Six years ago we created a model Growth Portfolio for my Internet Wealth Builder newsletter. In terms of gains, it has become our most successful model portfolio, by a wide margin. But it is also the riskiest, with 100 per cent exposure to the stock market. So be aware that when the market hits its next bear phase, this portfolio will take a hit.
The portfolio was valued at $10,000 when it was created, with the assets distributed among eight stocks. Three were U.S. companies while the rest were Canadian. We have switched several of the stocks over the years and now the mix consists of four Canadian and three U.S. securities.
Here are the stocks that make up the current portfolio, with an update on how they have performed since my last review in late February. Prices are as of the afternoon of Sept. 20.
Nvidia Corp. (NVDA-Q). We added this tech stock to the portfolio in August 2017 and it continues to do well. However, the growth pace is slowing; the shares are up only 10 per cent since the last review in February. We received two small quarterly dividends of 15 US cents per share.
Alimentation Couche-Tard Inc. (ATD.B-T). After being stuck in neutral for a long time, the shares have started to move higher and we have gained $3.28 since the last review. The quarterly dividend was increased by a penny to 10 cents a share in July.
WSP Global Inc. (WSP-T). WSP Global provided another strong gain in the period, with the shares up $11.15. We received two dividends totaling 75 cents per share.
Shopify Inc. (SHOP-T). Shopify stock continues to impress, with a gain of $43.24 since the time of our last review. This is the only stock in the portfolio that does not pay a dividend.
New Flyers Industries Inc. (NFI-T). This Winnipeg-based manufacturer of public transit buses has produced some great results for us but it appears to be running out of steam as a growth stock. The shares are down $5.44 since the last review, despite an increase of five cents in the quarterly dividend.
Apple Inc. (AAPL-Q). Apple recently became the first company to crack through the $1-trillion level in market capitalization and the shares continue to do well. We are up US$48.28 per share since the last review plus we received two dividends of 73 US cents each, a 15.9-per-cent increase.
UnitedHealth Group Inc. (UNH-N). It was another great period for this healthcare giant. The shares are up US$43.07 since the last review. The quarterly dividend was increased by 20 per cent to 90 US cents per share.
Cash. We received interest of $13.89 on our cash holdings in EQ Bank.
Here is how the portfolio stood on the afternoon of Sept. 20. Commissions are not taken into account. The U.S. and Canadian dollars are treated as being at par but obviously gains (or losses) on the American securities are increased due to the significant exchange rate differential.
Comments: Every stock but one (NFI Group) made gains in the latest period, some of them very substantial. Overall, the value of the portfolio now is $43,075.73, including cash and retained dividends. That’s a gain of 13.6 per cent since the last review in February.
The total gain over six years is now 330.6 per cent for an average annual compound rate of return of 27.56 per cent. That’s way ahead of my expectation, which is for an annual gain in the 12-per-cent range. But we’ll take it, knowing that more difficult times will come eventually.
Changes: NFI has been a great contributor to the success of this portfolio but the growth potential going forward appears to be limited. So we will say good-bye to this winner, having reaped a profit of over 600 per cent since we added it to the portfolio. Combined with retained dividends, that will give us $5,574.70 to invest.
I’m a little uncomfortable with having almost half our assets in the tech sector so we will lighten that a little by selling 12 shares of Shopify for $2,572.68. That leaves us with 25 shares with a market value of $5,359.75.
I considered several possibilities for a new stock for this portfolio and decided to divide the money between two companies. The first is a Canadian company, CGI Group Inc. (GIB.A-T). It is the fifth largest independent information technology and business consulting services firm in the world. Its services include systems integration, IT outsourcing, data centres, cloud computing, Internet security, and more. The company employs about 74,000 professionals in offices and delivery centres across the Americas, Europe, and the Asia Pacific region. Annual revenues are $10.8 billion.
The stock has moved steadily higher this year and hit an all-time high of $87.22 in July. It is currently trading at $85.56. The shares do not pay a dividend.
We will buy 50 shares for a cost of $4,278.
My second choice is Nike Inc. (NKE-N), the world’s leading manufacturer of sportswear. Although it’s a mature company, it continues to grow at an impressive rate. Moreover, the stock has been boosted in recent weeks by the controversial but apparently successful Colin Kaepernick promotion.
Less than one year ago, Nike shares were trading at about $50. They are now at $85.37. The stock pays a quarterly dividend of $0.20.
We will buy 45 shares of Nike for a cost of $3,841.65.
Those purchases will leave us with a small amount of cash ($27.73) from our sales. That will be added to our cash balance, which now totals $909.56, including retained dividends. We will keep that money in EQ Bank, still paying 2.3 per cent.
Here is a look at the revised portfolio. I will review it again in March.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.
Gordon Pape