I’ve been pretty busy over the last couple of months, mostly helping out with a renovation for the grocery chain I work for. It’s pretty fun work, actually. It gives me plenty of opportunity to use my imagination and I get to use my hands. The project will wrap up in about a month and then I’ll take it easy for an undetermined time after that. There’s the possibility for more work, which we’ll explore to see if there’s common ground.
So I haven’t been writing on the FU Machine that much, because as always I value income today at a higher level than potential income tomorrow. But I have been pretty much doing the same stuff behind the scenes, including writing for Motley Fool still and buying stocks at a pretty reasonable clip. And sexying up the joint, of course. IT’S IMPOSSIBLE FOR ME NOT TO DO THAT.
Is that enough preamble? I never know. Let’s just into the stocks I bought.
Nelson’s distressed real estate fund
It seems like all the smart real estate investors dedicate at least a portion of their capital to distressed assets. Brookfield has been doing it for years. Morguard is also usually sniffing around when there’s a bargain to be had. And so on.
It’s easy to see why. Bargains are good for the underlying share price. They’re relatively easy to identify, too. There are potentially limitless opportunities to buy these distressed assets. Once improvements are made they provide succulent income or you can flip them and put the cash to work in other assets.
I’m open to buying physical property with this mindset, but it’s gotta be a hell of a deal. I’m looking for a minimum of a 20% cap rate to consider physical property. Active investing and this lazy guy don’t really mix.
Fortunately, I’m pretty sure I won’t ever have to resort to physical property. That’s because there are usually a dozen or so REITs that are pretty beaten up on both sides of the border.
The first real purchase of my distressed real estate fund is American Hotel Properties REIT (TSX:HOT.UN). I kept the position small, picking up 400 shares at $7.11 each. I’ve written pretty extensively about the company before, so I’m not going to get much into it. I’ll just say the cash flow yield on the stock is pretty spectacular, and with a disciplined capital allocation strategy it could grow pretty nicely. We’ll see on that last part. Oh, and I’m getting a 12% yield to wait. Yes, there’s definitely the risk the dividend gets cut, but I don’t care. This is a value play, not a yield play. The distribution is just a bonus.
The other member of my distressed real estate fund is Morguard REIT (TSX:MRT.UN), which I’ve owned for a few years now. It trades at half of book value, and it also offers a pretty succulent cash flow yield. I’ll continue to collect the dividend while the Alberta economy recovers.
Genworth MI Canada (TSX:MIC) sold off after Trudeau and the feds announced CMHC would take equity positions in first-time homebuyer houses. This seems like a terrible fucking idea, but what do I know. I’m just some semi-literate dope with a blog.
I bought 100 more shares somewhere in the $40 range. My average cost for my 200 share position is now approximately $42. This is a full position for me. I’m not in any hurry to buy more shares.
I now own 130 Scotiabank (TSX:BNS) shares after buying 40 more in the last week. My average cost shrunk slightly to just under $72 per share.
People seem to think the international banking results are bringing the stock down but hot damn those numbers are pretty good. International banking profit grew by 16% in 2018, versus 8% for Canadian operations. And 2019 should be another nice year after the company made some acquisitions down in the region. Is the market anticipating a recession? I dunno. Happy to be picking up shares for less than 10x forward earnings, anyway.
Transcontinental’s (TSX:TCL.A) most recent quarterly results were, to use a technical term, the absolute shits. Disappointing numbers all around. No wonder the stock sank to below $17. I took advantage of the weakness and doubled my position to 400 shares. I took a little confidence in the board of directors increasing the dividend approximately 5%. I’m not 100% sure on this one but it represents a pretty good value here and I like I’m getting 5.3% to wait. Management needs to turn this thing around in a hurry. I think it’s possible, but this stock makes me more nervous than the others on this list.
In the early part of March Laurentian Bank of Canada (TSX:LB) came out with some craptacular earnings, probably because Quebec sucks and poutine. Or some other such nonsense. I’m still a long-term believer so I took the opportunity to average down and buy 100 more shares. I now own 200 shares at an average cost of a little more than $42 each.
Upon further inspection, I turns out I bought 200 RioCan REIT (TSX:REI.UN) shares back in the early part of March too. I barely remember this. Is this what it’s like to turn old? I meant to ask my grandma but I forgot.
I bought RioCan because of its redevelopment program. It’s in the beginning stages of taking some of its lower density property (mostly in Toronto) and turning it into larger complexes that feature a combination of retail, office space, or apartments. Most of the projects feature retail space in the bottom and 10-15 stories of condos. The company will then keep these condos and rent them out.
In the meantime, I’m collecting nearly a 6% dividend on my cost. This is well covered by earnings. I plan to sit back, relax, and promptly forget about owning this position for the next five years. My average cost is $25.39.
Preview for next month
Between my two jobs (remember, one is temporary), the wife’s job, and all our passive income, things look good on the savings front. We should be able to save some pretty serious cash over the next few months. Look for the next few monthly updates to be full of activity. And then we’ll go away this summer and the July one will be “uh, we bought 4 shares of some company I’ve never heard of while drunk.” Should be fun!