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Derek Knight
Derek Knight

ME AND MY MONEY

Maintenance planner has learned some hard investing lessons Add to ...

Derek Knight, 31

Occupation

Maintenance planner at an oil refinery.

The portfolio

Includes shares in Rogers Communications, Telus, Iamgold, Gildan Activewear, Cott, Leons Furniture, TD Bank, Bank of Nova Scotia, Petrominerales, Bird Construction, RioCan, Contrans Group and Badger Daylighting.

The investor

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Derek Knight and his wife, a teacher, are very good savers. But investing their money has been a roller-coaster ride because Mr. Knight has “no upper limit for risk tolerance.” Nevertheless, he is learning to temper his risk-taking for the sake of his wife, who has “a point where she trades sleep for possible return.”

How he invests

In the mid-2000s, Mr. Knight bought the battered shares of Stelco Inc., hoping for a turnaround. Instead, the company prematurely entered bankruptcy protection, wiping out shareholders.

Coming out of the 2008 bear market, the money left in their portfolio was put into shares of Teck Cominco (now Teck Resources Ltd.) at $4. According to Mr. Knight’s research, the company had $12 per share in net assets and was “financially backed by a major player.” A year later, the shares were sold at $40, more than recouping portfolio losses inflicted by the market crash.

Mr. Knight now believes “the best strategy is to keep it simple.” He confines his focus to about two-dozen “great companies” that have cash balances equal to at least 25-per-cent of debt. Then he waits to buy at a good price, usually after “the market punishes the company for some reason.” He and his wife have also diversified into an investment property.

Best move

Back in the mid-2000s, everyone was drinking a new beer called Lakeport. It was cheap and tasted good. When talking to his mom about investing, she said, “everyone seems to be drinking this beer lately and I bet it would be a good investment.” After he invested, the company, Lakeport Brewing Co., was taken over and a quick return was made.

Worst move

It was buying dividend stocks on margin (loan from the broker). The dividends were paying the interest and the position was deemed “essentially risk-free” as long as a 30-per-cent drop was avoided. Then the market collapsed in early 2009. He worked overtime “to dump money into the account to stay ahead of a margin call,” until he was forced to sell almost at the bottom.

Advice

Keep it simple. And take your spouse’s risk tolerance into account. For more, see freeat33.com/

Want to share your strategies?

E-mail mccolumn@yahoo.com

Follow us on Twitter: @GlobeInvestor

 
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