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What Scott Barlow bought and sold this year in his own portfolio

You've heard a lot of investing recommendations and trading ideas from our writers at Inside the Market over the past year. But we thought it would be interesting to find out what they actually bought and sold themselves - and the lessons they learned. Today, Scott Barlow -- who before joining the Globe and Mail worked for 20 years as an analyst at Canadian investment banks -- reveals his own portfolio manoeuvres in 2013.

I made two major buys and one sell in my portfolio this year and was generally happy with the goings-on. The biggest lesson I learned was that fewer transactions means fewer opportunities to screw up.

My investing style has changed a lot since I left the financial industry. It used to be part of my job to follow markets closely, staring at Bloomberg screens for hours on end. So I traded a ton.

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The usual strategy was to uncover stocks that traded in large, predictable ranges – orthopedic stocks were a good target – buying them at the bottom of the channel and selling near the top.

I don't do that anymore. Emulating Warren Buffett, I carry a big cash position (about 40 per cent right now) while identifying specific long-term themes I want to own. When a stock fitting the theme falls out of bed, I buy it.

One of the themes I like is U.S. energy infrastructure and MRC Global Inc. was one major investment for the year. The Americans' ability to transport oil and gas has not kept up with the shale revolution. There's a huge backlog of planned pipeline construction to connect new reserves to the populous areas of the northeast where it's needed.

MRC Global is the largest provider of valves connecting pipelines to refineries and power stations. Almost all of these valves are purpose-built, so there's no off the shelf solution and they're expensive. MRC recently announced a big increase in their order backlog and, although I wish the stock was cheaper, I'm comfortable holding it long term.

I built my MRC position in two stages. I was worried it was getting away from me so bought a half position at $31 (U.S.) even though it was expensive. I added the second half at $26 and it's currently $32.15.

The other buy for the year was a corporate bond issue of U.S. miner Southern Copper Corp. The idea arose from a Bank of America trade idea that I wrote about in August.

With the Southern Copper bond, I was able to lock in an annual U.S. yield of just under 5 per cent until 2022. In addition, the price of the bond is 2.2 per cent higher than when I bought it, and I also got a nice bump from the 4 per cent appreciation of the U.S. dollar against the loonie (since August). I can collect the yield here while waiting for a U.S. housing recovery to push Southern Copper's earnings growth higher.

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I sold biotech company Celgene Corp. for a sweet double but left a humiliating amount of money on the table. I bought Celgene at just over $50 in 2011 after writing a long research report on the sector in my previous life. I sold it this spring for $112, only to see it jump to $160.

In 2014, I'm hoping for a U.S. market correction so I can buy General Electric Co. In addition to the reasons I expressed in a blog post, GE is at the forefront of a revolution in new, freakishly innovative materials like graphene that few investors are aware of yet.

I do own a bunch of Canadian companies but all of the action this year was south of the border. In case you're wondering if I'm hiding my mistakes, a long-term position in telecom equipment maker Juniper Networks Inc. remains the bane of my investing existence. I still can't believe the company hasn't benefited from an annual doubling in mobile internet data traffic.

I like my new investment style much more than the old trade-heavy one. The lower amount of activity allows me to think hard about things rather than react too quickly to the market and wind up taking a beating.

At this point, I follow the health of my individual themes and don't really care what the market does in any given year. I find this a less stressful existence that so far has paid off in performance.

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More


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