Recent Sell – IPL, BTO

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A bit of portfolio cleanup with a couple of recent sales in my portfolio. As mentioned in my monthly outlook posts, I am looking for portfolio simplification — and as a result I want to be only invested in my high conviction ideas.

Instead of outright selling the stocks, I decided to write covered calls and let the market take care of it. The covered calls ended up in-the-money and got called away, but I have no regrets since I intended to sell these positions anyway.

First sale: I closed my position in Inter Pipeline Ltd (IPL.TO). This is a darling of the income-focused investors as it yields 7.5%+. In all, the company has some good assets and I have enjoyed the monthly distributions for a long time.

There were two main reasons for selling: (1) this company seems to have turned into a value trap (see chart below), and (2) I already have other companies that have plenty of pipeline exposure including Brookfield Infrastructure Partners (BIP.UN.TO)(BIP), Canadian Utilities (CU.TO), and Kinder Morgan Inc (KMI). Do I really need a 4th company that gives me a pure pipeline exposure in Alberta (and a little bit of Europe), esp when it looks like a value trap? I came to the conclusion that I didn’t need to own it, even though it results in a big drop in my dividend income going forward.

In total, profit from this company was 19.04% with most of the returns coming from dividends over the years. First tranche was in 2013, but more than 2/3 of the position was held for about 18 months.

Second sale: I sold and closed my position in B2Gold Corp (BTO.TO). While I am bullish on gold prices going forward, and B2Gold has some great assets (esp its Fekola mine), B2gold has not performed well as the price of gold moved from mid-$1200s to mid-$1400s. My other higher conviction gold companies like Kirkland Lake Gold (KL.TO), Franco Nevada Corp (FNV.TO), Wheaton Precious Metals (WPM.TO) are much better investments in the space.

Total profit from B2Gold was 54.8% during the 3-years of holding period.

Full Disclosure: Our full list of holdings is available here.

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