Monday, January 08, 2007

I'm tapping out, CWM.UN

First trading note in a while around here, as I finally pulled the trigger on a move I've been mulling for a while now.

So long, CanWest MediaWorks Income Fund (CWM.UN on the TSX) -- don't let the door hit you in that @$$ on the way out.

Essentially, I have zero faith in the fund's sustainability -- much less its potential to eke out capital gains. The newspaper industry is notoriously bad in Canada, and while I'm confident it will survive in some form over the long term (I'm looking at a few other stocks to keep an exposure, actually) I just don't think CanWest is the stock to ride the wave on.

The payout ratio has never been below 90% since the fund's inception in late 2005, and it's even gone above 100% occasionally.

In short, my gut tells a suspension of distributions is coming. So I'm out, and grabbing whatever I can on the way.

Now let's see. Initial investment? 200 units at the IPO price of $10 = $2000 book value. 14 months' worth of distributions = $231.30. Gains from selling out at $7.57 per unit = $1485. Bringing my total loss to $284 (14%) in a little over a year.

Damn.

Lesson learned, I hope.

Stay tuned to see what I plan on replacing that position with.

4 comments:

Canadian Capitalist said...

You should consider an index fund for the proceeds.

GIV said...

That's one of the three options I'm thinking of -- just a nice, general TSX-linked ETF. Probably the ishares one, whose ticker symbol escapes me now. Maybe a BRIC one if I'm feeling adventurous.

The other two are Loblaws which has been an alleged contrarian value play for about a year now. I seem to recall you even have a stake, CC. But the whole grocery business sort of scares me -- margins are razor thin and the pie is only so big. It's not like people are going to start eating 50% more food than they already do.

The other one I find intriguing is Torstar (TS.B)

Yielding a little under 4%, the stock has been languishing for a while, but I like Torstar's prospects over the mid-to-long term. It's certainly the only Canadian media company I'd be interested in right now, so if I want exposure to the sector -- which i'm not sure I do -- that'd be the place my gut tels me to go.

I'll have to have a closer look at Torstar's numbers, but off the top of my head, the Canadian dollar sliding a little certainly helps them.

Still, you gotta love those "set it and forget it" index funds.

Thanks for the input, CC. I'll probably keep hoarding cash until March 1 and then sock it all into whatever I choose during next year's tax year, as my RRSP is maxed out for this year.

Canadian Capitalist said...

You can already make RRSP contributions for 2007. The contribution window is from Jan 2007 to end of Feb 2008 or 14 months. There is no need for you to wait till March.

The only wrinkle is you estimate the contribution room and report the contribution in the tax return for 2006. You will have a over contribution that will be actually claimed in the 2007 return.

GIV said...

Thanks CC,

But I'm still going to wait a little longer so I can accumulate enough cash to meet my self-imposed $3,000 minimum investment threshold.