How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week an Inner Circle member asked us about a pharmaceutical firm whose shares recently had a strong run. Tekmira specializes in RNAi therapeutics which can “silence” disease-causing genes. The company is developing two drugs, one for Ebola and one for cancer. Pat looks at the progress of Tekmira’s drug trials and examines the company’s cash balance and its ability to continue developing its treatments in the years ahead. ...
ISHARES DEX UNIVERSE BOND INDEX FUND $30.34 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through brokers) mirrors the performance of the DEX Universe Bond Index. The 762 bonds in the portfolio have an average term to maturity of 9.53 years. The fund’s MER is 0.33%.
The bonds in the index are 68.0% government and 32.0% corporate.
The fund yields 3.2%, compared to the Short-Term Bond Fund’s 2.6%. Its yield to maturity is 2.79%, 0.95% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
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The bonds in the index are 68.0% government and 32.0% corporate.
The fund yields 3.2%, compared to the Short-Term Bond Fund’s 2.6%. Its yield to maturity is 2.79%, 0.95% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
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ISHARES DEX SHORT-TERM BOND INDEX FUND $28.63 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index.
This index consists of a wide range of investmentgrade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 379 bonds with an average term to maturity of 2.87 years. The bonds in the index are 60.9% government and 30.1% corporate. The fund’s MER is 0.28%.
iShares DEX Short-Term Bond Index Fund yields 2.6%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
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This index consists of a wide range of investmentgrade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 379 bonds with an average term to maturity of 2.87 years. The bonds in the index are 60.9% government and 30.1% corporate. The fund’s MER is 0.28%.
iShares DEX Short-Term Bond Index Fund yields 2.6%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
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ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $27.58 (New York symbol ESR; buy or sell through brokers) has 73.6% of its assets invested in Russia, followed by Poland at 20.3%; Czech Republic, 3.0%; and Hungary, 2.4%.
The fund’s top holdings are Gazprom (Russia: gas utility), 17.3%; Sberbank (Russia: bank), 10.8%; Lukoil (Russia: oil), 10.2%; Magnit OJSC (Russia: retailing), 5.1%; and Novatek (Russia: natural gas), 3.9%. Its expense ratio is 0.67%.
The fund’s concentration in Russia, and in resources, adds risk. But the long-term outlook for commodities, including oil, is positive.
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The fund’s top holdings are Gazprom (Russia: gas utility), 17.3%; Sberbank (Russia: bank), 10.8%; Lukoil (Russia: oil), 10.2%; Magnit OJSC (Russia: retailing), 5.1%; and Novatek (Russia: natural gas), 3.9%. Its expense ratio is 0.67%.
The fund’s concentration in Russia, and in resources, adds risk. But the long-term outlook for commodities, including oil, is positive.
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MARKET VECTORS VIETNAM ETF $18.84 (New York symbol VNM; buy or sell through brokers) holds shares of Vietnamese companies or foreign firms that get a significant amount of their revenue from Vietnam.
The ETF’s top holdings are Bank for Foreign Trade of Vietnam, 9.1%; Vincom Corp. (real estate), 7.7%; PetroVietnam Fertilizer & Chemical, 7.0%; Baoviet Holdings (finance and insurance), 6.5%; PetroVietnam Technical Services (oilfield services), 5.2%; Saigon Thuong Tin Commercial Bank, 5.1%; Minor International (a Thailand-based firm with hotels and fast-food restaurants in Vietnam), 5.1%; Charoen Pokphand Foods (a Thailand-based food conglomerate), 4.6%; PetroVietnam Drilling & Well Services (oilfield services), 4.6%; and Gamuda Bhd (a Malaysia-based construction group), 4.6%.
Market Vectors Vietnam ETF’s industry breakdown is as follows: Financials, 37.5%; Energy, 23.1%; Industrials, 11.7%; Materials, 9.7%; Consumer Discretionary, 9.1%; Consumer Staples, 4.4%; and Utilities, 2.9%. Its expense ratio is 0.76%.
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The ETF’s top holdings are Bank for Foreign Trade of Vietnam, 9.1%; Vincom Corp. (real estate), 7.7%; PetroVietnam Fertilizer & Chemical, 7.0%; Baoviet Holdings (finance and insurance), 6.5%; PetroVietnam Technical Services (oilfield services), 5.2%; Saigon Thuong Tin Commercial Bank, 5.1%; Minor International (a Thailand-based firm with hotels and fast-food restaurants in Vietnam), 5.1%; Charoen Pokphand Foods (a Thailand-based food conglomerate), 4.6%; PetroVietnam Drilling & Well Services (oilfield services), 4.6%; and Gamuda Bhd (a Malaysia-based construction group), 4.6%.
Market Vectors Vietnam ETF’s industry breakdown is as follows: Financials, 37.5%; Energy, 23.1%; Industrials, 11.7%; Materials, 9.7%; Consumer Discretionary, 9.1%; Consumer Staples, 4.4%; and Utilities, 2.9%. Its expense ratio is 0.76%.
