[humble_pie]

a couple years ago forum member Argonaut posted his concept of 5 leading canadian stocks as being suitable for tfsa accounts.

he had selected the 5 winners from a field of stocks widely held by equity etfs on a choose-the-winners-&-avoid-the-losers basis.

soon, the handy ready-to-go prepack came to be known as argo's 5-pack. Although the individual stocks were to change from time to time, the basic takeout kit would nearly always include a bank, a pipeline, a telco, a railroad & a real estate trust unit. Occasionally, it seemed, a utility would replace the railroad.

the problem has always been that updates for argo's 5-pack would appear here & there on a random basis. Sometimes in tfsa discussions, sometimes in What are You Buying thread, etc.

what i'm proposing is that the 5-pack, which argo uses for his tfsa account, have its own thread so that forum members can find its current version plus comments easily.

i'd like to make clear that other people would comment on the proposed thread, it should not be just the responsibility of Argonaut as that might be a wearisome burden for him. Recipe Monday, which was so great a success that it became a sticky, had one master chef - Brad - but other cooks tossed in amazing recipes whenever they felt like it.

here is the latest iteration of argo's 5-pack. For the first time, td bank has disappeared, to be replaced by bns.

Bought 88 shares of BNS today, was about that much cash available in TFSA. Argonaut 5-pack finally has its new 5th leg. Current iteration, yield of 4%:

Inter Pipeline
RioCan REIT
CN Rail
Telus
Bank of Nova Scotia

The replaced Fortis is down from where I sold it in April, and Scotia is down since then too so it worked out okay. BNS might shed a couple bucks but I think downside is minimal.

Their recent moves are a stroke of genius. Selling a high value asset in their Toronto tower that doesn't produce meaningful revenue, and then buying ING Canada which increases their assets under management and earnings potential in one fell swoop. Add in all the growth potential in their international business, and I like it a lot. Buy buy buy.

 

[Toronto.gal]

Although the individual stocks were to change from time to time....

He knows well what to buy/what to ignore, and more importantly, the reasons why [not much luck involved]. Argo focuses on what's really important rather than on short-term market noise. New [and not so new] investors can surely learn a lot from some of his basic & intelligent approach!

Good idea to start this thread.

 

[Lephturn]

Thanks humble_pie, I was just searching Argo's posts looking for this very thing!

Hopefully Argonaut will stop by and update us from time to time.

 

[Jungle]

I like the idea but I would add a few more stocks to make sure I was more diversified.

 

[Argonaut]

Hey guys, nice thread!

It's not something often updated, because the ideas and companies behind them tend to stay the same long term. Something new in 2013 with the extra contribution room might be the addition of covered calls. 100 shares of BNS and Telus, 200 RioCan, and 300 Inter Pipeline. I don't know if the latter two have much or any options though, I'll have to check.

Also, after my buys in 2013 I'll be transferring out from Questrade to RBC because I now qualify for cheaper trades. A bonus of this is the ability to put all dividends into the RBC investment savings fund until the next round of purchases. I'll open an RRSP with them too, with the easy gambitting. Perhaps I'll post an American version of the 5-pack at that time.

 

[humble_pie]

argo, why roybank ?

one hears they're not option-friendly

 

[Argonaut]

USD RRSP, aforementioned investment savings account, plus their regular deposit accounts are good for someone who doesn't want to keep any money in chequing account without fees. Non-registered account will be with Interactive Brokers, where most options trading will happen. I'm sure Royal can handle a few calls sold in a TFSA if I decide to do that.

 

[Lephturn]

Hey guys, nice thread!

It's not something often updated, because the ideas and companies behind them tend to stay the same long term. Something new in 2013 with the extra contribution room might be the addition of covered calls. 100 shares of BNS and Telus, 200 RioCan, and 300 Inter Pipeline. I don't know if the latter two have much or any options though, I'll have to check.

REI.UN has options listed, but almost no open interest or volume. If you trade these you need to know your price, be patient, and wait for somebody to pay you enough. You also need to trade them to expiration - with no open interest or volume to speak of, you won't be able to roll these easily.

Inter Pipeline is similar - extremely thin.

For both of these you need to price the options carefully and make sure you are getting paid enough for the risk of assignment. humble_pie is the expert when it comes to fishing in shallow waters like this.

Agonaut you can use the TMX site to check on the options easily. It's better than relying on RBC-DI!

 

[Argonaut]

I've checked option chains for all four stocks and none interest me for covered calls. $10+ commission is too prohibitive in TFSA. Selling spreads in margin account still the best strategy for me.

Back on topic, what say the forum for a preliminary USA made in America 5-pack? I'm thinking something like:

CAT/DE
MCD/KO
IBM/AAPL
CVX/XOM
PG/JNJ

No overlap with the Canadian version, each a complimentary new sector. I'm least excited about PG/JNJ, perhaps that could be the missing utility spot with an ED or something.

