Larry Cuozzo
Larry Cuozzo
Occupation
High school teacher
The portfolio
Berkshire Hathaway Inc., Onex Corp., Fairfax Financial Holdings Ltd., Birchcliff Energy Ltd., Pengrowth Energy Corp., Canadian banks, Canadian National Railway Co., BCE Inc. and Leon's Furniture Ltd.; Horizons S&P/TSX 60 and Horizons S&P 500 exchange-traded funds (ETFs).
The investor
Larry Cuozzo, 48, ran a disc-jockey business in high school and a window-cleaning franchise in university. After graduating with a business degree, he landed a job with a corporation. A few years later, he became a teacher.
How he invests
Because of his teacher's pension, Mr. Cuozzo has little room to contribute to registered retirement savings plans. So, nearly all his investing is done in taxable accounts.
He began in the early 1990s with a focus on dividend stocks, but as the dividends grew, so did the taxes. Given his high income from teaching and dividends, the tax hit was cutting into the compounding of portfolio returns, and he stopped buying dividend stocks (while keeping the ones he already owned). Now, he seeks capital gains through three strategies.
The first is investing in the shares of publicly traded companies managed by individuals with distinguished investment track records. In particular, he owns shares in Warren Buffett's Berkshire Hathaway, Gerry Schwartz's Onex and Prem Watsa's Fairfax Financial Holdings. If you can't beat them, join them.
A second is to own low-cost, broad-based ETFs that automatically reinvest distributions tax-free. Two such ETFs are the Horizons S&P/TSX 60 Index ETF and Horizons S&P 500 Index ETF.
A third approach is to occasionally buy beaten-down stocks that "financial gurus," such as Franco-Nevada Corp. co-founder Seymour Schulich, are buying. "I purchased shares of Birchcliff Energy this summer, and recently, shares in Pengrowth Energy," Mr. Cuozzo says.
The positions based on these three strategies pay no (or small) dividends. (Any stocks with high yields in his portfolio are carry-overs from the period before he switched to capital-growth approaches.) Moreover, they are long-term holds, and taxes will be paid only on capital gains when a sale occurs. The result is a better compounding of returns. Keeping taxable income low "will also allow me to receive Old Age Security payments [as a senior] ," he notes.
"My portfolio is higher-risk because it is fairly concentrated," Mr. Cuozzo adds. "I'm okay with this because the backbone of my retirement plan is my teacher's pension, which is rock solid."
Best move
"Discovering dividend investing in the early 1990s by happening upon a copy of [the investment newsletter] the Connolly Report."
Worst move
"Believing Penn West [Petroleum], or any other commodity company, was a dividend stock."
Advice
"For the majority of people who don't have a defined-benefit pension, you can't go wrong by investing in simple, low-cost index funds," Mr. Cuozzo recommends. "Set it and forget it – that works best." More advice is offered on his investment website at investingbs.com.
Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his website