Last updated by BM on June 6, 2022
“Success in investing has two parts: finding the edge and fully taking advantage of it through proper position sizing. Almost all investment firms focus on edge, while position sizing generally gets less attention.” Michael Mauboussin, Thirty Years: Reflections on the Ten Attributes of Great Investors
In his paper, Mauboussin speaks about the famous card counting system deployed by MIT students for the game of Blackjack as an example of finding an ‘edge.’ The students found their edge by counting cards and then took advantage of that edge when the remaining cards in the deck were in their favour (more face cards), they bet larger.
Translating his concept to investing, Mauboussin found that great investors find an edge and then take advantage of their edge through position sizing.
We agree with Mauboussin that our edge as dividend growth investors is first finding quality dividend growth companies and then taking advantage of that edge through position sizing. We allocate more to the highest quality companies.
Like the card counting strategy, we add to our position sizes (increase our bets) when our quality companies are sensibly priced and more aggressively when they go on sale. To dividend growth investors, this is equivalent to having many face cards left in the deck and increases the probability of better long-term returns.
To see our ‘position sizing’ and ‘quality rankings,’ subscribe to our Magic Pants Wealth-Builder Model Portfolio (CDN) by clicking this link. Scroll to the bottom of the Subscribe page to get started.
Performance of ‘The List’
Last week, ‘The List’ brought our YTD price return (capital) back to even. Dividend growth of ‘The List’ remains at 10.2% YTD, demonstrating the rise in income over the last year.
The best performers last week on ‘The List’ were Stantec (STN-T), up 4.5%; Brookfield Infrastructure Partners (BIP-N), up 3.9%; and TFI International (TFII-N), up 3.7%.
Dollarama Inc. (DOL-T) was the worst performer last week, down -1.8%.
Recent News
CCL Industries Announces Bolt-on Acquisition for Avery (CCL-B-T)
Geoffrey T. Martin, President and Chief Executive Officer of CCL Industries Inc., commented, “This transaction is an excellent complement to the recent MasterTag acquisition in the United States, offering significant synergies while benefiting from Avery’s digital and e-commerce marketing expertise. We welcome Floramedia’s leader, Joris Verweij, and his talented team to our Company.”
CCL-T has been a dividend growth star over the last decade, with a dividend growth rate that has been close to 20% annually. Earnings growth has slowed recently, so acquisitions are one way to get back on track.
Sorry, but markets aren’t even close to bottoming. Here’s how to know when to start buying
“The stock market, my friends, is following a familiar pattern of a recessionary bear market. The first phase is the Fed-induced price-to-earnings multiple contraction. Typically, the first 20-per-cent drawdown is all about how liquidity drainage causes the P/E multiple to shrink – typically by four percentage points in this first instalment of the recession bear market.”
We have already seen this in the US markets and on a few of our stocks on ‘The List’ here in Canada.
“Every recession in the economy necessarily involves a contraction in earnings, which hasn’t happened yet. It’s all been about the multiple.”
The author says that earnings contraction is the next shoe to drop. This will happen when analysts come to grips with reality and begin to cut their numbers. We have not seen much of this in Canada yet. Paying close attention to Q2 earnings will give us a clearer picture of when.
The author also leaves us with a warning.
“And it also means that once the analysts start to come to grips with reality and begin to cut their numbers, investors who are dipping their toes back into the market now because they believe that valuations have “improved” enough will face an ugly reality.”
There are two companies on ‘The List’ due to report earnings this week.
Enghouse Systems Limited (ENGH-T) will release its second-quarter 2022 results on Tuesday, June 7, 2022, after markets close.
Dollarama Inc. (DOL-T) will release its second-quarter 2022 results on Wednesday, June 8, 2002, before markets open.
Dividend Increases
Last week, there were no dividend increases from companies on ‘The List.’
Earnings Releases
Last week, there were no earnings releases from companies on ‘The List.’
Below is a snapshot of ‘The List’ from last Friday’s close. For a sortable version of ‘The List’, please click on The List menu item.