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ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $37.54 (New York symbol FXI; buy or sell through brokers) is an exchange traded fund that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest and most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on the New York exchange.
The fund’s top holdings are China Mobile, 9.6%; China Construction Bank, 9.0%; Industrial & Commercial Bank, 8.0%; Tencent Holdings, 7.1%, Bank of China, 6.1%; China Overseas Land & Investment, 4.1%; PetroChina, 4.1%, Agricultural Bank of China, 4.0%; and CNOOC, 3.9%.
The fund’s holdings give it the following industry breakdown: Financials, 56.0%; Telecommunications, 16.0%; Oil and Gas, 12.1%; Technology, 7.1%, Basic Materials, 3.7%; and Consumer Goods, 3.2%. Its expense ratio is 0.74%.
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The fund’s top holdings are China Mobile, 9.6%; China Construction Bank, 9.0%; Industrial & Commercial Bank, 8.0%; Tencent Holdings, 7.1%, Bank of China, 6.1%; China Overseas Land & Investment, 4.1%; PetroChina, 4.1%, Agricultural Bank of China, 4.0%; and CNOOC, 3.9%.
The fund’s holdings give it the following industry breakdown: Financials, 56.0%; Telecommunications, 16.0%; Oil and Gas, 12.1%; Technology, 7.1%, Basic Materials, 3.7%; and Consumer Goods, 3.2%. Its expense ratio is 0.74%.
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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $28.64 (Toronto symbol BEP.UN; Units outstanding: 265.2 million; Market cap: $7.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.3%; www.brpfund.com) owns 196 hydroelectric generating stations, 11 wind farms and two natural-gas-fired plants. In all, it has 5,900 megawatts of generating capacity.
Roughly 35% of Brookfield Renewable’s generating capacity is in Canada, with another 50% in the U.S. and 15% in Brazil.
In the three months ended June 30, 2013, Brookfield’s revenue rose 43.6%, to $484 million from $337 million a year earlier. Cash flow jumped sharply, to $187 million, or $0.71 a share, from $87 million, or $0.33.
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Roughly 35% of Brookfield Renewable’s generating capacity is in Canada, with another 50% in the U.S. and 15% in Brazil.
In the three months ended June 30, 2013, Brookfield’s revenue rose 43.6%, to $484 million from $337 million a year earlier. Cash flow jumped sharply, to $187 million, or $0.71 a share, from $87 million, or $0.33.
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BELL ALIANT INC. $26.76 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.1 billion; TSINetwork Rating: Average; Dividend yield: 7.1%; www.aliant.ca) sells phone and Internet services to 2.5 million customers in Atlantic Canada and rural Ontario and Quebec. It also provides wireless services through an alliance with BCE, which owns 45% of Bell Aliant. The company continues to replace copper wires with fibre optic cable. That’s attracting more highspeed Internet and digital TV customers. Strong demand for these services is also helping offset lower revenue from traditional phone services, which still supply 52% of the company’s revenue. Bell Aliant’s high-speed fibre optic systems now reach 725,000 homes, up from 650,000 at the start of this year. By the end of 2013, it plans to expand its network to 800,000 homes....
LOBLAW COS. $48.12 (Toronto symbol L; Shares outstanding: 282.1 million; Market cap: $13.4 billion; TSINetwork Rating: Above Average; Dividend yield: 2.0%; www.loblaw.ca) is cutting 275 jobs, mostly managerial and administrative positions at its head office. That’s about 1% of its total workforce.
The company did not say how much it expects to pay in severance and other costs. However, lower operating expenses will help Loblaw compete with other supermarket operators and big U.S.-based retailers like Wal-Mart and Target, which are selling more groceries in their Canadian stores.
In addition, the cuts will help eliminate duplication ahead of its $12.4-billion takeover of Shoppers Drug Mart.
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The company did not say how much it expects to pay in severance and other costs. However, lower operating expenses will help Loblaw compete with other supermarket operators and big U.S.-based retailers like Wal-Mart and Target, which are selling more groceries in their Canadian stores.
In addition, the cuts will help eliminate duplication ahead of its $12.4-billion takeover of Shoppers Drug Mart.
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INNERGEX RENEWABLE ENERGY $9.15 (Toronto symbol INE; Shares outstanding: 95.0 million; Market cap: $869.4 million; TSINetwork Rating: Extra Risk; Dividend yield 6.3%; www.innergex.com) operates 23 hydroelectric facilities, five wind farms and one solar-power plant in Quebec, Ontario, B.C. and Idaho. Innergex gets 59% of its power from hydroelectric facilities. Wind farms supply 36% and solar generates 5%.
In contrast to Algonquin, Innergex is growing slowly, mostly by building its own hydroelectric and wind plants, rather than through acquisitions. Right now, it is developing or building eight projects.
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