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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ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $22.87 (New York symbol ESR; buy or sell through brokers) is an ETF that aims to track the MSCI Emerging Markets Eastern Europe Index. The fund’s geographic breakdown is as follows: Russia, 73.1%; Poland, 20.1%; Czech Republic, 3.0%; and Hungary, 2.9%.
The fund’s top holdings are Gazprom (Russia: gas utility), 14.6%; Sberbank (Russia: bank), 10.9%; Lukoil (Russia: oil), 10.5%; Magnit OJSC (Russia: retailing), 5.1%; Novatek (Russia: natural gas), 3.9%; PKO Bank Polski SA (Poland: banking), 3.5%; Mobile TeleSystems (Russia: wireless), 3.4%; Uralkali (Russia: potash), 3.3%; and Rosneft Oil Company (Russia: oil and gas), 3.1%.
iShares MSCI Emerging Markets Eastern Europe Index Fund’s expense ratio is 0.66%.
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The fund’s top holdings are Gazprom (Russia: gas utility), 14.6%; Sberbank (Russia: bank), 10.9%; Lukoil (Russia: oil), 10.5%; Magnit OJSC (Russia: retailing), 5.1%; Novatek (Russia: natural gas), 3.9%; PKO Bank Polski SA (Poland: banking), 3.5%; Mobile TeleSystems (Russia: wireless), 3.4%; Uralkali (Russia: potash), 3.3%; and Rosneft Oil Company (Russia: oil and gas), 3.1%.
iShares MSCI Emerging Markets Eastern Europe Index Fund’s expense ratio is 0.66%.
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ISHARES S&P INDIA NIFTY 50 INDEX FUND $21.98 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities.
The fund’s top holdings are ITC Ltd. (conglomerate), 9.7%; Reliance Industries Ltd. (conglomerate), 7.4%; Housing Development Finance, 7.1%; ICICI Bank, 6.7%; HDFC Bank, 6.5%; Infosys, 6.4%; Larsen & Toubro Ltd. (conglomerate), 4.2%; Tata Consultancy Services (information technology), 4.0%; Hindustan Unilever, 3.4%; and Oil & Natural Gas Corp., 3.1%.
The fund’s industry breakdown includes Banks, 21.4%; Computers, 11.4%; Cigarettes, 9.7%; Refineries, 7.9%; Finance, 7.1%; Pharmaceuticals, 5.9%; Engineering, 4.2%; Oil Exploration and Production, 4.0%; and Automobiles, 3.6%; The ETF has a 0.92% expense ratio.
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The fund’s top holdings are ITC Ltd. (conglomerate), 9.7%; Reliance Industries Ltd. (conglomerate), 7.4%; Housing Development Finance, 7.1%; ICICI Bank, 6.7%; HDFC Bank, 6.5%; Infosys, 6.4%; Larsen & Toubro Ltd. (conglomerate), 4.2%; Tata Consultancy Services (information technology), 4.0%; Hindustan Unilever, 3.4%; and Oil & Natural Gas Corp., 3.1%.
The fund’s industry breakdown includes Banks, 21.4%; Computers, 11.4%; Cigarettes, 9.7%; Refineries, 7.9%; Finance, 7.1%; Pharmaceuticals, 5.9%; Engineering, 4.2%; Oil Exploration and Production, 4.0%; and Automobiles, 3.6%; The ETF has a 0.92% expense ratio.
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NEWMONT MINING $29.02 (New York symbol NEM; Shares outstanding: 492.3 million; Market cap: $14.5 billion; TSINetwork Rating: Average; Dividend yield: 4.8%; www.newmont.com) gets 90% of its revenue from gold mines in the U.S., Australia and Peru. Copper, zinc and other metals supply the remaining 10%.
Gold is down 33%, from $1,800 an ounce in September 2012 to $1,204 today. That’s partly because the U.S. Federal Reserve has indicated that it will soon scale back its bond-purchasing program, known as quantitative easing. Slowing growth in the money supply will reduce the likelihood of a sharp increase in inflation. Many investors buy gold as a hedge against inflation.
In response, Newmont is cutting jobs and postponing building new mines. The company also links its dividend to the price of gold, so it has lowered its quarterly payout by 17.6%, to $0.35 a share from $0.425, for a 4.8% yield. Further dividend cuts seem likely, particularly if gold prices continue to fall.
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Gold is down 33%, from $1,800 an ounce in September 2012 to $1,204 today. That’s partly because the U.S. Federal Reserve has indicated that it will soon scale back its bond-purchasing program, known as quantitative easing. Slowing growth in the money supply will reduce the likelihood of a sharp increase in inflation. Many investors buy gold as a hedge against inflation.
In response, Newmont is cutting jobs and postponing building new mines. The company also links its dividend to the price of gold, so it has lowered its quarterly payout by 17.6%, to $0.35 a share from $0.425, for a 4.8% yield. Further dividend cuts seem likely, particularly if gold prices continue to fall.
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BELL ALIANT INC. $27.96 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.5 billion; TSINetwork Rating: Average; Dividend yield: 6.8%; www.aliant.ca) sells phone and Internet services to 2.5 million customers in Atlantic Canada and rural Ontario and Quebec. It also sells wireless services through an alliance with BCE, which owns 44% 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.
Bell Aliant’s high-speed fibre optic systems now reach 679,000 homes, up from 516,000 a year ago. By the end of 2013, it plans to expand its network to 800,000 homes.
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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.
Bell Aliant’s high-speed fibre optic systems now reach 679,000 homes, up from 516,000 a year ago. By the end of 2013, it plans to expand its network to 800,000 homes.