‘The List’ is not meant to be a template for investors to copy exactly. Rather, its purpose is to provide investment ideas and a real-time illustration of dividend growth investing in action. It is not a ‘Buy List’ nor does it reflect the composition or returns of our Magic Pants Wealth-Builder (CDN) Portfolio. It is only a starting point for our analysis and discussion.
The List (2022)
Last updated by BM on June 3, 2022
*Note: The following graph is wide, you can scroll to the right on your device to see more of the data.
| SYMBOL | COMPANY | YLD | PRICE | YTD % | DIV | YTD % | STREAK |
|---|---|---|---|---|---|---|---|
| AQN-N | Algonquin Power & Utilities | 4.8% | $14.63 | 2.0% | $0.70 | 5.4% | 11 |
| ATD-T | Alimentation Couche-Tard Inc. | 0.8% | $57.70 | 10.7% | $0.44 | 18.1% | 12 |
| BCE-T | Bell Canada | 5.3% | $68.57 | 4.0% | $3.64 | 4.0% | 13 |
| BIP-N | Brookfield Infrastructure Partners | 3.4% | $62.62 | 2.5% | $2.16 | 5.9% | 14 |
| CCL-B-T | CCL Industries | 1.6% | $60.80 | -10.3% | $0.96 | 14.3% | 20 |
| CNR-T | Canadian National Railway | 2.0% | $147.66 | -4.7% | $2.93 | 19.1% | 26 |
| CTC-A-T | Canadian Tire | 3.4% | $172.41 | -5.9% | $5.85 | 24.5% | 11 |
| CU-T | Canadian Utilities Limited | 4.5% | $39.66 | 8.3% | $1.78 | 1.0% | 50 |
| DOL-T | Dollarama Inc. | 0.3% | $70.12 | 10.6% | $0.22 | 9.2% | 11 |
| EMA-T | Emera | 4.2% | $63.18 | 0.9% | $2.65 | 2.9% | 15 |
| ENB-T | Enbridge Inc. | 5.8% | $58.93 | 19.0% | $3.44 | 3.0% | 26 |
| ENGH-T | Enghouse Systems Limited | 2.1% | $33.72 | -26.5% | $0.72 | 16.3% | 15 |
| FNV-N | Franco Nevada | 0.9% | $143.70 | 5.6% | $1.28 | 10.3% | 14 |
| FTS-T | Fortis | 3.4% | $62.81 | 3.9% | $2.14 | 2.9% | 48 |
| IFC-T | Intact Financial | 2.2% | $184.67 | 12.8% | $4.00 | 17.6% | 17 |
| L-T | Loblaws | 1.3% | $117.63 | 14.5% | $1.54 | 12.4% | 10 |
| MGA-N | Magna | 2.8% | $63.95 | -21.6% | $1.80 | 4.7% | 12 |
| MRU-T | Metro | 1.5% | $71.61 | 6.8% | $1.10 | 12.2% | 27 |
| RY-T | Royal Bank of Canada | 3.8% | $131.95 | -3.6% | $4.96 | 14.8% | 11 |
| SJ-T | Stella-Jones Inc. | 2.2% | $35.78 | -12.0% | $0.80 | 11.1% | 17 |
| STN-T | Stantec Inc. | 1.2% | $60.15 | -14.3% | $0.71 | 6.8% | 10 |
| TD-T | TD Bank | 3.7% | $95.63 | -3.7% | $3.56 | 12.7% | 11 |
| TFII-N | TFI International | 1.3% | $84.36 | -23.8% | $1.08 | 12.5% | 11 |
| TIH-T | Toromont Industries | 1.4% | $111.01 | -2.4% | $1.52 | 15.2% | 32 |
| TRP-T | TC Energy Corp. | 4.8% | $73.87 | 23.7% | $3.57 | 4.4% | 21 |
| T-T | Telus | 4.2% | $31.56 | 6.0% | $1.33 | 6.2% | 18 |
| WCN-N | Waste Connections | 0.7% | $129.16 | -3.7% | $0.92 | 8.9% | 12 |
| Averages | 2.7% | 0.0% | 10.2% | 18 |
