FFJ Portfolio – November 2021 Report

This is my FFJ Portfolio - November 2021 Report; previous monthly reports are accessible through the Archives.

I readily admit that identifying attractively valued shares in high-quality companies has been a challenge for me throughout 2021. In addition, on multiple occasions, my analysis has led me to conclude a company's valuation is unreasonable and to 'pass' on acquiring shares. Following such decisions, I have watched the subject company's share price continue to appreciate.

In such instances, I have to remind myself that a company's share price viewed in isolation is meaningless. Just because a company's stock price is trading below its 50 or 200 day moving average or because the stock price is X% below its 52 week high is no basis upon which to make an investment decision.

November Purchases 

Recently, the valuation of some high-quality companies has become somewhat more reasonable. While it is highly probable valuations will become even more reasonable over the coming months, I know I can not perfectly time the market. I, therefore, acquire shares when I think a company's valuation provides me with a reasonable probability of being able to generate attractive long-term total investment returns.

During November, I added to my exposure in the following holdings in accounts I include in the FFJ Portfolio:

• Visa (V) - 50 shares;
• Blackstone (X) - 100 shares;
• Intact Financial (IFC.to) - 100 shares
• Stryker Corporation (SYK) - 5 shares

I also acquired 30 additional shares in Intuitive Surgical (ISRG) even though shares are richly valued. My rationale for acquiring shares that are richly valued is covered in my November 22nd post.

I have also been adding to several existing positions in accounts for which I do not disclose details. Examples include but are not limited to:

• The Royal Bank of Canada (RY.to)
• The Bank of Nova Scotia (BNS.to)
• Paychex (PAYX)
• Stryker Corporation (SYK)

FFJ Portfolio Holdings

Monthly FFJ Portfolio holdings reports from December 2018 to November 2021 are found here.

FFJ Portfolio - November 2021 Income

I track all my dividend income but only disclose details for holdings held in accounts I include within the FFJ Portfolio.

In my FFJ Portfolio - November 2020 Report I projected the following 2021 FFJ Portfolio dividend income:

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

My dividend income from holdings within the FFJ Portfolio for the first 11 months of 2021 is:

• Core Accounts – CDN ~$16,713 and USD ~$22,951
• Side Accounts – CDN ~$20,411 and USD ~$13,416

Looking at the YTD monthly dividend income history, I forecast FY2021 dividend income of:

• Core Accounts – CDN ~$18,217 and USD ~$27,884
• Side Accounts – CDN ~$22,323 and USD ~$15,939

The holdings within the Side Accounts will generate less dividend income than my forecast. Total investment return and not dividend income, however, is my primary focus.

RRSP Meltdown Strategy

In previous posts, I have explained our need to start 'melting down' our Registered Retirement Savings Plans over the next decade before we must convert these plans to Registered Retirement Income Funds (RRIFs). If we do not do this, we will find ourselves in the predicament where the mandatory minimum annual RRIF withdrawals will place us in the highest income tax bracket. In addition, my wife and I plan to start collecting the Canada Pension Plan (CPP) and Old Age Security (OAS) in another decade; these payments will be taxed at the highest income tax bracket unless we start taking action now.

Furthermore, OAS is subject to clawback when income levels are too high. The OAS clawback is triggered when net income is $79,054 or higher for the July 2021 to June 2022 pay period; this income is based on the 2020 tax return. You essentially incur a reduction in OAS benefits of $0.15 for every $1 above the threshold amount.

The implementation of the RRSP Meltdown Strategy requires a slightly different thought process to that with which I am familiar. Historically, the purchase of attractively/fairly valued shares in high-quality companies has been my focus. Now, I have to start thinking about selling shares. Logic would suggest I dispose of very richly valued shares. My challenge is wrapping my head around the disposition of such shares.

The problem would not be nearly as difficult if I could sell shares at the end of the 2021 calendar year so the trades settle in time for me to withdraw the proceeds from the RRSPs to reinvest in taxable accounts. Our RRSP withdrawals, however, will incur a 30% withholding tax. As a result, if we each withdraw $100,000 from our respective RRSP, we will only end up with $70,000 each.

I have yet to determine what to sell and how much to withdraw from the RRSPs. I do, however, want to nail this down no later than December 20th.

I anticipate the new Omicron COVID variant will contribute to further broad market volatility. As noted earlier, I know I can not perfectly time my purchases. By investing in high-quality companies for the long term, I am not concerned about buying at the most opportune time. I just want to acquire shares when I think they are, at the very least, reasonably valued based on earnings estimates.

That's it for now.

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 circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decisions without conducting your research and due diligence. You should also consult your financial advisor about your specific situation.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.