Limit Selling BLU

BLU is one of my best performing stocks currently, but I have decided to do something unusual.

I am going to sell 46% of my BLU stock when it hits $8.25 CDN per share.

I bought the stocks months ago for $3.49 per share, so if I sell roughly half of my shares I will get back my initial investment in the stock (plus a tidy profit) and my remaining shares of the stock I can then just "let it ride".

Imagine for example you had purchased 1000 shares for $3.50 each ($3500 worth) and you wait until it is worth $8.25 per share, at which point you sell 500 shares for $4,125...

So you just made a profit of $625, got back your initial $3500, plus you get to keep the other 500 shares, to see if the shares continue to go up in value.

My issue, part of the reason I am doing this, is because I have a sizable chunk of my portfolio in BLU (a bit too much really) and I would rather take my profits from that and put that money into some ETFs so I am diversifying my portfolio more.

...

And my stocks just sold. In less time than I needed to write this blog post my stocks of BLU sold for the price I was asking for, using a Limit Sell of $8.25. And the value of the stock price just got pushed up. It started the day at less than $8.

 

What is a Limit Sell?

A limit sell is when you set a minimum price you are willing to sell the stocks for.

Earlier today the stock was hovering around $8 even, but I wanted to sell for $8.25 or more so that I am guaranteed to make a profit off my sale. (Buying/Selling at Market Rate is for suckers.)

So I set up the Limit Sell and put a 90 day extension on the sale, so that even if it doesn't sell today (which it did), it could still sell tomorrow or any time within the next 90 days for my asking price.

The beauty of doing a Limit Sell is that there are suckers out there who are buying at average Market Rate who will pay your asking price (either as a Market Buy or a Limit Buy), even if it is more than what they are bidding, so long as the Average Price of their purchase averages out to a number matching their Limit Buy (etc).

Thus if your Limit Sell is within a certain range (5% more than asking price or less) of what people are bidding, you can usually sell your stock for a higher amount than what it is actually worth because there will be other people selling their stock for less (5% under the normal price), but the value of your stocks will be bundled together and sold to the buyer.

Like I said above... Buying/Selling at Market Rate is for suckers.

If you're good at math you can easily just buy/sell everything for between a margin of 3 to 5%.

Thus if you want to buy $1000 worth of stock, but you make a Limit Buy for 3% less than the value of the stock chances are likely you will still make your purchase because your purchase will be bundled together with other people looking to buy versus other people looking to sell (at market rate or a limit sell).

And later when it is time to sell for a profit, you do the same thing, but in reverse - asking for a higher price that is 3% to 5% above market rate.

Thus you can potentially make a 6% to 10% profit off a stock, trusting that it is popular and volatile enough to make up the difference.

What is the downside to Limit Buying/Selling?

Sometimes your purchase or sale doesn't get done. Nobody matches the price you are asking, even when bundled together and averaged. This is why I like the 90 day extension when doing such buys and sales. Someone might not buy/sell it within the 7.5 hour long trading day at the TSX, so it is better to wait and see if it buys/sells the next day/etc for your asking price.

So the downside essentially is that you're either not making the trade at all, or you have to wait longer than expected.

In which case you can always cancel the trade before it happens within the 90 day period if you change your mind. Then you've lost nothing but time spent waiting.

Myself, I would rather be patient and gain an extra 6 to 10% on my investment just by being patient.

So what about BLU?

I am going to sit on the stock now. Let it ride. I have already made a profit on it. I want to see what happens next to the stock. Maybe years or decades from now I will sell it. Or maybe the company will be taken over by a bigger corporation. Should be interesting to watch and see what kind of profit I can get out of it now that I have already made back my initial investment.

Penn National takeover of theScore

Recently I received a notification on WealthSimple regarding the takeover of theScore (a Canadian company also known as Score Media and Gaming Inc.) by Penn National (an American company)...

What followed was that I received stocks in Penn National... and cash.

Now I have to decide several things, chief of which is:

Is it worth keeping my new stocks in Penn National (PENN), or should I sell them?

When I first bought theScore stock (SCR.TO) it was a smart buy. The company is essentially an online casino that uses an app that allows users to gamble on sports. So very low overhead, but high profits thanks to the app being the #1 sports gambling app in Canada (and #3 in North America).

It was a smart move for me to buy the stocks... and it is similarly a smart deal for Penn National (which runs hotels, casinos, slot machines, online gambling, horse races, etc.

And we're not talking a small amount either. The takeover of theScore went to the tune of $2 billion USD. So that isn't chump change.

Now you might think: "Wait, isn't there a pandemic going on? Isn't a company that owns hotels inherently risky?"

Yes, in a country that cares about the pandemic. But we're talking about American hotels, a country with a reasonably high vaccination rate and a laissez-faire approach to handling the pandemic. America is open for business. Come hell or high water, they want to make money.

