Every stock in a portfolio doesn’t have to be a big winner. You just need a couple of those with a strong supporting cast to enjoy superior returns.
My Internet Wealth Builder Growth Portfolio proves the point. Most of the stocks hovered around break-even during the latest six-month period. But two posted outsized returns, pushing the whole portfolio to a gain of more than 13 per cent. The biggest winner was chipmaker Nvidia Corp. (NVDA-Q).
The portfolio was launched 12 years ago, in August, 2012. It had an initial value of $10,000 and a target annual growth rate of 12 per cent. It’s a high-risk portfolio, with 100-per-cent exposure to the equity markets. It’s not a place for cautious investors.
Here are the securities that make up the current portfolio, with an update on how they have performed since our last review in March. Prices are as of the afternoon of Aug. 22.
iShares US Aerospace and Defense ETF (ITA-A): Wars are never welcome news, but they offer profits for those who own defence stocks. This ETF invests in the U.S. defence and aerospace industries. We added it to the portfolio in 2021. It posted a gain of US$16.80 a unit in the latest period and we received two distributions for a total of 56.5 US cents a unit.
Alimentation Couche-Tard Inc. (ATD-T): Investors weren’t impressed by Couche-Tard’s bid to buy the Japanese parent company of 7-Eleven convenience stores and the stock has been sliding. The shares are down $4.88 since our last review. However, over time this stock has been a huge winner for us. The company pays a quarterly dividend of 17.5 cents a share.
WSP Global Inc. (WSP-T): Montreal-based WSP is an international engineering and design firm. This stock has been a big winner, but slowed dramatically in the latest period, gaining only 92 cents. We received two dividends totalling 75 cents a share.
TFI International Inc. (TFII-T): This Montreal-based trucking firm was added to the portfolio in February, 2023. It did well out of the gate but stalled in the latest period, losing $2.64 a share. The company pays a quarterly dividend of 40 US cents.
Nvidia Corp. (NVDA-Q): Sometimes it takes just one stock to carry a small portfolio. Nvidia is doing that right now. The company makes computing chips for AI processors, and its sales keep beating even the most optimistic expectations. We added it to the portfolio in February, 2023, and it has quadrupled since. The shares split 10 for 1 in June, so we now own 400 of them. Over the latest period, the split shares gained US$23.85. We received a tiny dividend of a penny a share.
Novo Nordisk (NVO-N): This is the Danish pharmaceutical company that manufactures Ozempic, the diabetes and weight-loss drug that is in huge demand worldwide. The stock was recommended in the IWB by contributing editor Adam Mayers. We added it to the portfolio in March at US$133.49. Since then, it has had a modest gain of US$3.39. We received two dividends for a total of US$1.443 a share.
Costco Wholesale Corp. (COST-Q): Costco shares were up US$191.94 in the latest period. The quarterly payout is US$1.02.
CGI Inc. (GIB.A-T): This is a Montreal-based international consultancy company that has been on our recommended list since August, 2012. We added it to the Growth Portfolio last fall at $140.51. Last March it was up to $159.66, but it slipped back to $147.85 in the latest period. CGI recently announced it will begin paying a quarterly dividend. The initial amount will be 15 cents a share, starting in the first quarter of fiscal 2025. The new annual rate of 60 cents yields 0.4 per cent.
Cash: We had cash and retained earnings of $2,734.15. We deposited it at Duca Credit Union, which was offering a high rate of 5.25 per cent. We received $71.77 in interest.
Here is how the portfolio stood at Aug. 22. Commissions are not considered. The U.S. and Canadian dollars are treated as being at par but obviously gains (or losses) on the American securities are increased because of the exchange rate differential.
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Comments: It was another strong six months. The portfolio gained 13.5 per cent in that period, led by huge contributions from Nvidia and Costco. ITA and NVO were also up.
The total value of the portfolio (market price plus retained distributions) now stands at $134,467.15. Over the 12 years since this portfolio was launched, we have a cumulative return of 1,244.7 per cent. That’s an average annual compound growth rate of 24.18 per cent.
Changes: We have a big problem. It’s a good one to have but it must be addressed. Nvidia shares have risen so far, so fast that they now represent more than a third of the portfolio’s valuation. That’s too much concentration. Accordingly, we will sell 100 shares for a return of $12,374.
We will use the money to buy 170 shares of Celestica Inc. (CLS-T) at $71.68 for a total cost of $12,185.60. The stock was first recommended in the IWB in November, 2023, at $38.46 and is one of the top performers on the TSX this year. The shares have come off their peak and trade at a reasonable P/E ratio of 17.31.
We will add the balance of $188.40 to cash.
All else stays the same, but I’m keeping a close watch on WSP and CGI. If we don’t see a resumption of growth in the next period, it may be time to move on.
Our total cash plus retained earnings is now $3,118.95. We will move it to EQ Bank, which is offering a high interest rate of 5 per cent on its 30-day notice savings account.
Here’s a look at the revised portfolio. I will review it again in February.
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Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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