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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IMPERIAL OIL $39.57 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $34.2 billion; TSINetwork Rating: Average; Dividend yield: 1.2%; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. Imperial also owns four refineries and operates 1,850 Esso gas stations.
Imperial produced 284,000 barrels of oil equivalent per day in the latest quarter, down 1.7% from 289,000 barrels a year earlier. The decline was mainly the result of planned maintenance at the Syncrude oil sands project, in which Imperial owns a 25.0% stake.
In the three months ended March 31, 2013, Imperial’s earnings fell 21.4%, to $798 million, or $0.94 a share, due to an 8% drop in the company’s selling price for oil. A year earlier, it earned $1.0 billion, or $1.19 a share. Cash flow per share fell 17.4%, to $1.19 from $1.44. However, revenue rose 3.3%, to $8.0 billion from $7.5 billion, largely because downstream sales (refineries and gas stations) rose 10.0%.
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Imperial produced 284,000 barrels of oil equivalent per day in the latest quarter, down 1.7% from 289,000 barrels a year earlier. The decline was mainly the result of planned maintenance at the Syncrude oil sands project, in which Imperial owns a 25.0% stake.
In the three months ended March 31, 2013, Imperial’s earnings fell 21.4%, to $798 million, or $0.94 a share, due to an 8% drop in the company’s selling price for oil. A year earlier, it earned $1.0 billion, or $1.19 a share. Cash flow per share fell 17.4%, to $1.19 from $1.44. However, revenue rose 3.3%, to $8.0 billion from $7.5 billion, largely because downstream sales (refineries and gas stations) rose 10.0%.
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Pat McKeough responds to many requests for specific advice on the best stocks to invest in 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, we received a question from an Inner Circle member about a stock that may not be well known to Canadian investors, but has a product which has made headlines. Israeli defense contractor Elbit Systems has seen its profits rise thanks to the sale of unmanned air vehicles, or drones. Pat looks at the company’s overall outlook and how much emphasis investors should put on one ‘hot’ product like drones....
LEON’S FURNITURE LTD. (Toronto symbol LNF; www.leons.ca) built its 75-store furniture chain on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended March 31, 2013, Leon’s sales rose 3.2%, to $162.5 million from $157.4 million a year earlier. However, earnings fell 36.9%, to $5.4 million, or $0.08 a share....
TIM HORTONS INC. (Toronto symbol THI; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts. The company also has 808 U.S. stores. The stock has moved up lately in response to demands from Highfields Capital Management, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares. Highfields has proposed several ways to boost shareholder value, including slowing Tim Hortons’ expansion in the U.S., where it faces intense competition from larger chains like McDonald’s, Dunkin’ Donuts and Starbucks....
DOMINO’S PIZZA (New York symbol DPZ; www.dominos.com) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,040 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores. Excluding one-time items, the company’s earnings per share rose 25.5% in the quarter ended March 24, 2013, to $0.59 from $0.47 a year earlier. Sales rose 8.6%, to $417.6 million from $384.6 million. Same-store sales rose 6.5% internationally and 6.2% in the U.S....
H&R REIT (Toronto symbol HR.UN; www.hr-reit.com) owns stakes in 41 office buildings, 112 industrial properties and 163 shopping malls in Canada, principally in the Greater Toronto Area. In the past two years it also added two major purchases in the U.S: Two Gotham Center in New York and the Hess Tower in Houston. The trust has a 99.0% occupancy rate....
Pat McKeough responds to many requests for advice on specific stock picks and other questions on investment 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 a stock that has risen sharply this year. AutoCanada’s franchise car dealerships have profited from robust car sales and the company continues to expand. Pat looks at whether AutoCanada can sustain its growth and also measures the risk of its growth-by-acquisition strategy....
The new U.S. health care law (“Obamacare”) will force Baxter International to pay a 2.3% tax on certain medical devices it sells in the country. However, the law will also expand health insurance to more Americans, which should spur demand for the company’s products. It is also increasing its overseas sales. The U.S. accounts for just 40% of Baxter’s sales....
BONAVISTA ENERGY $15.94 (Toronto symbol BNP; Shares outstanding: 179.1 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.3%; www.bonavistaenergy.com) explores for oil and gas in Alberta, Saskatchewan and B.C. Its production is 62% gas and 38% oil.
In the three months ended December 31, 2012, cash flow per share fell 37.4%, to $0.57 from $0.91 a year earlier. Gas prices declined by 12.7%, to $3.22 per thousand cubic feet from $3.69. Production dropped 2.1%, to 71,842 barrels of oil equivalent a day (including gas) from 73,373.
Bonavista recently cut its monthly dividend by 41.7%, to $0.07 from $0.12. That’s helping it save cash for exploration and development. The new annual rate of $0.84 a share still yields a high 5.3%. As well, Bonavista now pays out just 36% of its cash flow as dividends, so more cuts are unlikely.
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In the three months ended December 31, 2012, cash flow per share fell 37.4%, to $0.57 from $0.91 a year earlier. Gas prices declined by 12.7%, to $3.22 per thousand cubic feet from $3.69. Production dropped 2.1%, to 71,842 barrels of oil equivalent a day (including gas) from 73,373.
Bonavista recently cut its monthly dividend by 41.7%, to $0.07 from $0.12. That’s helping it save cash for exploration and development. The new annual rate of $0.84 a share still yields a high 5.3%. As well, Bonavista now pays out just 36% of its cash flow as dividends, so more cuts are unlikely.
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