So should I feel guilty about owning hotels in the USA where people will go out, socialize and a percentage of them will die from COVID because they aren't vaccinated?

Nope.

Absolutely not. They made their choice not to get vaccinated. If they die, they die. Not my fault. They live in a pro-choice country (except for Texas).

So the fundamentals of owning stocks in a company which owns hotels/casinos/gambling is pretty solid. Pandemic? Pff! It is full steam ahead in the USA.

So I might as well keep the American stocks in PENN for now. They have a nice upward curve, so they do fit into my definition of a Darling Stock.

What about my rule about preferring to own Canadian stocks?

It is true, I do prefer to own Canadian stocks.

But I also own Canadian companies (and ETFs) which operate internationally. And I own ETFs that invest in American stocks, but are hedged in Canadian dollars. This allows me to invest in American companies, but limits my risk since I prefer to use ETFs that are hedged.

So it doesn't matter.

What about the cash I received after the takeover?

I received half the value of my SCR.TO stocks as cash. So far I have decided to use a portion of that cash to invest in:

FIE.TO (iShares Canadian Financial Monthly Income ETF)

Now it should be noted that this ETF is currently growing very nicely due to the pandemic, but historically tends to have a flatter curve. What I like about FIE is that it has a yield of 5.79% and it is a historically very stable ETF. So it is a smart buy as a dividend ETF.

I expect it to trend upwards for the next year and then level off, and continue to provide nice fat dividends.

I haven't decided what to do with the rest of the cash I received from the takeover of theScore, but I will sprinkle it around in different things.

The Rich get Richer, A Self Perpetuating Cycle

You know the old saying "The rich get richer, but the poor stay poor"? Chances are likely you've heard this saying, or some variation of it before.

So here's the thing about wealth. Once you have it, unless you do something stupid with it, you are pretty much guaranteed to get wealthier over time.

Consider this:

Imagine you own your own home and have $1 million in stocks.

You own the home so you still need to pay land taxes, insurance, and repair bills... but you own it, so you're not paying to rent or lease. It is yours to keep.

Plus you own $1 million in stocks. If they are Dividend Stocks then you might be earning perhaps 5% annually on the value of those stocks. So $50,000 per year, just for owning the stocks.

That $50,000 is more than enough to pay for your land taxes, insurance, repair bills, etc... plus your food, electricity, etc... And you would still have money left over. You don't even need to work and you're still making money.

Add to that a part time job for $20,000 per year (you know, as something fun to do since you don't need to actually work like a normal person) and even with government taxes you've got plenty of money.

Meanwhile let's do the same math for a poor person living in a big city like Toronto or Vancouver.

You are working TWO part time jobs to make ends meet, earning $40,000 per year, minus taxes.

• Your rent is $2000 so deduct $24,000 per year.
• You don't own a car so you're taking the subway regularly. In Toronto a 12-month pass costs you $143 per month, so deduct $1,716.
• You still need to pay for internet, phone bills, electricity, food, etc. So deduct $400 per month ($4800) for all of that.

So you've got $9,484 left before income taxes.

And keep in mind that is someone who manages to earn $40,000 per year working two part time jobs. In order to do that those part time jobs would need to be 40 hours per week, 52 weeks per year, at $19.23 per hour, with zero sick days, no vacation, etc.

The working poor meanwhile aren't making that much. $19.23 per hour for 40 hours x 52 weeks would sound pretty nice to some people because at least they're getting paid a living wage.

Meanwhile a vast number of Canadians are making $14.35 or less. In Ontario the minimum wage is $14.35, but the minimum wage varies by province.

Plus good luck finding two part time jobs that provide 40 hours of work per week without a ridiculous schedule. More likely a person will be working 30 to 35 hours because the schedule fluctuates based on how often their boss needs them to cover someone else's shift.

So $14.35 x 35 hours x 52 weeks = $26,117.

Oh look. Don't bother having kids. You couldn't afford the apartment + expenses. Instead you'll be living in an apartment you share with a roommate and you cannot afford to have children.

If you want to be living, actually living, then people need to demand the following:

#1. Full time work. 40 hours per week. Anything less than full time isn't worth it unless they're paying proportionally a lot more.

#2. A minimum of $20 per hour. Otherwise you will be perpetually poor.

#3. Two Weeks or more Paid Vacation. So you don't burn out doing a job you hate.

People need to be demanding better paying jobs, better hours, and more vacation time. Otherwise it isn't worth their time in the long run.

This is fundamentally a problem which separates the rich from the poor. Decent wages, the ability to own property, and the ability to invest their excess wealth in order to create more wealth.

