating year to date. WTW introduced a new product that took market share away from NTRI. It is tough for me to judge the success of this company. The last earnings beat were due to reduced advertising. Since marketing is such a big deal for NTRI, I have trouble seeing how lower advertising expenses will help drive sales going forward. Though it is nice to see a cost conscious company, the fact that advertising was cut so much and management feels that it won’t affect their position in the market means that much of the previous advertising may have been a waste.

Final Thoughts

Once again I find myself pressed for time. It is tough to get the right amount of time to actually focus on picking stocks. I don’t think my poor performance has anything to do with mental capacity or the way I view volatility, I think it has to do with time. I just need more. I have started pouring more of my time into picking companies.

Though I wouldn’t judge my performance on a year alone, it is obvious that something is lacking. Let’s hope the rest of the year is a bit better. I am finding quite a few interesting ideas and hope to post a few shortly.



Filed under Portfolio Performance

Q1 2011 Performance, Updates and Thoughts


I have ended Q1 2011 almost at the exact same spot as I left 2010. Still trailing my target portfolio by almost the exact same amount. Though both me and the mock portfolio ended  up around 3.7% for Q1 2011. There has been some changes to the portfolio so I would expect the underperfomance to continue, especially if this rally in the equity market continues.


I have sold WJA, FES and EQI (formerly GHC). WJA was around 25% below my low end fair value. The same with FES. EQI was almost at fair value. None of the companies have done anything wrong, but I am finding better value in smaller names. I added to MGO and have bought a few new companies. I hope to have write-ups on them in the coming weeks.


The markets have had a very nice run. The higher they move, the less I like them. I start to get nervous about my holdings in large companies. QE2 is ending soon, and we will this economy on its own footing for the first time. I think that “the economy” is no longer a catalyst going forward. Picking specific companies that have their own internal catalysts will be more important than just plowing money into what’s hot. I don’t think that you will see another recession, but I doubt the mean reversion growth rates in GDP continue. Some large US companies are cheap and some look cheap. Looking back over the last 10 years you see excess. Excess borrowing and spending. I don’t think that profit margins and growth rates will look so rosy over the next 10 years. Profit margins are quite high and have the potential for mean reversion to the downside. With steady revenue and closer to normal margins will take away any margin of safety in the broader market. That is why I am focusing more and more on small companies with their own internal catalysts.

Given the extreme debt levels, a small increase in interest rates will dramatically increase the cost to service those debts. That’s money that won’t be spent further to buy more flat-screens, cars, or other discretionary items.


Japan was horrible. The damage isn’t completely tallied yet. The Nikkei is off 7-8%. That’s not really that much. Japan is not a long term investment. Their companies are not shareholder friendly. The have an even worse debt/GDP ratio than America. Their aging demographics are the worst in the first world. Japan would be nothing more than a sentiment trade. In order to minimize risk on that type of a trade you need panic. I don’t see panic. As soon as Buffett says “buying opportunity” you money flowing in whether it’s warranted or not. Maybe the eventual trade would be uranium, but again I see no panic.


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