Welcome to the November edition of Money While You Sleep. Well November the market was on fire. You could literally have put 50 companies on a dart board and chances are you would have done well. More on that shortly. Here is what we have been up to:
- Had a couple weeks off which were much needed and spent a lot of time hanging out with the family, making many meals, home maintenance and trying to make sense of this highly inflated market.
- Got a chance to use the new snowblower and my back is thanking me for it!
- Kids still going to school during the pandemic, online dance classes and really anything to keep the kids engaged.
Here are a few pictures
This month the TSX shot up like a rocket going from $15,580.64 to $17,190.25, an increase of 10.33%. I’m not going to complain as life came back to the blue chip companies which was 60% of the portfolio to over 68%. This is the first month in a very long time that we didn’t perform better than the TSX as we only gained 7.6% this month. However after out performing the TSX over the past several months we are still far ahead of the index, We’ll take it! We made some purchases this month but probably not where you’d expect. I’ll get to that after we go through the details of the purchases.
We did not sell anything in November.
Added to our Barrick Gold position by purchasing 35 shares @ $31.85
Who is ABX.TO:
Barrick Gold Corporation engages in the exploration, mine development, production, and sale of gold and copper properties. It has ownership interests in producing gold mines that are located in Argentina, Canada, CÃ´te d’Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Papua New Guinea, Tanzania, and the United States. The company also has ownership interests in producing copper mines located in Chile, Saudi Arabia, and Zambia; and various other projects located throughout the Americas. Barrick Gold Corporation was founded in 1983 and is headquartered in Toronto, Canada.
While the markets continuing to go higher I was finding it very hard to find anything for the most part that wasn’t ahead of itself. So we ran some numbers on Barrick and to our surprise it is not getting the love it should be. Over the first 9 months of 2020 in comparison to 2019 here is what we found. Revenue is up 36%, cost of sales is down 12%, EPS is up 135%, free cash flow is up 223% (over 2.2 billion), total cash of Equivalents is up 36% (over 4.7 billion) and they raised the dividend yet again while many have cut or suspended theirs. Barrick came out with 3rd quarter results and the stock went up 7.6%. Vaccine news came out days later and the stock has dropped ever since coming down over 23%. In my mind based on the fundamentals this is a buying opportunity. Although the dividend is low the capital gain is impressive.
Opened a position in Kirkland Lake Gold by purchasing 40 shares at an average share price of $54.39
Who is KL.TO:
Kirkland Lake Gold Ltd. engages in the acquisition, exploration, development, and operation of gold properties. The company’s principal properties include the Fosterville Mine located in the State of Victoria, Australia; and Macassa Mine situated in the Municipality of Kirkland Lake, Ontario, Canada. It has a strategic alliance agreement with Newmont Corporation to assess regional exploration opportunities around Newmont’s Timmins properties and the company’s Holt Complex in Ontario, Canada. The company was formerly known as Newmarket Gold Inc. and changed its name to Kirkland Lake Gold Ltd. in December 2016. Kirkland Lake Gold Ltd. is headquartered in Toronto, Canada.
Kirkland maybe the best purchase of the gold companies we have acquired. Again we ran some numbers comparing the first 9 months of 2020 against 2019, this is what we found. Revenue is up 83%, cost of sales is the best of the large caps (over 12B market caps) at 43%, zero debt which helps earnings in a big way (You heard that right!), total assets up 167%, increased dividend 100% in 1st quarter followed by another 50% increase in 3rd quarter. This puts KL’s payout ratio around 15% giving plenty of room to increase in the future. So were going through a pandemic and KL is increasing their dividend at an insane amount while others are cutting and suspending. No brainer for me. Hint into December buys we have added to this position again. Recent earning can be found at sedar.com or yahoo for a quick overview right here
Opened our first position in Eldorado Gold Corporation by purchasing 80 shares @$16.75
Who is ELD.TO
Eldorado Gold Corporation and its subsidiaries engage in the exploration, discovery, acquisition, financing, development, production, sale, and reclamation of mineral products, primarily in Turkey, Canada, Greece, Brazil, and Romania. The company primarily produces gold, as well as silver, lead, zinc, and iron ore. It operates five mines: Kisladag and Efemcukuru located in western Turkey, Lamaque in Canada, and Olympias and Stratoni located in northern Greece. The company was formerly known as Eldorado Corporation Ltd. and changed its name to Eldorado Gold Corporation in April 1996. Eldorado Gold Corporation was founded in 1992 and is headquartered in Vancouver, Canada.
Did some homework and comparisons of many mid cap gold players and Eldorado stuck out like a sore thumb.Again i am going to compare 2020 first 9 quarters vs. 2019. Revenue is up 75%, cost of sales is down 12%, EPS is up 776% (Ya your reading that right!), Free cash flow is up 607% (Again your reading that right). When running the numbers i was a bit shocked as you probably are looking at some of those increases. We decided to take a small position in comparison to the two buys above as Eldorado knocks it out of the park when gold is trading at where it is, it does cost them more to mine than the larger caps but if you believe that gold is going to perform well in 2021 this is a good company to add a position in.
Dividend increases and decreases
- No Cuts
2016 – 2017 – 2018 – 2019 – 2020 Dividends and Rebates received
November dividends came in at $204.36 which is an increase over last November of 41%. This is keeping us in line with our 2020 goal of receiving over $3,100 in dividends.
My thoughts moving forward
Current economy conditions
Canada unemployment rates are starting to improve by going from 12.3% in June to 10.9% in July to 10.2% in August, 9% in September, 8.9% and 8.5% in November. We are continuing to go in the right direction, we will see if it holds as the second wave in coming in very fast. January will be telling!
As you can see by our buys in the month we have started to deploy some of the cash we had available into Gold mining companies. Canada has announced some of the details around stimulus going into 2021 yet again devaluing the currency and I’m confident the US will be printing shortly with talks of over 3 trillion more to hit the currency market. This is why we have dropped our overall cash position and hedged it in companies that produce metals that can be a hedge against currency. My personal view is sometime in 2021 gold will go to all time highs based on the printing machine.
Sectors I like
- Basic metals
What to look for
As we are into the fourth quarter it is very important to have a good peak at third quarter results. Here are some tips when looking into the financials:
- What do 3rd quarter current revenues look like in comparison to last years 3rd quarter? How about quarter over quarter?
- Have assets dropped?
- Have liabilities taken a turn for the worse? Any additional debt taken on? If so at what interest rate, short term or long term?
- How do assets compare to liabilities?
- What is shareholder equity vs. market cap and current growth plans?
- Did you read the full report? This is important so you don’t miss something, it’s your hard earned money your investing so you want to be sure there are no bad apples in the small print.
Keep an eye on earnings vs analysts expectations. Look for any forward guidance in the report that can help you better understand what management expects over the next few quarters. When checking if the dividend is in good shape focus on three metrics, Free Cash Flow %, Operating Cash Flow % and Payout Ratio %, these metrics can help determine the health of the current dividend.
Current companies I’m watching. I own many of these but don’t have a full position that’s why they are still on the list.
PIF.TO, ARE.TO, RY.TO, BMO.TO, EQB.TO, MFC.TO, SLF.TO, NWH.UN.TO, FTS.TO,CPX.TO, AQN.TO, T.TO, NFI.TO,BCE.TO, POW.TO, DOC.V, NEWU, REAL.TO
Thanks for reading and feel free to leave a comment!
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. Please ensure you do your own research.