Flipped 3 Penny stocks for long term holds.

In November I decided to put just over $2,000 into 2 different Marijuana stocks, knowing full well this was a short term play/gamble.

I purchased 7100 shares of LGC Capital ($LG) for .14
I purchased 4000 shares of National Access Cannabis ($NAC) for .20
I had also previously purchased 2500 shares of Nutritional High ($EAT) for .25

Total cost of purchasing all 3 including commission: $2448.85

This week I liquidated all 3 holdings for a total of $7816.41 after commission.

Total Gain after 2 months of holding: $5367.56

Although these are obviously great gains especially in such a short period of time – I actually got a bit greedy and should have sold earlier – as I could have made an extra $3000 if I had sold LG a few days prior.  I was originally very interested in holding LGC Capital for the long haul, but after reading a bit more about their chairman, as well as seeing his antics on twitter, I ultimately decided against it as he seemed to be more worried about the stock price, and less worried about the future of the company.

Now I have almost 8k I can put towards some long term holdings, specifically ones that will add to my yearly dividend income.  Over the past few weeks I’ve been doing some research on a few different stocks, and narrowed it down to the following 5:

Northview Apartment Reit ($NVU.UN)

I have had my eye on this stock for about 3 years.  I first started looking at this stock when it was trading around $14-15 dollars and thought it was attractively valued.  It is now trading over $24 and I still think it is cheap.  With a P/E of 7.4 and a payout ratio of under 50% I feel both the stock price and the dividend still have room to grow.  The other REIT’s in my portfolio are commercial/industrial so I’ve been looking to add a residential REIT as well.  The stock currently yields 6.58%.

Interrent Real Estate Investment Trust ($IIP.UN)

This is one of the cheapest residential REIT’s I have been able to find.  With a stock price under $10, this is currently trading with a P/E of 4.4.  The yield is very low for a REIT (2.84%) and has a very low payout ratio as well which makes me think we will see some dividend increases over the next couple of years.  One concern I have with this stock is the lack of diversification (all properties are in Ontario).  Due to its extremely low valuation – this stock seems like a prime candidate for a buyout by one of the larger REIT’s.

Cascades ($CAS)

This company reminds me of one of my recent purchases (Intertape Polymer).  It is a boring, reliable company that continues to show strong profits, but has recently been beaten down by the market for no real reason.  The yield on this one is extremely low(1.17%), as is the valuation.  The 52 week high is $18.20 and it is currently trading just under $14.00.

Western Forest ($WEF)

The lowest priced stock on my list (trading at $2.68) this is a B.C wood producer that has shown consistent profits and has increased revenue over the previous 3 years.  The dividend hasn’t grown in 5 years which is a slight concern, although with a payout ratio under 40% there seems to be some room to grow it in the future as long as revenues keep increasing and they can control their costs.

Power Corp ($POW)

This is another one of those buy and hold forever type of stocks, and also another I’ve had on my watch list for some time.  Currently trading at a P/E under 10, while also paying a generous 4.45% yield makes this especially attractive right now.  Power corp is the holding company of Great West Life (one of the largest insurance companies in Canada and I believe the largest employer in my hometown of Winnipeg).  Power Corp has also maintained a dividend for 20 years, and has increased it’s dividend for 3 consecutive years.

When purchasing stocks for the long haul,  I like always ensure that I DRIP any dividends and like to have enough shares so that I can at least DRIP a full share each dividend payout.  To ensure I could reinvest 1 full share at the current prices, I would need to invest the following into each of the stocks above:

NVU.UN = $4583

IIP.UN = $4181

CAS = $4685

WEF = $356

POW = $2877

So What did I buy? 

In the end I decided I liked the idea of set it and forget it.  I purchased 200 shares of Power Corp which should give me enough to drip at least 2 shares every quarter.  With the remaining cash I only had enough to ensure I could reinvest in full shares of Western Forest so I purchased 522 shares of Western Forest which should allow me to repurchase 3-4 shares each quarter.  Another reason I leaned towards these 2, is that I already have about 10% of my TFSA invested in REIT’s, and I recently purchased a similar packaging company to cascades (Intertape Polymer).  I feel like all of these would have been good buys, but these 2 specifically help with diversification.

These purchases will add $328.56 to my yearly dividend income (purchased in my Tax Free Account).

I am still very interested in adding the other 3 stocks on my list to my portfolio, but unfortunately it will have to wait until I can inject some more cash into my TFSA.

Curious what the rest of you think with these choices – do you think I made the right choice?  Would you have purchased one of the others on my list instead (or some different stocks altogether)?

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10 thoughts on “Flipped 3 Penny stocks for long term holds.

  1. Thanks Matt. It’s not something I like to do – or normally do – but it sure is fun (when it works)…haha

    I still prefer the slow & steady route of buying good stocks at good prices for the long haul though.

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  2. Nice work locking in the gains on those speculative stocks! Not easy to know when to sell, so congrats on taking those winnings off the table and putting them into some long-term solid investments. I don’t know much about Canadian stocks, but NVU and IIP sound very cheap. Do you also get partial imputation credits on the dividends from all Canadian stocks?

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  3. There is a Canadian Dividend tax credit – however all the stocks listed above are in my TFSA (tax free savings account) so all capital gains & dividends are tax free forever 🙂

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  4. The TFSA is definitely a nice tool for investors. Unfortunately the government didn’t do a very good job of explaining to people how it works – so most people just park cash in it and use it as a savings account…

    But basically you can put 5-6k into it each year (from the time you were 18) and the amount rises each year with inflation or when there is a change in goverment (used to be able to put 10k a year in) right now I think its 5500 or so each year.

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  5. Your flipped those penny stocks like a King! Good job booking those profits and putting that cash to work for more divvies. Out of all companies you mentioned, I like Power Corp the most. I haven’t started buying insurance companies yet, but this is what I’m thinking to do this year. I think insurance companies do well when interest rates go up, right?

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  6. Heya – thanks…yea I’ve had my eye on Power & Manulife for a long time – those gains made the decision easy to finally make a move.
    As for the site – i’m still very new to wordpress – so just playing around with the themes….I think eventually i’ll get around to actually worrying about how it looks – and working on the design – but for now i’m just focused on finding the time to update posts here and there 🙂

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