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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $29.20 (Toronto symbol BEP.UN; Units outstanding: 265.2 million; Market cap: $7.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.0%; 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 March 31, 2013, Brookfield’s revenue rose 2.6%, to $437 million from $426 million a year earlier. Cash flow gained 4.3%, to $195 million, or $0.73 a share, from $187 million, or $0.71 a share.
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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 March 31, 2013, Brookfield’s revenue rose 2.6%, to $437 million from $426 million a year earlier. Cash flow gained 4.3%, to $195 million, or $0.73 a share, from $187 million, or $0.71 a share.
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TELUS $31.68 (Toronto symbol T; Shs. o/s: 653.8 million; Market cap: $20.7 billion; TSINetwork Rating: Above Average; Dividend yield: 4.3%; www.telus.com) has 7.7 million wireless subscribers across Canada, and gets much more of its revenue from wireless than BCE (54% compared to BCE’s 32%—see left).
Telus gets the remaining 46% of its revenue from its traditional phone business, which has 3.4 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.3 million Internet subscribers and 712,000 Telus TV subscribers.
In the three months ended March 31, 2013, Telus’s earnings per share rose 14.3%, to $0.56 from $0.49 a year earlier. Revenue rose 4.8%, to $2.76 billion from $2.63 billion.
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Telus gets the remaining 46% of its revenue from its traditional phone business, which has 3.4 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.3 million Internet subscribers and 712,000 Telus TV subscribers.
In the three months ended March 31, 2013, Telus’s earnings per share rose 14.3%, to $0.56 from $0.49 a year earlier. Revenue rose 4.8%, to $2.76 billion from $2.63 billion.
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BCE INC. $42.68 (Toronto symbol BCE; Shares outstanding: 775.9 million; Market cap: $33.4 billion; TSINetwork Rating: Above Average; Dividend yield: 5.5%; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. It also sells satellite and Internet TV services across the country.
In the three months ended March 31, 2013, BCE’s earnings per share rose 11.6%, to $0.77 from $0.69 a year earlier. Revenue increased slightly, to $4.35 billion from $4.33 billion. Revenue fell 2.8% at the wireline (land line) division, which accounts for 58% of total revenue. This division faces rising competition. As well, many customers are cancelling land lines and switching to wireless devices.
Revenue from wireless services (32% of total revenue) rose 6.3%. The company’s network upgrades continue to attract new wireless subscribers, and it’s benefiting from rising use of smartphones, which generate higher monthly fees than regular cellphones. Bell’s Fibe high-speed Internet TV service also offers strong growth prospects.
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In the three months ended March 31, 2013, BCE’s earnings per share rose 11.6%, to $0.77 from $0.69 a year earlier. Revenue increased slightly, to $4.35 billion from $4.33 billion. Revenue fell 2.8% at the wireline (land line) division, which accounts for 58% of total revenue. This division faces rising competition. As well, many customers are cancelling land lines and switching to wireless devices.
Revenue from wireless services (32% of total revenue) rose 6.3%. The company’s network upgrades continue to attract new wireless subscribers, and it’s benefiting from rising use of smartphones, which generate higher monthly fees than regular cellphones. Bell’s Fibe high-speed Internet TV service also offers strong growth prospects.
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NCR CORP. (New York symbol NCR; www.ncr.com) is a leading maker of automated teller machines (ATMs), checkout scanners, cash registers and self-serve kiosks.
In February 2013, the company paid $791 million for Israel-based Retalix, whose software helps retailers manage their sales and track inventories. Retailers with a combined 70,000 locations in over 50 countries use Retalix’s products. NCR feels Retalix’s expertise will improve its point-of-sale terminals and self-serve kiosks.
In the three months ended March 31, 2013, Retalix contributed $50 million to NCR’s revenue. That helped push up the total by 13.3% in the latest quarter, to $1.4 billion from $1.2 billion a year earlier. The acquisition should add $255 million to the company’s full-year revenue.
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In February 2013, the company paid $791 million for Israel-based Retalix, whose software helps retailers manage their sales and track inventories. Retailers with a combined 70,000 locations in over 50 countries use Retalix’s products. NCR feels Retalix’s expertise will improve its point-of-sale terminals and self-serve kiosks.
In the three months ended March 31, 2013, Retalix contributed $50 million to NCR’s revenue. That helped push up the total by 13.3% in the latest quarter, to $1.4 billion from $1.2 billion a year earlier. The acquisition should add $255 million to the company’s full-year revenue.
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Pat McKeough responds to many requests for specific advice on buying stocks and other questions on investment strategy and the economy from the members of his Inner Circle. 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 about the world’s biggest heavy equipment maker, Caterpillar. With slower economic growth in its main markets, especially China, the company has seen its revenues slip. Pat examines Caterpillar’s ambitious acquisition policy and looks at the company’s financial outlook in the face of slowing demand in a still-sluggish global economy. ...
LOBLAW COMPANIES LTD. $46 (Toronto symbol L; www.loblaw.ca) announced yesterday that it has a friendly deal to purchase Shoppers Drug Mart Corp. (Toronto symbol SC) for $12.4 billion in cash and stock. The transaction, which combines Canada’s largest grocery and pharmacy chains, will be the biggest takeover in Canadian retail history. Shares of Loblaw rose 5% yesterday on the news. Loblaw had already risen 42% for us since its announcement in December 2012 that it would set up 75% of its real estate holdings as a publicly traded real estate investment trust (REIT) under the name Choice Properties REIT (Toronto symbol CHP.UN)....
