Vacation

I will be on vacation from now until August 7th and won't have access to the internet for the week so...you might as well cancel your internet and disconnect your computer as there will be no posts until my return.

Cheers,

US Banks

The US banks haven’t been a pleasant place to be invested recently. Here is a snapshot of the price history of some of the big US banks over the last month (remember these loses exclude any losses resulting from the rising CDN dollar)

C
June 25: $51.69
Now: $49.21
Change: DOWN 4.8%

BAC
June 25: $48.85
Now: $47.93
Change: DOWN 1.8%

JPM
June 25: $48.36
Now: $45.27
Change: DOWN 6.4%

USB
June 25: $33.39
Now: $31.14
Change: DOWN 6.7%

WB
June 25: $51.91
Now: $48.83
Change: DOWN 5.9%

WFC
June 25: $35.08
Now: $34.57
Change: DOWN 1.5%

As you can see there where some fairly impressive declines over the last month. So…does this mean it might be time to pickup some big US banks? Personally, I think there might be another round of declines. What’s your opinion?

Bicycle Trusts

I was recently reading about setting up trust funds and thought I’d highlight this interesting trust structure. A bicycle trust is similar to traditional trusts except there are certain milestone and requirements that must be met by the beneficiaries. These milestones can be virtually anything ie-graduating university, turning 35, etc...So much like riding a bicycle you have to “pedal” to make it work. This is a great structure to ensure that your hard earned inheritance is being used in an appropriate and responsible manner. A properly thought out bicycle trust would ensure that if something did happen your 18 year old son couldn’t drop out of school and use the $300,000 trust fund to tour himself and his band around the country for a few years. Instead, the trust could be setup so that he’d receive $20,000 upon your death however, after that milestones would have to be met to receive more money, $15,000 after the first year of university, $15,000 after the second etc...

If your interested in reading more here is a link to an article about bicycle trusts.

Alimentation Couche-Tard

I initiated a position in ATD.B on Friday. I revisited this name shortly after my last Wednesday’s posting “Where is the Value?”. I’ve provided a brief description of ATD.B as well as my reasons for buying:

“Couche-Tard is the largest convenience store operator in Canada with a network of over 2,000 stores in Canada as well as a considerable presence in the U.S., with more than 3,000 additional stores. Over 3,600 of the total number are Company-operated stores and nearly 1,400 stores are operated under our affiliate program. The Company sells fuel in 65% of its Company-operated stores. The Canadian stores are located in Quebec, Ontario, Alberta, British Columbia, Manitoba, Saskatchewan and the Northwest Territories. The U.S. stores are located in 28 states. The stores are primarily operated under the Couche-Tard® and Mac’s® trademarks in Canada and the Circle K® trademark in the U.S."

"In addition to the North American Couche-Tard network, there are approximately 3,500 Circle K licensed stores located in seven other regions worldwide (Japan, Hong Kong, China, Indonesia, Guam, Macao and Mexico).”

-Trailing P/E 20
-2008 estimated P/E 16
-2009 estimated P/E 14.5
-ROA 10.46
-ROE 23.46
-Recession proof industry
-Recognizable and strong brand (I personally like the layout of the Mac stores)
-Stock has been under pressure recently due to declining US fuel margins (at the pump) as well as the integration of the 236 convenience stores purchased from Shell in Dec 2006.
-In my opinion the last couple of quarters were decent despite the unfavourable fuel margins. I believe that when margins turn around these guys will surprise the street.
-TDWaterhouse has a 12 month target price of $28 (up about 30% from current levels)
-Successful history of growing by acquisition (in both Canada and the US)

Inflation

The latest inflation numbers are in and to the surprise of many economists inflation declined 0.3% from the previous month (2.2% versus the predicted 2.5%...but still above the central banks target of 2%).

Although inflation checked in at a national annualized rate of 2.2% I think it’s meaningful to examine where this average is coming from. Listed below are the inflation rates per province and territory:

—Newfoundland and Labrador 1.4
—Prince Edward Island 1.6
—Nova Scotia 1.8
—New Brunswick 1.9
—Quebec 1.5
—Ontario 1.6
—Manitoba 2.2
—Saskatchewan 3.2
—Alberta 6.3
—British Columbia 1.5
—Whitehorse, Yukon 1.7
—Yellowknife, N.W.T. 3.6
—Iqaluit, Nunavut 2.8

Anything stand out? Of course it does...all the provinces/territories participating in the oil boom are also experiencing rapid inflation (mainly as a result of the high cost of housing).

Where is the Value?

With the exception of resource companies I invest for the long term based on a number of factors (mainly fundamentals). However, lately I’ve been having a hard time finding any attractively priced equities that I’d want to hold for the long term (if you’ve found any let me know). I have a personal philosophy that once money enters my investing account it can’t be taken out until retirement. As a result, I’ve been accumulating cash in my regular bank account (which isn’t included in my monthly nest egg statements). Instead of depositing this money into my nest egg investing account I am going to be using this money on real estate in 1 of 2 ways:

1. Going to pay down my existing mortgage (which would be equivalent to generating a guaranteed after tax return of 5%)
2. I’m in talks to purchase a house privately and would use this money as a down payment/deposit (would be over a year closing time).

Golden Blog Awards

Well I just thought I’d tout my own horn today as I’ve recently won a very very very prestigious “Golden Blogs” award in the “Best Blog Name” category. The awards were held at the lavish and informative online palace of The Money Gardener over at http://themoneygardener.blogspot.com. If you want to check out the event or any other of the prestigious award winners you can check them out here.

