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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SPDR S&P 500 ETF $131.97 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group.
The index’s highest-weighted stocks are Apple Inc., ExxonMobil, Microsoft, Procter & Gamble, Wells Fargo & Co., Johnson & Johnson, IBM, Chevron, General Electric, Pfizer Inc., Coca-Cola Co., Google and AT&T.
The fund’s expenses are just 0.10% of its assets.
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The index’s highest-weighted stocks are Apple Inc., ExxonMobil, Microsoft, Procter & Gamble, Wells Fargo & Co., Johnson & Johnson, IBM, Chevron, General Electric, Pfizer Inc., Coca-Cola Co., Google and AT&T.
The fund’s expenses are just 0.10% of its assets.
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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.08 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. It yields 4.5%.
The fund’s top holdings are CIBC, 6.9%; National Bank, 6.0%; TD Bank, 5.6%; Bank of Montreal, 5.2%; Bonterra Energy, 5.2%; AG Growth International, 4.8%; Royal Bank of Canada, 4.3%; Bank of Nova Scotia, 4.3%; and BCE Inc., 4.0%.
The fund holds 54.1% of its assets in financial stocks. Utilities are next, at 21.4%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.
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The fund’s top holdings are CIBC, 6.9%; National Bank, 6.0%; TD Bank, 5.6%; Bank of Montreal, 5.2%; Bonterra Energy, 5.2%; AG Growth International, 4.8%; Royal Bank of Canada, 4.3%; Bank of Nova Scotia, 4.3%; and BCE Inc., 4.0%.
The fund holds 54.1% of its assets in financial stocks. Utilities are next, at 21.4%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.
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ISHARES S&P/TSX 60 INDEX FUND $16.65 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.
The index mostly consists of high-quality companies. However, as the fund must ensure that all sectors are represented, it holds a few stocks we wouldn’t include.
The index’s top holdings are Royal Bank, 7.2%; TD Bank, 7.0%; Bank of Nova Scotia, 5.9%; Barrick Gold, 4.4%; Suncor Energy, 4.3%; CN Railway, 3.7%; Bank of Montreal, 3.5%; Potash Corp., 3.4%; Goldcorp, 3.3%; BCE Inc., 3.2%; Canadian Natural Resources, 3.2%; Enbridge, 3.1%; TransCanada Corp., 3.0%; CIBC, 2.8%; Cenovus Energy, 2.3%; and Telus Corp., 1.9%.
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The index mostly consists of high-quality companies. However, as the fund must ensure that all sectors are represented, it holds a few stocks we wouldn’t include.
The index’s top holdings are Royal Bank, 7.2%; TD Bank, 7.0%; Bank of Nova Scotia, 5.9%; Barrick Gold, 4.4%; Suncor Energy, 4.3%; CN Railway, 3.7%; Bank of Montreal, 3.5%; Potash Corp., 3.4%; Goldcorp, 3.3%; BCE Inc., 3.2%; Canadian Natural Resources, 3.2%; Enbridge, 3.1%; TransCanada Corp., 3.0%; CIBC, 2.8%; Cenovus Energy, 2.3%; and Telus Corp., 1.9%.
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TRANSCANADA CORP. $42.76 (Toronto symbol TRP; Shares outstanding: 704.2 million; Market cap: $30.1 billion; TSINetwork Rating: Above Average; Dividend yield: 4.1%; www.transcanada.com) has won a contract to build and operate a $4-billion, 700-kilometre pipeline for Shell Canada and its partners Korea Gas, Mitsubishi and PetroChina.
The pipeline will pump natural gas from the Montney region of eastern B.C. to a proposed liquefied natural gas facility at the port of Kitimat, B.C. From there, tanker ships will transport the liquefied gas to customers in Asia.
TransCanada aims to begin operating the new line by 2020.
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The pipeline will pump natural gas from the Montney region of eastern B.C. to a proposed liquefied natural gas facility at the port of Kitimat, B.C. From there, tanker ships will transport the liquefied gas to customers in Asia.
TransCanada aims to begin operating the new line by 2020.
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INNERGEX RENEWABLE ENERGY $10.55 (Toronto symbol INE; Shares outstanding: 81.3 million; Market cap: $857.7 million; TSINetwork Rating: Extra Risk; Dividend yield 5.5%; www.innergex.com) owns and operates 25 hydroelectric and wind-power facilities in Quebec, Ontario, B.C. and Idaho.
Innergex gets 80% of its power from hydroelectric plants. Wind farms supply the remaining 20%. Wind power is heavily reliant on politically sensitive government subsidies. To cut its risk, Innergex makes sure it has firm long-term powerpurchase contracts in place before it makes acquisitions or starts building new plants.
In April 2011, Innergex bought Cloudworks Energy for $187 million. That added stakes in six operating hydroelectric plants in B.C. and other projects that are still under development.
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Innergex gets 80% of its power from hydroelectric plants. Wind farms supply the remaining 20%. Wind power is heavily reliant on politically sensitive government subsidies. To cut its risk, Innergex makes sure it has firm long-term powerpurchase contracts in place before it makes acquisitions or starts building new plants.
