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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CANADIAN TIRE CORP.(Toronto symbol CTC.A; www.canadiantire.ca) operates 490 Canadian Tire stores, which specialize in automotive, household and sporting goods. The company owns these stores, but franchisees operate most of them. Canadian Tire also operates 299 gas stations and 87 PartSource auto parts stores. In the past few years, the company has diversified its product lines by purchasing retailers with specialized products. These include Mark’s, which sells casual clothing though 386 stores, and Forzani Group, which sells sporting goods through 495 outlets, mainly under the SportChek banner. As well, Canadian Tire will soon complete its $85-million purchase of Pro Hockey Life, which sells hockey equipment through 23 stores....
Pat McKeough responds to many personal questions about investing in stocks and other topics 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, we received a question from an Inner Circle member about Pitney Bowes. This company has been a leader in the manufacture of postage meters and mailing equipment, and Pat assesses its efforts to adapt to the growing predominance of electronic mail and Internet communications. ...
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on a wide range of investing topics, including trading stocks online. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “Online trading seems like an easy and convenient way to invest, but that can also make it an easy way to lose money.”...
Pat McKeough responds to many personal questions about the best stocks to invest in and other topics 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, one Inner Circle member in search of a U.S. stock asked us about one of the most iconic brands on the American market, Coca-Cola. Pat looks at the company’s penetration of international markets and its efforts to broaden its market with healthier products, while taking into account the increasing appeal of private-label beverages to price-conscious consumers. ...
Hidden value is one of the key factors we examine when we look for top stocks. A company’s brand name is one good example of an underappreciated asset. Balance sheets often fail to assign any value to brands, even household names that have built up multitudes of loyal customers over the years. Two weeks ago we looked at the value of the brand of Canada’s best known tech company. (View the article here.) Today we examine another company whose strong brand is helping it grow internationally. THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) gets 57% of its revenue and 50% of its earnings by selling news and information to professionals in the banking industry. It also sells specialized information products to clients in the legal, accounting and scientific research fields....
ALGONQUIN POWER & UTILITIES CORP. $7.63 (Toronto symbol AQN; Shares outstanding: 175.0 million; Market cap: $1.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.algonquinpower.com) has received approval from regulators to complete its purchase of a natural gas distribution utility in Georgia for $147.0 million U.S.
This utility serves 64,000 consumers. The purchase is scheduled to close on April 1, 2013.
Algonquin will borrow funds to pay for 50% of this business and will issue shares for the other 50%. Emera which is a recommendation of The Successful Investor, our conservative growth advisory, will buy enough of these new shares to keep its interest in Algonquin at 19.9%.
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This utility serves 64,000 consumers. The purchase is scheduled to close on April 1, 2013.
Algonquin will borrow funds to pay for 50% of this business and will issue shares for the other 50%. Emera which is a recommendation of The Successful Investor, our conservative growth advisory, will buy enough of these new shares to keep its interest in Algonquin at 19.9%.
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ISHARES MSCI BRAZIL INDEX FUND $55.03 (New York Exchange symbol EWZ; buy or sell through brokers) is an exchange traded fund that is designed to track the Brazilian stock market. The fund’s top holdings are Cia Itau Unibanco Holding (banking), 8.1%; Vale do Rio Doce (mining) preferred, 7.2%; Petrobras common, 7.2%; Banco Brandesco (banking) preferred, 6.7%; Cia de Bebidas das Americas (beer and beverages), 6.7%; and Vale SA, 3.8%.
The fund’s focus on the resource sector and its concentration in certain stocks, such as Petrobras and Vale do Rio Doce, add risk. However, both are high-quality stocks.
Brazil’s economy is forecast to grow at a rate of 3.1% this year. Domestic consumption is recovering, although exports remain slow. Growth could be as high as 3.7% next year.
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The fund’s focus on the resource sector and its concentration in certain stocks, such as Petrobras and Vale do Rio Doce, add risk. However, both are high-quality stocks.
