A $130,000 TFSA investment portfolio high on weed and energy stocks

A $130,000 TFSA pumped high on energy and weed stocks

By Julie Cazzin on September 24, 2018
Estimated reading time: 4 minutes

This 26-year-old invests in what he knows and it works—but experts say he could sell off to expose to other sectors

Scott Todd

Age: 26
Location: Calgary
TFSA value: $130,248
Strategy: Contrarian growth with some value investing

Scott Todd is 26 years old and has been working full-time in the energy sector in Alberta for three years. During that time, he contributed $52,500 to his TFSA and has built it up to a whopping $130,248—all through active stock picking. “I read the Motley Fool website (www.fool.com) as well as MoneySense and have created my own TFSA stock portfolio of 12 stocks,” says Scott. “I prefer stock picking to mutual funds because I can invest in things I understand, so you’ll see my portfolio is heavily weighted in weed and energy holdings.”

The reasoning for the choice of energy stocks is pretty clear since Scott works in the energy sector but his strategy for weed investing is a little different. “In 2015, me and a friend were sitting watching the federal Liberals get voted in and I wanted to follow where the young people go,” says Scott, who got interested in weed stocks with the pending legalization. “I held some Tweed company stock which became Canopy Growth and I still have about $41,233 invested in it.” Scott’s second weed holding is a company called Aurora Cannabis, valued at $44,500. Together these two stocks make up more than 40% of Scott’s portfolio.

The other 60% is made up of a combination of energy companies, pipelines and gas stocks. “I pick dividend stocks that are DRIP-enabled in my BMO account,” says Scott. “I like DRIP stocks but it was really the cannabis stocks that propelled my TFSA.”

Right now, Scott is looking at adding a financials ETF such as BMO Equal Weighting U.S. Bank Index (TSE: ZBK) or BMO Equal Weighting Bank Index ETF (TSE: ZEB) but is unsure which is the better choice. “It would be nice to know the difference between these two banks and financials ETFs and which one would be a better fit for my portfolio,” says Scott.

Scott is also unsure of what to do with his large holding of weed stocks. “My friends say to leave them there for future generations but I’m not sure that’s the right choice for me,” says Scott. “I rent right now and may someday want to own a home so that’s a consideration as well.” Whatever Scott decides, he’s looking forward to years of tracking his TFSA stocks on his Yahoo App. “I really enjoy watching them go up and having them handy to look at whenever I want really adds to my day.”

Scott’s portfolio

Equity	Symbol	% of Portfolio	Value
ALTAGAS	ALA	2%	$2,444.00
AURORA CANNABIS	ACB	34%	$44,500.00
CANOPY GRWTH CORP COM SHARES	WEED	32%	$41,233.94
CARDINAL ENERGY	CJ	2%	$2,555.00
CHOOM HLDGS	CHOO	3%	$3,927.00
INTER PIPELINE	IPL	2%	$2,307.00
MEDMEN ENTERPRISES	MMEN	8%	$10,900.00
PHIVIDA HOLDINGS	VIDA	5%	$6,000.00
SHAW COMMUNICATIONS	SJR.B	2%	$2,500.00
TRANSCDA CORP	TRP	4%	$5,534.80
ENBRIDGE	ENB	3%	$4,079.27
FORTIS	FTS	3%	$4,180.57
Cash		< 1%	$87.14
Total		100%	$130,248.72

Tips from the pro

“Scott has done a great job of following Peter Lynch’s adage of investing in what you know,” says John DeGoey, a portfolio manager with iA Securities (iAS) in Toronto. “To date, he has a sector-specific barbell strategy of sorts (cannabis and energy).” Here’s what DeGoey suggests:

From a concentration perspective, the Aurora and Canopy positions are definitely heavy. One thing that some people like to do is to split the difference—sell half of what they own (this is especially attractive if the underlying holdings have doubled) to re-position the proceeds into other areas, sectors or asset classes.

Doing so would free up over $40,000 for Scott. It might not hurt to sell one or two energy-related positions, as well. That could get the amount available for re-positioning to close to half the portfolio’s total value.

To answer the question of distinguishing between ZBK and ZEB, there are two primary differences. Both are equal-weight products, but ZEB is Canadian banks, whereas ZBK is U.S. Banks and unhedged. If you like American banks (and especially if you think the greenback will be strong), buy ZBK.

There might be room for things that have been beaten up a bit, too. One of my long-term favourite asset classes is emerging market equity. This is a good long-term growth play and the asset class has had a difficult year so far, so it would likely be an attractive time to get in.