In April 2011, Innergex bought Cloudworks Energy for $187 million. That added stakes in six operating hydroelectric plants in B.C. and other projects that are still under development.
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ALGONQUIN POWER & UTILITIES CORP. $6.55 (Toronto symbol AQN; Shares outstanding: 159.1 million; Market cap: $1.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.algonquinpower.com) holds interests in 45 hydroelectric plants in Canada and the northeastern U.S. It also owns 12 thermal energy facilities. Algonquin’s wholly owned subsidiary, Liberty Water Co., owns 19 water-distribution and sewagetreatment plants in the U.S.
The company also has a partnership with Emera Inc. (Toronto symbol EMA), which is a recommendation of The Successful Investor, our conservative growth advisory. Emera holds a 25% interest in Algonquin. This partnership, called Liberty Energy Utilities, continues to make acquisitions.
Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 77,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 126,000 customers in New Hampshire.
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The company also has a partnership with Emera Inc. (Toronto symbol EMA), which is a recommendation of The Successful Investor, our conservative growth advisory. Emera holds a 25% interest in Algonquin. This partnership, called Liberty Energy Utilities, continues to make acquisitions.
Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 77,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 126,000 customers in New Hampshire.
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CENOVUS ENERGY $32.47 (Toronto symbol CVE; Shares outstanding: 754.7 million; Market cap: $24.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.7%; www.cenovus.com) has received regulatory approval to develop its Narrows Lake oil sands project in northern Alberta; U.S.-based ConocoPhillips (New York symbol COP) owns 50% of this property.
Narrows Lake, which could start up in 2017, is expected to produce 130,000 barrels a day (Cenovus’s share is 65,000 barrels). To put that in context, Cenovus produced an average of 156,850 barrels a day in the first quarter of 2012. The property’s reserves should last 40 years.
The company plans to use a new technique, called a solvent-aided process, to extract the oil from Narrows Lake. That will add to the project’s development costs, but it should let the partners recover up to 15% more oil than they could using today’s methods.
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Narrows Lake, which could start up in 2017, is expected to produce 130,000 barrels a day (Cenovus’s share is 65,000 barrels). To put that in context, Cenovus produced an average of 156,850 barrels a day in the first quarter of 2012. The property’s reserves should last 40 years.
The company plans to use a new technique, called a solvent-aided process, to extract the oil from Narrows Lake. That will add to the project’s development costs, but it should let the partners recover up to 15% more oil than they could using today’s methods.
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BONAVISTA ENERGY $17.42 (Toronto symbol BNP; Shares outstanding: 145.8 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 8.3%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C.
Bonavista produces an average of 70,202 barrels of oil equivalent per day, weighted 60% to gas and 40% to oil.
In the three months ended March 31, 2012, the company’s cash flow per share fell 23.2%, to $0.63 from $0.82 a year earlier. Lower gas prices more than offset a 6.1% production increase.
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Bonavista produces an average of 70,202 barrels of oil equivalent per day, weighted 60% to gas and 40% to oil.
In the three months ended March 31, 2012, the company’s cash flow per share fell 23.2%, to $0.63 from $0.82 a year earlier. Lower gas prices more than offset a 6.1% production increase.
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PEYTO EXPLORATION & DEVELOPMENT CORP. $18.17 (Toronto symbol PEY; Shares outstanding: 138.5 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.0%; www.peyto.com) produces and explores for oil and natural gas in Alberta.
Peyto’s average daily production of 40,903 barrels of oil equivalent is 90% gas and 10% oil.
In the three months ended March 31, 2012, the company’s cash flow was $0.56 a share, unchanged from a year earlier. Lower gas prices offset a 29.7% rise in production.
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Peyto’s average daily production of 40,903 barrels of oil equivalent is 90% gas and 10% oil.
In the three months ended March 31, 2012, the company’s cash flow was $0.56 a share, unchanged from a year earlier. Lower gas prices offset a 29.7% rise in production.
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BANK OF NOVA SCOTIA $52.20 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $57.4 billion; TSINetwork Rating: Above Average; Div. yield: 4.2%, www.scotiabank.com) is the third-largest of Canada’s five big banks, with assets of $659.7 billion.
Without one-time items, the bank earned $1.15 a share in the quarter ended April 30, 2012, up 8.5% from $1.06 a share a year earlier. It is also setting aside less money to cover bad loans: loan-loss provisions fell 2.2%, to $264 million from $270 million a year ago.
The Canadian banking division’s earnings jumped 23.3% due to an increase in deposits and higher demand for loans. The division also did a good job of controlling its costs.
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Without one-time items, the bank earned $1.15 a share in the quarter ended April 30, 2012, up 8.5% from $1.06 a share a year earlier. It is also setting aside less money to cover bad loans: loan-loss provisions fell 2.2%, to $264 million from $270 million a year ago.
The Canadian banking division’s earnings jumped 23.3% due to an increase in deposits and higher demand for loans. The division also did a good job of controlling its costs.
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