I swapped Consumers’ Waterheater Income Fund (TSX: CWI, OTC: CWIUF) from the Conservative Holdings in late 2009 for Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF) because of several concerns.

First, the sub-metering business had become a severe drag on profit and the regulatory roadblock to growth in Ontario showed no sign of lifting. Second, the company was running into tough competition for its core waterheater business. Third, it had taken on substantial debt that needed to be refinanced, and the distributable cash flow was barely covering the reduced dividend. And finally, there was no clear plan for dealing with 2011 taxation or guidance from management.

Since then, Consumers’ management has answered my concerns one by one. As a result, its units have actually outperformed Davis’ torrid 64 percent gain with an 80 percent-plus return. On the other hand, now that the risk has diminished, the company’s 11 percent-plus yield is doubly attractive.

I’m adding Consumers’ Waterheater Income Fund to the Aggressive Holdings as a buy up to USD6.50.

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