RRSP Addition - Canam Group

Last week, I purchased a new company in my RRSP -- Canam Group Inc. (Toronto: CAM), headquartered in St. Georges in the Beauce region of Quebec. So I am investing in my back yard! :o)

Canam Group Inc. is an industrial company specialized in the design and fabrication of construction products and solutions (i.e. concrete, steel and wood structures for large projects). The company employs close to 2,600 people in Canada, the United States, Romania and India, and has partnerships with companies in Saudi Arabia, the United Arab Emirates and China.

The financial situation of the company is strong, with only $70M in debt and net earning of $48M ($0.99 per share, diluted). A dividend of $0.04 per share is paid quarterly, for a dividend yield of 2.5% (a decent yield) on a dividend payout ratio of 20% (which leaves plenty of room to grow the company).

The stock currently trades in a $6-7 rande, while the book value is above $9. That's a discount to book value of 25 to 35%. Using the Graham formula to calculate the fair value of the stock, I get close to $13, for a margin of safety of 50%. A classical value pick.

Why is the company trading so low? I believe it is the uncertainty of the economy. Although economic stimulus packages -- with an emphasis on infrastructures -- have been announced in many countries (including both Canada and the U.S.), the markets seem unsure whether this will be enough to maintain the earnings of the company. I believe that, even if those fears prove to be true in the short term, the company will flourish over the long term (5 years or more).

I can afford to wait.

DRiP Addition - Hasbro

I am in the process of adding a new company to my DRiP portfolio: the toy manufacturer Hasbro, Inc. The company sells many different game and toy, with well-known brands such as Monopoly, Transformers, Magic: The Gathering, Tonka and NERF. It also sells toys related to the Star Wars franchise and the Marvel-related toys (think Spider Man, Iron Man, Hulk and X-Men).

Toys are not going to go away anytime soon. New toys are always sold, since few children want last year's hot items. The recession may pressure the earnings somewhat, but the company should still be able to make a profit and continue paying its dividend. Although I don't see the company as a high-growth, this should provide a moderate but steady growth of about 5-10% per year (when including the dividend).

Hasbro currently pays out a dividend of $0.20 per quarter, for a yield of 3.4%.

The company's DRiP/SPP has no fees, and allows monthly purchase of little as $25.

Net Worth Update

As of July 1st, my net worth was $80 228 (up 2.4% from $78 372). If I exclude house-related assets and liabilities, my net worth is $53 014 (up 3.2% from $51 352).

The market continued its rise this month, although things became more volatile with both ups and downs. As I mentioned last month, I am not convinced that this spring's rise is solid and I expect things to weaken over the summer, as the severity of job losses impact the economy. The price of oil rose has began stalling around $70, and the Canadian dollar has move down a little from its recent peak of the beginning of June.

I have money ready to be deployed in my self-directed RRSP account, and I continue to slowly add money to my DRiPs.

Assets ($145 067, up 1.7 % from $142 605)

• Bank Accounts $3 981 (up 23% from $3 227)
• Emergency Funds $2 604 (up 0.3% from $2 595)
• RRSP Accounts $35 742 (up 2% from $35 051)
• Non-Registered Investments $14 527 (up 7% from $13 550)
• Home $88 050 (stable)

Liabilities ($64 839, up 0.1% from $64 233)

• Credit Cards $3 845 (up 26% from $3 051)
• Mortgage $60 836 (down 0.35% from $61 050)
• Line of Credit $0 (stable)

Ratios

• Debt / assets: 0.445 (down from 0.447)
• House value / total assets: 0.607 (down from 0.617)

My credit card debt went up this month because of planned expenses: new tires for the car (about $550) and materials for the work I have begun on the back yard (about $500).

The one bad news this month was that at work the project I was working on has temporarily been put on hold by our client. We are confident that it will restart within a few months -- it is a delay, not a cancellation -- but this will cause us some headaches when things restart. In the meantime, I've been assigned to another smaller project. So there is a little bit of uncertainty on this side.

Just to be of the safe side, Princess and I decided to postpone the addiitonal windows replacements. So instead of replacing three more windows over the summer (for about $3 000 -- our windows are large), we will wait until December to order this year's set along with next year's. Both sets would be installed next summer. That will allow us to take advantage of the Canada renovation tax credit announced in January, while deferring most of the expense to next year. We will review this plan in a couple of months to see if it is still viable.

RRSP Manager Change

A couple of months ago, my employer announced that it was switching manager for our group RRSP. Our former plan manager (Fidelity) is pulling out of Canada for the management of group plans. A few weeks ago, we got more details regarding the new manager (Sun Life) and the plan features, including the products that will be available.

Here's a summary of the changes, and how they impact me.

1. Employer's Contribution: Currently, my employer provides a 50% match to the contribution we make under the group plan, up to 4% if the employee contributes 8% of their salary.
   This won't change, except for a little detail. Previously, the employee's contribution would be in increments of 1%, and the employer's contribution would match in increments of 0.5%. Now, the employer's contribution will be in increments of 1% (rounded down).
   This doesn't impact me, since I contribute 8% to fully take advantage of the employer's contribution.
2. Products Available: With Fidelity, we had a limited list of mutual funds available, none of which were index funds. The funds' total expense ratios were reduced because of the group plan, but were still between 0.75% (money market fund) to 1.25% (foreign stock funds).
   With Sunlife, the range of funds offered is a little bit broader and includes some index funds from Barclays Global Investors (BGI). The total expense ratios for the index funds are from 0.36% (bond index fund) to 0.56% (EAFE index fund).
   Good news for me, since it will allow me to move towards an index strategy in this part of my RRSP.
3. Fees: With Fidelity, there was no additional fees -- everything was included in the expense ratios of the funds. Transferring money out of the plan to another (possible only for the employee's contribution) was also free. So I was doing this once or twice a year, transferring money from my group plan towards my self-directed RRSP at my discount broker.
   With Sun Life, there will be heavy fees and penalties -- 100$ for each transfer and the employer's contributions will be suspended for 1 year.
   This has a big impact on me, since I will no longer be able to transfer money from my group RRSP towards my self-directed RRSP.
   To reduce the impact of the additional fees, I decided to transfer most of the money from my contributions towards my self-directed RRSP. Since the transfer was processed before the switch to Sun Life, there will be no fee. And transfers before the switch does not trigger the suspension of the employer's contributions.

So the news were mixed for me. On one hand, the new fees and penalties on transfers threw a wrench in my usual way of handling my different accounts. On the other hand, the availability of index funds made it easier and less expensive to implement an index strategy.

Closed my CSI Account

I've finally closed my Canadian ShareOwner Investments brokerage account. I opened this account in 2006 when I began my adventures with dividend reinvestment plans (DRiPs), but stopped using it when I discovered a more cost-efficient way to purchase starter shares for my DRiP portfolio.

I had mentioned doing thisin one of my 2009 financial goals (Reorganize my Investment Accounts). This will be one less account to keep track of.

It is still my intent to open anothe brokerage account, to take advantage of tax-free growth in a TFSA. At this time, TD Waterhouse has to most appeal to me.