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Magna International Inc. (MG)
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Open Text Corporation (OTEX)
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Richelieu Hardware Ltd. (RCH)
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Nutrien Ltd. (NTR)
Long time subscriber and was curious as to the weightings of these four stocks in the BP. ranging from 1.15% to 1.76%. Conventional wisdom is that as weightings get closer to 1%, any movement has less effect on the overall portfolio.
What does one look for to justify holding on to these smaller holdings? I have a long time frame, and I know three of the four are recent additions, with OTEX being increased once.
Just looking for my held to be held, I suppose.
Thanks in advance.
Generally, we like to keep positions at a minimum of 1.5%, and most of these positions were added to the model portfolio at a 1.5% weighting, with the idea that we will add to them if we feel encouraged by their price development and fundamentals.
NTR was a recent addition, and we would like to see its price hold the current levels. This name we feel needs more time to settle into a floor before increasing its position size.
RCH was moving in the right direction, however, a string of weak quarters caused us to be more cautious on the name, and we would like to see more positive momentum.
OTEX also did not display the rebound that we were looking for, and we will need to monitor this name.
MG has been disappointing of late, and this will need to be assessed.
Largely, some names can be eventually consolidated, but the idea of keeping some at low levels is that a quick jump in price (25%+) can easily send some of their weightings back into the 2% range, and this can be accomplished by just one good earnings result.
Exposure to different sectors is one main reason that we like these stocks, and a lot of the times, weak stocks can become strong, and vice versa, and so chasing stocks can sometimes work against an investor.