Update on Your Discretionary Portfolio

We’ve been putting some cash to work.

Highlights of the past month.

Dear Clients, It’s been quite a whirlwind couple months, as we have outlined in detail in our recent monthly newsletters.

Back in March, we made the decision to free up an additional 5% in cash from the discretionary portfolio. Less than a month later, the aftermath of “Liberation Day” in the U.S. brought the S&P 500 down roughly 19% from its peak by April 8th . Playing defense had been the correct call.

As a rebound in both market sentiment and stock prices started to take hold, our focus turned to the potential opportunities presenting themselves. It was time to start dipping into the cash pile. Rather than using it all up at once, we began to selectively add to companies at relatively attractive valuations. To date, we have used just under half of that initial 5% cash.

Here are some examples of recent trades in the past month:

April 24th: added to CargoJet (CJT) at $85.48 and Brookfield Infrastructure (BIP.UN) at $40.27. Both of these companies have been in our Canadian equity model for many years. CargoJet that day had reported solid earnings and appeared primed for a recovery, so we took the opportunity to “average down” and add to the stock. Both companies have continued to climb in price since that date.

April 25th: added to Amazon (AMZN) at $189.29 and Meta Platforms (META) at $547.68. The day after our previous additions, it was time to add to the US side. The volatility in the stock market had dropped both Amazon and Meta over 30% from the highs they had set in February. With cooler heads beginning to prevail in the trade war – we added some more to each position. As of yesterday, Meta has recovered over 16% and Amazon over 6% (though both had been even higher last week).

May 2nd: Reduction in UnitedHealth (UNH) position at $398.32. Proceeds to Eli Lilly (LLY) at $824.59. So, this one is very interesting in hindsight (and more on UNH below). UnitedHealth has had a whole host of problems this year, but we decided to trim 1/3 of our current position in early May after some weak earnings. This was before their CEO abruptly stepped down and before rumours of a DoJ investigation were printed in the Wall Street Journal. After we sold, UNH was only a 2.25% position in our US model (after being a much larger core holding for many years). We maintained our health care sector exposure by adding these proceeds to Eli Lilly after the stock dropped after earnings. While LLY has still struggled a bit since (down about 10%), the shares sold in UNH would drop an additional 35% shortly after – making this a great relative win!

*more activity with UnitedHealth* - on May 15th we took advantage of the avalanche of “bad news” on UNH and bought back most of the recently sold shares at $262.75. This was definitely a tactical move to rebuild the position size at a heavily reduced price. It appeared that the market was capitulating on the stock, opening up the possibility of a sharp bounce back as it was trading at a valuation not seen since COVID. Within days of our purchase, the stock was back over $300. Longer term, we can look for a more favourable exit position on this company if we choose to move on.

Other transactions from the past couple of weeks:

Buying more Alphabet (GOOG) at $151.38 on May 7th – negative headlines related to Google search growth and potential AI disruption brought the stock down (unnecessarily in our view). We bought some more that same day - GOOG is currently back trading around $170.

Adding to Zoetis (ZTS) at $155.22 on May 14th – we had been planning on adding more to this animal health stock, so we took advantage of a down day to do so last week. Zoetis is now back above $161 and trending in the right direction.

All of the above examples pertain to stocks that were already in the discretionary portfolio – and displays how we like to add to great companies when we feel there is value.

However, we also did buy an entirely new company in our Canadian equity model as well:

Purchase of BCE Inc. (BCE) on May 8th at $31.07 and top up on May 13th at $30.76 – currently a 3% weight in CAD model.

We have been avoiding the telecom space in Canada for a while but had eyed BCE as a potential model addition - IF the company was to end up finally cutting its dividend and focusing more on balance sheet improvement. Bell finally did just that on their earnings call in May and we started a position. Currently, the stock trades around $30, but in this case we feel this could be a multi-year recovery story and are less concerned about the short term performance (plus we locked in a nice 5.8% dividend yield to boot – with the risk removed of any future cut to the dividend for now). BCE is finally set up to be a much healthier company and it will be interesting to see how competitors of theirs manage their own cash flow issues. With the stock having gone through an almost 60% reduction since 2022, we think additional downside is limited and it's a good time to build a position.

What now?

We are not rushing ahead to use up all the free cash, but we are looking out for opportunities when they present themselves. If we see some weakness in the next few weeks in certain stocks, we won’t hesitate to add more to companies we plan to own for the longterm. The beauty of the discretionary portfolio is that we can act immediately for all our clients when the time is right.

Thank you as always for your trust in our team, and please reach out to us directly with any questions about your individual portfolio.

A referral to family or friends is always appreciated as well. If you’d like to put them in touch with us to learn more, please do so any time!

Best regards,

Ord Private Wealth Management

John, Tim, Mikail & Michael