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.