A wealthy landowner plus stock investor doesn't even need to work in order to make money. Their stocks are doing the work for them. They could spend their life being an artist, a dancer, an actor, etc and never make a lot of money, and still be financially better off than the working poor thanks to the fact that they already own land, don't pay rent + have over a $1 million in dividend paying stocks.

They could take the extra $24,000 they are saving from not having to pay rent and put that into buying more stocks. After 40 years they would have closer to $2 million plus whatever increase valuation of the stocks due to them going up in value over 40 years.

Imagine you bought just $1000 USD in McDonald's stocks in October 1981. Those stocks today, almost exactly 40 years later, would be worth $30,188,890 USD, plus you would have gained the dividends for 40 years. The dividend yield of MCD is currently 2.26%, which amounts to $682,268.91 per year currently.

All that just by investing $1000 back in October 1981. MCD is a great example of a darling stock that really returned on the initial investment.

Anyone sitting on $30 million worth of MCD stock is laughing all the way to the bank.

And thanks to the way governments tax stock investors, this is unlikely to ever change. The rich are going to continue to get richer.

While the working poor, eg. the people working at McDonald's for minimum wage, continue to pay rent while the rich get richer off of the fruit of their labours.

It is an incredibly unfair system, but the sooner YOU realize that you can become one of the people making money and creating wealth for yourself, the sooner you can become one of the people who is making money off of the poor instead of just being poor.

If you want to stop being poor you should sign up for a WealthSimple account today and get 2 free stocks.

Notes

Now I know some people are going to complain about $2000 rent/month. That is pretty normal for a 3 bedroom apartment in a major city, which is what you need if you're raising a family. Roughly 40% of Canadians live in Canada's 10 biggest cities/regions, and due to higher rent and low wages many of them are likely to be the working poor.

Higher Bond Values = Temporarily Lower Stock Market

When the value of government bonds go up, the stock market gets hurt. It is a wound, but it is temporary. That is what is happening right now with the US and Canadian stock markets. The government recently raised the interest rate for government bonds, which means that some investors take their money out of the stock market and buy government bonds instead.

Give it 2 or 3 weeks however and the stock market, I have noticed, will typically recover. Why? Because investors are still making money from their jobs and they want to put their money into stocks (not everyone likes bonds for various reasons) so it is just a matter of time before the market recovers.

It is a temporary shock to the stock market...

But it is USEFUL.

The temporarily lower stock market might cause various stocks to become 2 to 3% cheaper, which effectively means they're on sale. You wait until the stocks appear to have reached the bottom, likely a week or two after the initial sell off, then you buy.

Then you wait another 2-3 weeks later and your stocks have shot up in value by 2 to 3% already.

Just temporary. Nothing to worry about. Check the TSX index in 3 or 4 weeks from now, roughly around October 22nd or 29th, and you will see I am right. Might be a full recovery, or a partial recovery, but guaranteed they will be back up again unless there has been some huge disaster (highly unlikely) in the markets caused by something else.

Eg. I am foreseeing the Chinese stock market to get hard by the Evergrande decline in value unless it gets some kind of bailout from the Chinese government. That house of cards is going to come tumbling down eventually because Evergrande has basically been running a ponzi scheme with Chinese investor money and real estate.

UPDATE OCTOBER 14TH

Evergrande has dropped in value 11.1% since the last time I checked on October 1st. I expect it to keep going down in value. Notice the 52 week low of 0.0001 USD??? I expect it to reach that or lower again.

Evergrande is just the tip of the iceberg when it comes to Chinese companies running real estate ponzi schemes. They take money from investors to build condos and office buildings, but so few people end up living or working in the buildings that in order to make their companies look better than they really are they cheat on the finances and use money from new investors to pay off the old investors, and fudge the records to make their balance sheets look better than they really are. And Evergrande is a HUGE company. It is the 2nd largest property developer in China by sales... But their assets are only worth $306 billion USD, but their debts are over $300 billion... so the stocks are really worth almost nothing.

This is why people really should do their research to determine a company's assets vs debts.

And to make matters worse, Evergrande is hurting China's bond market and its stock market. Speculation abounds that China's stock and bond markets are due for a rough ride.

Plus China is currently planning to invade/conquer Taiwan, which could spell disaster for the global computer chip industry, which could see foreign investment in China collapse.

When Chinese investors start talking nervously about "World War Three" you should definitely worry. An invasion of Taiwan would effect American tech stocks, car manufacturers and more. The USA and their NATO allies will want to secure their access to computer chip manufacturing, otherwise their economies could also collapse. Taiwan makes approximately 65% of the world's computer chips. The global economy depends on those chips. It would be an economic disaster for many companies, including companies in Russia, India, the USA and others who have nuclear weapons who will be very upset if the global production of computer chips is hurt and the global economy collapses.

Hopefully China will come to its senses and realize that invading Taiwan would be economic and military suicide.