 

[humble_pie]

no, i'd never fish here. These options are scrawny minnows. Some time ago i looked at montreal options for all the major canadian reits & decided against all of them. Bad options markets are the reason i don't hold any reits at present, although in the past i've had dundee & a penny reit named btb.un, which at the time was fine.

where i prefer to fish for options are deep US pools with big fish that are difficult to catch.

 

[humble_pie]

I've checked option chains for all four stocks and none interest me for covered calls.

rail, telus & bns ought to have calls worth selling. A low-volume exchange like montreal, you have to go out at least to january to find decent premium ... in bns, you could take in 190.00 for one single jan 58, or 180.00 after commish ... what's wrong with that ?? do that twice a year & one would be earning more than the dividend.

btw there's something funny about the jan 58, open interest is well over 5000 contracts, sometimes this indicates that an institution has shorted stock but bought large number of calls as a hedge ...

 

[GOB]

humble, I think you might have misread the quote for the BNS Jan 58 call. I'm seeing 0.18, or $18 per contract...

Edit: never mind, I see you're talking about the Jan 2014 contract. Not too bad, but that's quite a wait.

 

[gibor365]

Back on topic, what say the forum for a preliminary USA made in America 5-pack? I'm thinking something like:

CAT/DE
MCD/KO
IBM/AAPL
CVX/XOM
PG/JNJ

No overlap with the Canadian version, each a complimentary new sector. I'm least excited about PG/JNJ, perhaps that could be the missing utility spot with an ED or something.

Instead CVX/XOM, I personally prefer COP

 

[donald]

What about a more pure play on health instead of the consumers(ie:jnj/pg)-----ABT/mdt(mdt just had some insider buying and looks good Imo amateur opinion)
I'm with gibor i I like tobbacco-Pm?MO...even deo(liquor)
I like that list,so many combo's selections in
-industrials.
-consumers
-tech
-oil
-consumer defensive.Could add in the tele co's----T/vz(maybe if you had the canadians already you would be ok,still they are nice yield/income stocks)

 

[Argonaut]

Agree with GOB that 2014 is a bit long of a wait. I also think that BNS will be higher than 58 by that point, otherwise I wouldn't have bought it. May be somewhat interested in selling some Telus @70 strike but the bid/ask on most of their options is a canyon. Could fish for a while, I suppose. 100 shares of CNR is out of reach by way of equal weight, of course. Don't have a $45000 TFSA yet.

 

[humble_pie]

gob is right, i read the 2014 while the jan 2013 58 is only .18 bid. Going out to 2014 as an opening trade would be foolish, as argo says.

a possibility is april 56 (1.13-1.23) or 58 (.64-.72) but one has to juggle this against possibility of assignment if one is bullish over this winter & does not want to be assigned.

however looking at montreal quotes at the tail end of a 3-day holiday weekend, left over from friday as these were, is not going to tell us much about the working tuesday that will open up in a few hours. Usually i see that the options specialists go to ultra-wide spreads in the last 30-40 minutes of trading each day; before a long holiday this gets even worse.

one can see this effect in the telus 2014s. The BAs are impossible. They might persist even after trading commences this am. There's a lot of similar presentations in montreal. When i see pages of quotes like this i go away, don't bother trying anything. Plus it seemed to me that nearer-term telus options had no money in em except for some 64s, which argo probably wants to avoid.

 

[humble_pie]

actually it's pitiful lo volume in illiquid telus options in montreal which caused me to buy bce in the 1st place.

there are US telus options that look good at first glance but watch out, the underlying is the non-voting shares, the CUSIP number is different. US TU is T.A.

 

[gibor365]

What about a more pure play on health instead of the consumers(ie:jnj/pg)-----ABT/mdt(mdt just had some insider buying and looks good Imo amateur opinion)
I'm with gibor i I like tobbacco-Pm?MO...even deo(liquor)
I like that list,so many combo's selections in
-industrials.
-consumers
-tech
-oil
-consumer defensive.Could add in the tele co's----T/vz(maybe if you had the canadians already you would be ok,still they are nice yield/income stocks)

I wanted also to add ABT in my post, but imho all of them ABT/PG/JNJ are good long term holdings

 

[Lephturn]

actually it's pitiful lo volume in illiquid telus options in montreal which caused me to buy bce in the 1st place.

there are US telus options that look good at first glance but watch out, the underlying is the non-voting shares, the CUSIP number is different. US TU is T.A.

Telus was an exception I made as it didn't pass my initial screen. It had decent open interest though:
TELUS Corporation*(T) 63.540 T 5,393

It also had over 1k in volume on the day I took the snapshot Aug. 23rd. Given the low volume period, that's not too shabby.

That said I'm in BCE instead as well. It had roughly twice the volume and three times the open interest on the same day.

 

[Argonaut]

Can one theorize that if Telus gets their share merger through the clutches of this crappy hedge fund, that both options markets will improve? US traders being able to journal their shares and-all-that.

Abbott is a decent choice, though I can't say I know much about health and drugs.