FFJ Portfolio - April 2021 Report

This is my FFJ Portfolio - April 2021 Report. The portfolio was created in January 2017 to demonstrate how investing in reasonably valued high-quality companies with competitive advantages can assist investors in reaching their long-term financial goals without the need to speculate or chase dividend yield.

Skimming Additional Income With Covered Calls

Articles posted in April can be accessed here.

There were no sales or lump-sum purchases in April. I did, however, disclose writing short-term out-of-the-money covered calls on Visa (V) (June expiry) and Mastercard (MA) (May expiry).

The strike prices are well above the current market prices so the option premiums are slim. I typically write calls with strike prices well above the market price. My objective is to merely skim additional income with minimal risk of having the options exercised or having to close the position at a loss.

FFJ Portfolio Holdings

Monthly FFJ Portfolio holdings dating back to December 2018 can be found here.

The portfolio has grown in value during the December 2018 - April 2021 timeframe through additional investments and the growth in value of most holdings.

The strengthening of the Canadian dollar relative to the US dollar certainly works in my favour. Unfortunately, the valuations of the companies which appeal to me are well in excess of what I deem reasonable. This is borne out from my decision to 'PASS' on acquiring additional shares in recently reviewed companies.

I have self-directed investment accounts at two banks and a few holdings are in accounts at both banks. Interestingly, the closing share price for the same companies held in accounts at the two banks does not always agree. The variance is typically under $0.25/share so I do not bother inquiring about the reason for the variance.

For example, the April 30th closing price for my CNR shares at one bank is $132.21 and $132.33 at the other bank. The closing share price for Berkshire Hathaway (Class B) shares held at one bank is $274.70 and $274.57 at the other bank.

FFJ Portfolio - April 2021 Income

The maximization of dividend income is NOT my priority. This is borne out by several of the companies within my Top 30 holdings which have a sub 1% dividend yield. In fact, my 16th largest holding (Berkshire Hathaway) distributes no dividend.

Nevertheless, I do track dividend income generated from the holdings within the FFJ Portfolio.

In my November report, I tried to extrapolate what would be FY2021 dividend income and estimated the following:

  • Core Accounts – CDN ~$17,600 and USD ~$23,500
  • Side Accounts – CDN ~$24,200 and USD ~$17,000

This is the FFJ Portfolio's dividend income for the first 4 months of 2021:

  • Core Accounts – CDN ~$6,800 and USD ~$7,700
  • Side Accounts – CDN ~$8,200 and USD ~$5,000

I do not invest in unreasonably valued companies for sake of exceeding an annual dividend income target.

FFJ Portfolio - April 2021 Report - Final Thoughts

In my March update I indicated:

'I am currently concerned about the valuation of companies in which I wish to increase my exposure or initiate a position. Given my concern, I have terminated the automatic dividend reinvestment for several of my holdings and am building my cash position.'

Despite arguments to the contrary, I think we are witnessing another period of irrational exuberance. Many new equity investors make investment decisions with no/little concept of risk. In many cases, reviewing a company's financial statements is a totally foreign concept. Stock price movement is the basis upon which investment decisions are made. This is akin to playing games of chance.

There is no telling when a pullback will occur. Given what I am witnessing, however, I am being cautious and am in no rush to invest new money until such time as companies of interest to me reach valuations where I think I will have a reasonable chance to generate an attractive return.

Stay safe. Stay focused.

I wish you much success on your journey to financial freedom.

Note: Please send any feedback, corrections, or questions to [email protected].

Disclaimer: I do not know your individual circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your own research and due diligence. Consult your financial advisor about your specific situation.