Blessed by the Potato

For those following along with my adventures in investing, May was a fairly interesting month. I last left off lamenting about Migao, which was in the pits for no real reason I could understand. It recovered a bit since then, and then there was an earthquake in China and Migao said that they hadn’t suffered any damage but were shutting down for a day just in case. Not fully trusting that, I bailed, realizing a slight loss. Since then it’s continued to rally, but oh well, I’ll be watching good old POT and wishing I was smarter instead.

Not quite trusting the spike in oil prices, especially since it seemed to be partially driven by temporary(?) violence-related supply issues in Nigeria, I didn’t end up buying any XEG after my update last month, and that ETF continued to rise impressively. Oh well, at least I got a some benefit of oil’s run up from my ownership of the TSX-Composite on the indexing side of things. Speaking of indexing, I’m still proceeding with the currency neutral US index largely out of fear and uncertainty of what might happen with the Canadian dollar. My index holdings are now up to 5% of my overall portfolio, and keep growing as I plow my new savings and dividends into them.

GE has slid a little further since I bought it. I still think it’s a good long-term value, and am tempted to buy a bit more to “dollar cost average”. However, the commissions and moreover, exchange rate fees to buy this US stock make me less inclined to give that a try for “just” a further 6% drop. This is exacerbated by the fact that the Canadian dollar has dropped in the past few days, so in Canadian terms, GE is only down about $1 from where I bought it (vs. the $2.10 it’s down nominally). I’m also tempted to cost-average into YLO.UN, as it’s dropped another buck to the $10 range and is now yielding over 11%. I’ve already done this once before, and YLO is already a pretty hefty portion of what I own, so I’m pretty hesitant to buy more. However, there is nothing I can find that contradicts my view that this is a quality company with a safe yield and a sound, stable business.

Finally, the banks are still declaring new writedowns and uncertainty about their future profitability abounds. However, we appear to be past the worst and this might be the time to buy. I’ve always had a preference for Canadian banks, but the risk discount seems to have gone out of them with recent rallies. In the US however, Bank of America (NYSE:BAC) and Citi (NYSE:C) are both still looking pretty beat up. Yes, they both have some uncertainties in terms of how much more money they stand to lose, whether their dividends will be cut, and if/when they will return to taking in money hand over fist. Of course, that’s kind of the point when going out shopping for value bargains: I’m essentially going to be gambling that the market is over-stating the risk and thus driven the share price of these banks below what they’re “actually worth”. I can’t say whether that’s the case yet, as I still have a lot more reading to do on that matter, but that’s what I’m looking into right now.