‘It worked out … we shall not do it ever again’

Jim has been retired for more than 20 years from a managerial role in the private sector. He and his wife live comfortably off their pensions; their adult children are leading productive, independent lives; and he has no financial need to take investment risk.

For the Winnipeg man in his eighth decade, investing is a hobby, and the big Canadian banks — RBC, BMO, CIBC, TD and Scotiabank — have long piqued his capitalist curiosity.

“TD Bank has always been my favourite investment,” he says, adding it is the couple’s largest holding.

Jim likes it was a leader in moving into the United States, a highly fragmented financial market.

“To me, it was visionary: same continent, language, similar background and society.”

Yet his belief in its business model was put to the test recently after TD admitted to and paid a multibillion-dollar fine in October 2024 resulting from a few U.S. employees caught laundering money for organized crime.

“I started to get a little twitchy,” Jim says.

Should they sell their stock, he wondered? Yet Jim — who reads financial reports of companies he invests in — felt torn. TD “otherwise looked good financially,” he recounts.

At one point, its stock was down almost 20 per cent — reaching $73.22 — following the fine announcement. Pundits were piling on. It looked bad.

So what did Jim decide to do?

“In fact, I doubled down and bought more TD shares.”

He didn’t do this arbitrarily; he pored over reports about TD’s financial picture. Most importantly, he discussed the decision with his spouse. After all, he was considering investing tens of thousands of dollars. The sum wouldn’t threaten their retirement. They had good pensions after all. Still, the stakes were high enough.

“I said to her, ‘I don’t understand it because everything’s positive about TD except this one thing.’”

So he bought more TD shares.

“We had a few rocky months,” he says, adding its stock price bounced up and down. “I shall never forget my wife looking at me a couple of times saying, ‘Do we know what we’re doing?’”

Jim’s contrarian trade is characteristic of what many value investors seek to do, says Toronto investment adviser Adam Hennick with Research Capital Corporation.

A value investor himself, Hennick seeks bargains — mispriced companies, whose share price is below their intrinsic value, based on revenues and profits.

Indeed, events like the TD scandal can be ‘buy’ opportunities — though not without risks, Hennick says.

These issues could run deeper than reported. Other problems could crop up further depressing stock prices.

He adds the probability a big bank will recover from this type of event is often higher than it sparking an even more dire turn financially. “I certainly understand the allure” of these opportunities.

So, too, does Mark Seed, a soon-to-be-retired 52-year-old do-it-yourself investor in Ottawa, who writes about investing on his popular blog My Own Advisor.

“I’ve known people like that (Jim) who visit my site,” and have had plenty of discussions regarding how moments of financial upheaval can represent buying opportunities for long-term growth.

A trade like Jim’s is actually common among DIY investors, even retirees, Seed notes. While some DIYers invest to save for retirement, many are already retired, have good pensions and invest as a hobby rather than for financial need.

Seed adds that contrary to the notion older investors must take less risk, many are like Jim. They have the financial capacity and investing experience to make this type of contrarian trade.

Still, it is a risky financial move, Seed says. Sometimes stock prices of a company are down for good reason, despite compelling valuations, and they never recover.

In the industry, that type of stock is called a “value trap.”

Yet this type of trade is “almost riskier for someone who is age 21, who may have a long time horizon, but (has) less capital to lose, versus retirees who have all their cash needs met by secure (pension) income streams,” Seed says.

Most investors, however, are probably better served holding diversified, low-cost exchange-traded funds (ETFs) to avoid single-stock risk, he adds. (You can even buy ETFs focused only on Canada’s financial sector.)

Even Jim admits the TD trade is not characteristic of his investment history.

He has conservatively purchased bank stocks gradually over many decades mainly because of their steadily growing dividends. But he also has watched investment opportunities slip by that he has come to regret.

Among them is Dollarama when it traded $17 a share more than a decade ago, when investors were torn whether consumers would gravitate to the low-cost retailer.

Indeed, consumers have. Today, its share price is about $190.

“I just didn’t have the financial guts to do it,” he says.

So when TD dipped, Jim thought it would be his last chance to seize on that type of opportunity, albeit one involving a fair amount of risk.

He is glad he did. Six months after making the trade, TD’s stock price rebounded and eventually reached $130 a share — an all-time high where it still hovers around today.

Jim and his wife made a profit of more than $200,000, with 90 per cent of that sum held in Tax-Free Savings Accounts, resulting in a substantial tax-free profit.

“Our adult kids had a very nice Christmas,” he says, noting he and his wife gifted their children some of those profits.

Jim adds with a laugh: “For once, it worked out, but we shall not do it ever again.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com