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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We receive lots of interesting questions from members of our Inner Circle service. Many zero in on individual stocks, wanting to know whether or not a particular company is a good stock market investment. This week, we answered a question on a stock with a well-known name. Q: Hi Pat and team: Can you please tell me your take on Costco? Your advice makes for great bedtime reading in our house! A: Costco Wholesale Corp., symbol COST on Nasdaq (Shares outstanding: 443.6 million; Market cap: $33.2 billion; www.costco.com), owns and operates warehouse-sized stores that sell a wide variety of consumer goods. It also sells merchandise online....
VANGUARD EMERGING MARKETS ETF $43.93 (New York symbol VWO; buy or sell through brokers) aims to track the MSCI Emerging Markets Index, which is made up of common stocks of companies located in emerging markets around the world. The fund has an MER of 0.22%. The fund’s top holdings are Petroleo Brasileiro SA (Brazil: oil and gas), Vale SA (Brazil: mining), Samsung Electronics (South Korea: electronics), Gazprom (Russia: gas utility), China Mobile (China: wireless), Taiwan Semiconductor (Taiwan: computer chips), America Movil SAB de CV (Latin America: wireless), Itau Unibanco Holding SA (Brazil: banking), Industrial & Commercial Bank of China, and CNOOC Ltd. (China: oil and gas). The $65.0-billion Vanguard Emerging Markets ETF’s breakdown by country is as follows: China (17.4%), South Korea (15.2%), Brazil (15.1%), Taiwan (10.9%), South Africa (7.4%), India (7.3%), Russia (7.1%), Mexico (4.4%), Malaysia (3.2%), Indonesia (2.8%), Thailand (1.9%), Poland (1.7%), Chile (1.6%), Turkey (1.3%), Colombia (0.6%), Philippines (0.6%), Peru (0.5%), Czech Republic (0.4%), Hungary (0.4%) and Egypt (0.2%)....
BANK OF NOVA SCOTIA $54.53 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $58.1 billion; TSINetwork Rating: Above Average; Div. yield: 3.8%, www.scotiabank.com) is the third largest of Canada’s five big banks, with assets of $567.7 billion. Excluding one-time items, the bank earned $1.14 a share in the quarter ended July 31, 2011. That’s up 16.3% from $0.98 a share a year earlier. The bank continues to set aside less money to cover bad loans because of the improving economy. Loan-loss provisions fell 12.0%, to $243 million from $276 million a year earlier. The Canadian banking division’s earnings rose just 4.1%, due to strong competition for depositors. However, the international-banking division’s earnings jumped 20.7%, thanks to strong demand for business and consumer loans. As well, Bank of Nova Scotia recently bought Uruguay’s fourth-largest private bank, and this acquisition also contributed to the higher earnings....
VANGUARD GROWTH ETF $60.58 (New York symbol VUG; buy or sell through brokers) aims to track the MSCI U.S. Prime Market Growth Index, a broadly diversified index that mainly consists of stocks of large U.S. companies. The fund has an MER of just 0.14%. The $21.0-billion fund’s top holdings are Apple Inc., IBM, Google, Coca-Cola, Microsoft, Philip Morris International, Oracle Corp., Schlumberger, Wal-Mart and PepsiCo. Vanguard Growth ETF is broken down by economic segment as follows: Information Technology (29.3%), Consumer Discretionary (17.0%), Consumer Staples (12.3%), Energy (10.9%), Industrials (11.1%), Health Care (10.9%), Financials (4.8%), Materials (4.5%), Telecommunication Services (0.7%) and Utilities (0.2%)....
The state of the U.S. economy continues to worry many investors. Some are wondering if they should dump their U.S. stocks for fear that the U.S. stock market will move further down due to rising debt and unproductive government policies. We think this would be a mistake. In fact, our investment advice is that you should keep at least one fifth of your portfolio in U.S. stocks. Here’s why. The troubles that have stirred markets recently – like the downgrade in the U.S. debt rating – are much different from great house-price collapse in the U.S. in 2007-2009. Today there is no boom that could deflate and bring down the economy....
Some investors rely on technical analysis (or chart reading) when they’re picking stocks. That’s because relying on charts seems much simpler
Lower consumer confidence and higher gas prices are cutting U.S. store traffic. So, successful retailers will need to have a well-established niche and quality name-brand merchandise to attract customers. We also think it’s important, when investing in stocks in the retail industry, to focus on chains that can adapt quickly and prosper in the ever-changing economic landscape. In the latest issue of Wall Street Stock Forecaster, we updated our advice on one consumer stock that has a dominant position in its market. PetSmart Inc. (Nasdaq symbol PETM) is the biggest pet-supply chain in the U.S. In all, it operates 1,197 pet stores in the U.S. and Canada. It also has 185 in-store PetsHotels, which look after pets while their owners are away....
Precision Drilling Corp., Toronto symbol PD, provides contract-drilling services to oil and gas producers. The company owns 360 drilling rigs in Canada, the U.S. and Mexico. We analyze Precision in The Successful Investor, our newsletter that recommends stock picks for conservative investors. Precision recently converted from an income trust to a regular corporation. Investors received one common share for each trust unit they held. The change was in response to Ottawa’s new tax on income-trust distributions, which came into effect on January 1, 2011....
Dorel Industries, symbol DII.B on Toronto, makes a wide range of products: including bicycles; ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs (including Eddie Bauer and Disney Baby licensed products); home furnishings, including chairs, tables, bunk beds, futons and step stools; and recreational products. Dorel is one of the Canadian stocks we analyze in Stock Pickers Digest, our newsletter that recommends the stocks for the part of your portfolio you devote to aggressive investing. In the three months ended June 30, 2011, Dorel’s sales rose 1.9%, to $619.0 million from $607.7 million a year earlier (all figures except share price in U.S. dollars). The Canadian stock’s recreational/leisure division’s sales rose 15.9%, mainly on strong demand for bicycles. That offset lower sales in the other divisions....
Reductio ad absurdum (Latin: “reduction to the absurd”) is a form of argument that goes back thousands of years, to Aristotle and before. It works like this: to prove a proposition is false, you simply show that its logical implications lead to absurd conclusions. This can be a great time saver for investors.