Renovations Update – II

I made some significant progress in my house renovations over the last 4 days. I primed and painted almost the entire interior of the house. Here are the approximate costs of the work:

–paint and primer (cost $210)
-beer for helpers ($175)
-food for helpers ($20)
-brushes and trays ($45)
-plaster for areas damaged by wallpaper/trim removal ($5)
-misc ($10)

TOTAL: $465 (leaves me $1120 in my renovations budget)

In my opinion the painting is by far the best "bang for my buck" and will have the greatest return once I sell the house.

Items Remaining:
-Aesthetic work to 2nd bathroom
-Painting front door
-Painting trim
-Replacing kitchen counter tops(?)
-Replace receptacle, switches + plates
-Clean/scrub garage
-Paint Kitchen cabinets

Dividend Growing Stocks - V

TransCanada Corp - TRP

"TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure. Our network of more than 59,000 kilometres (36,500 miles) of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with approximately 360 billion cubic feet of storage capacity. A growing independent power producer, TransCanada also owns, or has interests in, approximately 7,700 megawatts of power generation."

-Has paid a dividend for the last 42 years
-Long history of increasing dividends (with the exception of 1999 where they cut it from $1.12 to $0.8)
-The purpose of the dividend cut was "to strengthen its financial flexibility and capture North American energy growth opportunities."
-Current P/E 17X
-Estimated 2007 P/E 18X
-Estimated 2008 P/E 16.7X
-Current yield 3.7%
-TD target price of $44

15 year Dividend History

Year Annualized Dividend (Declared)
2006 $1.28
2005 $1.22
2004 $1.16
2003 $1.08
2002 $1.00
2001 $0.90
2000 $0.80
1999 $1.12
1998 $1.18
1997 $1.18
1996 $1.10
1995 $1.02
1994 $0.94
1993 $0.86
1992 $0.78
1991 $0.73

Inter Pipeline Fund - IPL.UN

I’ve put in a limit buy for IPL.UN at $9 per unit. For those of you unfamiliar with the company here is a little blurb about them:

“Created in 1997, Inter Pipeline Fund is a major petroleum transportation, storage and natural gas liquids extraction business based in Calgary, Alberta, Canada. Inter Pipeline is a publicly traded limited partnership that owns and operates a diversified combination of energy infrastructure assets in western Canada, the United Kingdom, Germany and Ireland. This asset portfolio generates long-term and predictable cash flows, thereby providing unitholders with a growing and stable source of monthly cash distributions.”

I’ve decided to put a limit price in for IPL.UN for many of the same reasons outlined by Moneygardener in his May 18th post. If my order is filled I will be buying these units with a portion of the proceeds from a bond that matured in June. I am not expecting a large increase in either the share price or distributions from IPL.UN however, what I am expecting is a steady and consistent distribution. I am treating this purchase as a replacement to the small fixed income portion that I used to have in my portfolio. I am aware that there is more risk involved and of the argument that trusts can never be considered a replacement for fixed income. However, I am comfortable with the additional risk and with bond yields barely over 5% I am willing to bet that IPL.UN will maintain their distribution (or not reduce it significantly) and be either at or above it’s current value in 5 or 10 years. If my thesis holds true I’ll handily beat any bond that I could purchase with a 5 or 10 year maturity date.

Here are some of the reason that I’ve put a limit buy in:
•Currently transport 18% of total western Canadian conventional volumes and 50% of oil sands volumes.
•Inter Pipeline's NGL business currently processes approximately 40% of the natural gas exported from the province of Alberta.
•At 9$ a unit it will yield 9.33%
•Trailing P/E 14.9
•Estimated 2007 P/E 17.6 (at 9$ a unit)
•Estimated 2008 P/E 15.5 (at 9$ a unit)

Home Renovation Update

Last week I wrote about some home renovations that I plan on doing prior to selling, here’s the update:
•Stained the deck (approx cost $15)
•Removed kitchen cabinet doors and filled in holes (approx cost $0)
•Replaced bathroom vanity, sink, faucet and moved plumbing (approx cost $400)

This week I plan on:
•Filling some holes in the bathroom drywall that were created as a result of removing porcelain inlayed toilet paper rolls and towel holders.
•Painting the removed kitchen cabinets

Total spent on the renovation so far:$415. This leaves me with $1585 remaining in my budget.

Questrade - Promotion

Hi All,

I just got some more news from Emil over at Questrade.

"I came across some news recently that I'm not sure if you know about, and thought you and your readers might be interested in.

As of June 26th, Scotiabank has bought out TradeFreedom Securities. This makes Questrade the last independent brokerage in Canada, and with Canada Day just around the corner, we decided to celebrate.

Please feel free to check out our site for the independence celebration promotion. It’s quite humorous. I hope it will spark a new conversation in your website."

Here's a link to their July promotion here.

Retirement Nest Egg at the close of June 30, 2007.

-Down 2.5% from last month.
-Up 9.1% in 2007.

TRP – 3.96%
ABX – 3.72%
CSH.UN – 3.41%
GWO – 4.72%
PFE – 3.97%
POW – 3.41%
BA.UN – 0.4%
L – 4.27%
UNS – 2.8%
GZ – 2.82%
TD – 13.77%
EIT.UN – 3.05%
JNJ – 5.66%
MMM -4.16%
ZED - 0.74%
GO.A – 3.21%
O'Shaughnessy’s Global Fund – 4.01%
American Growth Fund – 1.02%
Canadian Value Fund – 3.88%
Small Cap Growth Fund – 4.28%
Chou Associates Fund – 10.68%
Health Science Fund – 0.88%
Money Market Fund – 10.29%

Well this has been one of my worst months so far as my portfolio is down 2.5% from last month. This is mainly due to currency appreciation and a general decline in the market. I am going to continue to hold all my positions and will begin to look at accumulating more shares if the market declines further.