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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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 investment advice, including how to use financial ratios and other information in your stock research. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “Use the price-to-sales ratio correctly and you can uncover stocks with strong growth potential.”...
Peter Lynch, the world’s top mutual fund manager from the 1970s through the early 1990s, maintains that it’s a good idea to invest in companies you’re familiar with, companies you see in action regularly. That stock market advice could certainly be put to the test by the many Canadians who pour through the doors of the country’s best known coffee and fast food chain every day. TIM HORTONS INC. (Toronto symbol THI; www.timhortons.com) operates 3,295 coffee-and-donut stores in Canada and 714 in the U.S. It also has five recently-opened outlets in the Persian Gulf....
Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of 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. Last week, one Inner Circle member asked for stock investing advice on one of the world’s largest chemical manufacturers. Pat notes that the company has made headway with new specialty chemicals, but that its future is closely tied to the economic recovery. ...
This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This time, Canadian real estate investing is the subject, as Pat replies to a question from a reader inspired by the increase in property values. Is buying a property and becoming a landlord a good investment? Look beyond today’s prices before you act, is Pat’s advice. Below is the transcription of Pat’s comments....
PENGROWTH ENERGY $10.09 (Toronto symbol PGF; Shares outstanding: 329.3 million; Market cap: $3.3 billion; TSINetwork Rating: Average; Dividend yield: 8.3%; www.pengrowth.com) plans to invest $625
million to develop its properties in 2012. That’s up 3% from the $607 million it spent in 2011.
Pengrowth will spend about 40% of these funds on its Swan Hills light oil project in Alberta. The rest will go toward its other oil projects, including its Lindberg oil sands deposit. Due to low natural gas prices, the company will hold off on further investments in its gas properties this year.
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million to develop its properties in 2012. That’s up 3% from the $607 million it spent in 2011.
Pengrowth will spend about 40% of these funds on its Swan Hills light oil project in Alberta. The rest will go toward its other oil projects, including its Lindberg oil sands deposit. Due to low natural gas prices, the company will hold off on further investments in its gas properties this year.
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INNERGEX RENEWABLE ENERGY $10.27 (Toronto symbol INE; Shares outstanding: 81.3 million; Market cap: $835.8 million; TSINetwork Rating: Extra Risk; Dividend yield 5.7%; www.innergex.com) owns and operates 25 hydroelectric and wind power facilities in Quebec, Ontario, B.C. and Idaho.
Innergex gets about 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 power-purchase 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 about 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 power-purchase 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. $6.20 (Toronto symbol AQN; Shares outstanding: 136.1 million; Market cap: $843.8 million; TSINetwork Rating: Extra Risk; Dividend yield: 4.5%; 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 sewage treatment 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 24.4% 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 83,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 130,000 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 24.4% 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 83,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 130,000 customers in New Hampshire.
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ISHARES AUSTRALIA INDEX FUND $23.75 (New York symbol EWA; buy or sell through brokers), is an ETF that holds the 73 largest Australian stocks. Its MER is 0.52%.
The fund’s top holdings include BHP Billiton, 13.7%; Commonwealth Bank of Australia, 9.2%; Westpac Banking Corp., 7.5%; Australia and New Zealand Banking Group, 6.9%; National Australia Bank, 6.1%; Woolworths, 3.6%; Rio Tinto, 3.5%; Wesfarmers, 3.5%; Newcrest Mining, 3.0%; and Woodside Petroleum, 2.8%.
Australia benefits from its stable banking and political systems. It is also rich in natural resources, and its exports are in high demand in Asian markets, including India and China.
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The fund’s top holdings include BHP Billiton, 13.7%; Commonwealth Bank of Australia, 9.2%; Westpac Banking Corp., 7.5%; Australia and New Zealand Banking Group, 6.9%; National Australia Bank, 6.1%; Woolworths, 3.6%; Rio Tinto, 3.5%; Wesfarmers, 3.5%; Newcrest Mining, 3.0%; and Woodside Petroleum, 2.8%.
Australia benefits from its stable banking and political systems. It is also rich in natural resources, and its exports are in high demand in Asian markets, including India and China.
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RIOCAN REAL ESTATE INVESTMENT TRUST $27.12 (Toronto symbol REI.UN; Units outstanding: 267.0 million; Market cap: $6.9 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.riocan.com) reported revenue of $988 million in 2011, up 12.0% from $882 million in 2010. That’s mainly due to the 38 new malls the trust bought during the year. (In all, RioCan purchased $1.1 billion of new properties in 2011.) Cash flow per unit rose 7.5%, to $1.43 from $1.33.
RioCan yields 5.1%. It paid out 96.5% of its cash flow in 2011. However, 22% of its investors prefer to receive new units instead of cash. On this basis, the actual payout was just 74.8% of its cash flow.
RioCan is still our #1 safety-conscious buy for 2012.
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RioCan yields 5.1%. It paid out 96.5% of its cash flow in 2011. However, 22% of its investors prefer to receive new units instead of cash. On this basis, the actual payout was just 74.8% of its cash flow.
RioCan is still our #1 safety-conscious buy for 2012.
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IBM $197 (New York symbol IBM; Shares outstanding: 1.2 billion; Market cap: $236.4 billion; TSINetwork Rating: Above Average; Dividend yield: 1.5%) is now developing software that helps prevent online data theft.
The company’s analytics software already helps businesses and governments quickly gather and analyze a wide range of data. This technology is used in many ways, from easing traffic congestion to making power grids more efficient.
IBM recently demonstrated software that can detect and prevent unauthorized access to databases by analyzing certain patterns, such as failed login attempts. This product could be in huge demand, particularly in light of recent high-profile attacks on U.S. government websites.
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The company’s analytics software already helps businesses and governments quickly gather and analyze a wide range of data. This technology is used in many ways, from easing traffic congestion to making power grids more efficient.
IBM recently demonstrated software that can detect and prevent unauthorized access to databases by analyzing certain patterns, such as failed login attempts. This product could be in huge demand, particularly in light of recent high-profile attacks on U.S. government websites.
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