Wednesday, June 25, 2008

Are you Worried about a Breakup?

Since posting about my recent purchase of GE I’ve been emailed a number of times asking if I’m concerned about the increasing pressure being exerted on GE to breakup. Well the answer is no, absolutely not! Personally, I think that the real value of a world class conglomerate like GE would be unlocked if it was broken up into their separate operating divisions. It’s very rare that large conglomerates trade at a value equal to the sum of their parts and I think that GE is no exception. As a shareholder of a conglomerate you really have nothing to lose from a breakup. Instead of owning many shares of one world class company you’d own less shares of many world class companies. The only difference being is that you can sell the divisions you don’t like and in all likely hood the value of the separate companies would be greater than that of the conglomerate. So to make a short answer long----breakups are an investors best friend.

Monday, June 23, 2008

BCE – A Sigh of Relief

You could almost hear a communal sign of relief today as the Supreme Court of Canada dismissed bondholder objections to the proposed $35-billion deal to privatize BCE. Despite this ruling there is obviously still a lot of doubt on the street as the 30 million shares traded today resulted in only a 5.7% increase in the share price. Personally, I will continue to hold my shares and am speculating that this ruling will solidify the deal in the $41 to $42.75 range. Here is what some of the professional are predicting:

-Troy Crandall at MacDougall, MacDougall & MacTier – $42.75 (80% likelihood)
-Joseph MacKay at Desjardins Securities Inc. – $39.25
-David Lambert at Canaccord Adams – $42.75

Monday, June 16, 2008

How I Added $20,000 to My Home in 3 Days - Part 2

Here are the Details:

Time Spent:
In total there were 3 of us working on the house from 8AM until Midnight Friday, Saturday and Sunday.

Improvements Made:

* Removed dated wallpaper and chair rail - Free
* Re-Mudded sections of the wall after the paper was removed - $5
* Primed and painted walls- See Paint costs
* Primed and painted 3 doors in the hall

Half Bathroom
* Replaced cabinet - $50(we bought this used new it would be around $300)
* Replaced Sink and Faucet - $300
* Replaced toilet paper and towel holders - $50
* Bought new towels - $20 (and we take them with us)

Dining Room
* Removed dated crown mouldings - Free
* Primed and painted - See Paint costs

* Removed dated wallpaper - Free
* Re-Mudded sections of the wall after the paper was removed - $2
* Removed dated oak cabinet doors and primed and painted them with cabinet paint - $80
* Replace old hardware on the cabinets - $50
* Replaced counter tops - $250 (bought precut sections from Home Depot)
* Replaced sink - $150
* Replaced faucet - $100
* Replaced hood above the stove - $60
* Put up a stylish border around the kitchen - $30
* Bought new curtains - $30
* Primed and Painted - See Paint costs

Living Room
* Primed and Painted - - See Paint costs

* Primed and Painted - See Paint costs

Full Bathroom
* Removed old floor and tilled - $50
* Painted the shower grout with grout paint - $15
* Bought new towels - $40 (and we take them with us)
* Removed old wall paper - Free
* Re-mudded one whole wall - $5
* Primed and Painted - See Paint costs
* Replaced toilet paper and towel holders - $50
* Re-cocked the shower and bathroom cabinet - $10

Back Deck
* Cleaned and re-stained - $20

Front Deck
* Cleaned and painted - $10

Back & Front Yard
* Raked - Free
* Grass cut - Free
* Planted flowers (annuals). Some perennials were already there. - $30

* Cleaned - Free
* Primed and painted the door - - See Paint costs

* Thoroughly cleaned everything (there wasn't a single surface that wasn't cleaned)
* Repainted all trim and doors - See Paint costs
* De-cluttered the house. We removed almost all of our possessions from the house prior to listing. We only left enough items to stage the house.

Miscellaneous Decorations
We probably spent around $200 on decorations (however we get to take them all when we move).

Paint Costs
I'm estimating that we spent around $200 on paint and painting supplies.

So in total we spent around $1800 (I'll round up to $2000 in case I forgot something). So basically over the course of 3 very long days we were able to turn $2000 into $20,000. Not bad for 3 days work.

Thursday, June 12, 2008

How I Added $20,000 to My Home in 3 Days - Part 1

As many of you know I have recently relocated to my country property and switched to a slower paced lifestyle. As a result there was no need to keep our house in the city so about a month ago we listed the house and I'm happy to say that this week it sold for 98% of the asking price.

In order to make the house more appealing we decided that if we wanted to get top dollar for our home some improvements were needed. Being a frugal kind of guy we of course did all the improvements ourselves and on the cheap. I wanted at least a rough idea of how much value we'd be adding to the house so prior to beginning the work I had 2 real estate agents in to view the property and provide me with a suggested listing price. After the renovations were complete I had them in again to re-evaluate the listing price and both were about $20,000 higher. In my next post I'll explain exactly what improvements were made and the approximate time and cost involved.

Tuesday, June 10, 2008


I recently initiated a position in GE for the following reasons.

"General Electric is one of the largest and most diversified industrial corporations in the world. GE is engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity. Some of GE's products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products. Their operations are divided into six different segments; Infrastructure, Industrials, Healthcare, Commercial Finance, GE Money and NBC Universal."

-2008 Estimated PE – 13.8X
-2009 Estimated PE – 12.5X
-2010 Estimated PE – 11.25X
-Current Yield – 4.05%
-5 Year Average Yield – 2.6%
-Current Payout Ratio – 53%
-5 Year Historical Payout Ratio – 52%
-3 year dividend growth rate – 10.56%
-5 year dividend growth rate – 9.16%
-Argus rating of "Buy" and a 1 year price target of $40
-S&P rating of "4 Stars", "Buy" and a 1 year price target of $38
-increased their dividend every year for the past 31 years.
-their dividend has been paid quarterly since 1899

I like the fact that GE has clearly defined goals (8% organic growth) and I believe they are definitely moving in the right direction with their “ecomagination” concept. I don’t think it will be long until green technologies will start to really sell, and GE is taking an aggressive stance on their green (and profitable) technologies. They also have a dominant global position in one of my favourite areas, infrastructure. Shares of this world class comglomerate have recently been under pressure due to an earnings miss caused by weakness in their financial services, healthcare and domestic consumer segments. However, their global and infrastructure segments remained strong and I believe they'll continue to due so. Although, GE may experience further short term declines I iniated this position for the long term and just couldn't resist picking up some of this world class company at valuations not seen for over a decade.

[As always please do your own research and consult your own financial advisor before making any decisions.]

Monday, June 9, 2008

Back From Vacation

I'm officially back from vacation now and will start posting regularly again. Here is a little preview of the topics I'll be posting about this week.

1. Provide an analysis of a new addition to my portfolio.
2. Post my regular monthly portfolio update
3. Talk about how I added $20,000 to the value of my home in 3 days.