Tuesday, March 24, 2015

Recent sell ($POW)

Today, March 24th 2015, I decided to sell 25 shares of Power Corporation (POW) at 34,57$ for a total of 864.25$.

This means I also have to chop off 29$ worth of dividend annually. 


My forward 12 month dividends now stands at 2 934.78$. This is even still farther away from my 4800 $ 2015 goal...

Why did I sell might you ask since I just wrote a post singing the praises of Power Corp

I reassure you right away dear followers, all is well with this gem of a company. Actually, all is very well and POW will likely raise its dividend next quarter, just like Power Financial (PWF) just did. 

The fact and the matter is I had too much of Power Corp ever since I started buying its Power Financial company, which is 66% own by POW.

POW is the conglomerate. And PWF is one of its many companies. For an overview of their organisation chart click here.

Like I mentioned previously, I have recently started adding Power Financial (PWF) to my portfolio. 

Therefore, the two companies combined weighted heavily on my portfolio. And with the recent raise of their share prices, they both accounted to more than 10% of my portfolio. 

With this small sell of POW they both now stand at 8,75%, which is still high. But I will leave it at that for now -- and for a long time.

For the record, I now own 300 shares of POW and 75 shares of PWF. The dividend total of both companies is over 450$ annually. It represents 16% of all my paid dividends.

Why sell POW instead of PWF?

I like PWF just as much as I like POW. But, to me, PWF is a more of a pure player when it comes down to the insurance and financial sectors. Whereas POW is a little bit more diversified with, for instance, investments in a Communication group and in China via the Sagard investments. 

Is it bad to be diversified? Of course not, although I'm not entirely sure the Communication group will be financially very lucrative over the long course. (They actually just sold many regional newspapers here in Québec). 

The main factor is that I wanted to have a little bit more direct exposure to the Insurance and Financial sectors of the many companies hold by PWF directly.  

All in all regarding the Desmarais Family conglomerate, I'm still 80% invested in POW and 20% invested in PWF.

What do you think of this sell? Does it matter to you when a single company accounts for more than 10% of your portfolio?

4 comments:

  1. Ive been looking at POW and like what I see. I should just go ahead and buy it already.
    I am all for diversification - and realy feel uncomfortable owning a company that makes up more than 5% of my portfolio. I think you are taking the right course of action liquidating some of the shares of a company that makes up such a huge portion of the portfolio.

    cheers
    R2R

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  2. hey R@R. I'm not going to argue with you if you decide to buy POW. You know love this company. And yes, at more than 10% I felt I a little bit uncomfortable. But just a little bit... ;-) They are likely to rise their dividends next quarter. Take car and thanks for stopping by.

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  3. Think there is a bigger question built into this post - and it has to do with diversity vs concentration. It is an internal struggle I have often. You are young (and thus can bounce back) and really believe in a particular company why diversify away from it, just for the sake of diversification. Warren Buffett once said, to invest like you have a punchcard with only 10 great investments.

    It is easy for me to write it but I haven't really practiced it as my dividend growth portfolio has over 30 holdings.

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  4. Hello Evan,

    You are right. And that's a subject I have tried to tackle a few times here on this very blog. I have to say I totally agree with Buffett's quote "to invest like you have a punchcard with only 10 great investments". A fellow of one of the Financial letters I read (in French) suggest to build a portfolio of only 8 great companies from 4-5 different sectors. He’s adamant that it is this way you will get better return. Others suggest 15-20 to avoid (almost) all risk.

    Right now I own 15 companies. (I don’t count my two smaller ones, which are mainly speculative, nor should I count my RBC Fund). POW and PWF are the same company really so it counts for one. And I have Kraft and Mondelez because of their 2012 spinoff. (I now own Kraft Heinz!)

    The point is, the more companies you hold the more I believe it affects your return %. For a do-it-yourself-investor I find it hard to believe you can closely monitor more than 20 companies. Heck, I can barely monitor 15… Matter of fact, I can barely remember to take out the trash on Friday!

    Personally, if at some point I own too many companies (because the market will have kept going up and I would have had problems buying shares at a decent price of companies I already own), I would think about eventually switching to ETF’s. Something as simple as buying 35% US ETF, 35% Canadian ETF, 20% International ETF and 10% ETF Bond.I would have the whole lot of companies at a minimum low fee.

    Just a thought. Thanks for your comment.

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Thanks a lot for your comment.