Recent Sell – SWA, BMO

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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.

First sale: I closed my position in Sarama Resources (SWA.V). This is a gold exploration & development company in Burkina Faso. The resources are fairly low grade, but there is gold in the ground. In the past few months, there hasn’t been much movement even on some decent news on drills. It appears that most shareholders are now simply hoping for the best and praying for a takeover (which could take years). I might regret this sale if the takeover comes soon at a huge premium, but like they say “hope is not a strategy”. It was a small enough position in my portfolio that unless it went 10x, the gains/losses would not matter. So in the interest of portfolio consolidation, I decided to sell and exit the position here.

Total loss = 48% (holding period = approx 2 yrs) 🙁

Second sale: I closed my (and Baby R2R’s) position in Bank of Montreal (BMO.TO). BMO has underperformed its peers and has been extremely lethargic in going after growth markets and expanding its books. My initial thought for investing in BMO was the track record of dividends, and possible growth in US markets.

But as the charts never lie, the following images show the story compared to its peers – RY, TD, and BNS. On a long term basis, BMO has even underperformed BNS — which is not a well run bank!

In addition, with interest rates going further down (and remain low for a long time), financials will continue to face pressure as those margins get squeezed.

I do not intend to completely quit all banks with this sale. I am simply going to focus on the banks that are executing well. I currently own TD in my portfolio, and will continue to build that position instead.

Total profit = 0.37% (including dividends for approx 2.5 yrs)

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

4 thoughts on “Recent Sell – SWA, BMO

  1. Always good to trim

    Dunno much about sarama but bmo has been the dirt for sure. Td has dominated on the dividend raise front but stock appreciation they have been the same for me. up about 10% on each.

    Td is definately a superior bank but national has actually been my top one up about 40% and I think I had them all roughly the same time.

    Look forward to seeing where you redeploy that cash.

    cheers Road

    • I should take a look at the regional banks – I have usually avoided regionals as I find that they might be too dependent on local economies and real estate markets, but there might be better opportunities there.

      Good perf on your picks there.

      cheers
      R2R

  2. Ed says:

    I’ve owned the big banks for around 15-20 years and my spreadsheet automatically computes the CAGR whenever I update the price. TD is my best performing bank. 2nd is RY and third is BNS. I own a bit of CM as that is my worst performer of the banks. I owned some BMO for about 6-7 years but cut that a long time ago as the dividend growth was less than the others at that time. I also owned some NA for a while and that was a decent performer however I recently eliminated it to reduce my overall bank exposure.
    So I agree with your overall conclusion that the ranking of the banks in order of long term performance is 1-TD, 2-RY, 3-BNS. The only one I’d put fresh money into today is TD.

    • Yeah TD has executed well. I still remember clearly during the financial crisis when banking sector was in chaos, TD made the right move to expand into the US market. Talk about good timing on the management’s part. The other banks are trying to take a page from their books, but you cant find good opportunities like the GFC.

      R2R

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