Brazil’s economy is forecast to grow at a rate of 3.1% this year. Domestic consumption is recovering, although exports remain slow. Growth could be as high as 3.7% next year.
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PENGROWTH ENERGY $4.49 (Toronto symbol PGF; Shares outstanding: 509.0 million; Market cap: $2.3 billion; TSINetwork Rating: Average; Dividend yield: 10.7%; www.pengrowth.com) plans to spend $770 million on upgrades to its oil and natural gas properties in 2013. That’s up 46.7% from the $525 million it probably spent in 2012.
Of this total, $300 million will go toward its Lindbergh oil sands project in Alberta. As a result, Lindbergh’s first phase will start in 2015, one year earlier than planned.
The company expects its cash flow to rise 14% in 2013, to $680 million. However, that’s 11.7% less than its spending plans. To make up the difference, Pengrowth plans to raise $700 million by selling certain properties. The cash from these sales should also help it maintain its monthly dividend of $0.04 a share. The annual rate of $0.48 yields 10.7%.
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Of this total, $300 million will go toward its Lindbergh oil sands project in Alberta. As a result, Lindbergh’s first phase will start in 2015, one year earlier than planned.
The company expects its cash flow to rise 14% in 2013, to $680 million. However, that’s 11.7% less than its spending plans. To make up the difference, Pengrowth plans to raise $700 million by selling certain properties. The cash from these sales should also help it maintain its monthly dividend of $0.04 a share. The annual rate of $0.48 yields 10.7%.
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PEYTO EXPLORATION & DEVELOPMENT CORP. $23.06 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $3.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.1%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Peyto’s average daily production of 46,033 barrels of oil equivalent is 89% gas and 11% oil.
In the three months ended September 30, 2012, the company’s cash flow was $0.54 a share, down 12.9% from $0.62 a share a year earlier. Lower gas prices offset a 26.5% rise in production.
The shares trade at 7.3 times Peyto’s forecast 2013 cash flow of $3.14 a share. The company’s long-term debt of $615 million is a low 18.1% of its $3.4-billion market cap.
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In the three months ended September 30, 2012, the company’s cash flow was $0.54 a share, down 12.9% from $0.62 a share a year earlier. Lower gas prices offset a 26.5% rise in production.
The shares trade at 7.3 times Peyto’s forecast 2013 cash flow of $3.14 a share. The company’s long-term debt of $615 million is a low 18.1% of its $3.4-billion market cap.
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BONAVISTA ENERGY $13.57 (Toronto symbol BNP; Shares outstanding: 176.9 million; Market cap: $2.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.1%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C. Bonavista’s production is weighted 61% to gas and 39% to oil.
In the three months ended September 30, 2012, the company’s cash flow per share fell 42.9%, to $0.48 from $0.84 a year earlier. Gas prices declined by 38.0%, to $2.56 per thousand cubic feet from $4.13. Production also dropped 8.6%, to 65,464 barrels of oil equivalent per day (including gas) from 71,636 barrels.
Bonavista has cut its monthly dividend by 41.7%, to $0.07 from $0.12. That will help the company conserve cash to invest in its exploration and development program. The new annual rate of $0.84 a share still yields a high 6.1%. As well, Bonavista will now pay out just 39% of its cash flow as dividends, so further dividend cuts are unlikely.
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In the three months ended September 30, 2012, the company’s cash flow per share fell 42.9%, to $0.48 from $0.84 a year earlier. Gas prices declined by 38.0%, to $2.56 per thousand cubic feet from $4.13. Production also dropped 8.6%, to 65,464 barrels of oil equivalent per day (including gas) from 71,636 barrels.
Bonavista has cut its monthly dividend by 41.7%, to $0.07 from $0.12. That will help the company conserve cash to invest in its exploration and development program. The new annual rate of $0.84 a share still yields a high 6.1%. As well, Bonavista will now pay out just 39% of its cash flow as dividends, so further dividend cuts are unlikely.
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