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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In the August 5, 2011, Wall Street Stock Forecaster hotline, we updated our buy/sell/hold advice on one of our long-time top stock picks, Kraft Foods Inc. (symbol KFT on New York). Kraft is the world’s second-largest food company, after Switzerland-based Nestle. Its owns many well-known brands, including Philadelphia cream cheese, Maxwell House coffee, and Oscar Mayer meats
Top stock picks: Kraft breakup could unlock hidden value
Kraft just announced plans to break itself into two separate, publicly traded companies. One company will sell snack foods, such as Oreo cookies, Cadbury chocolates, Trident gum and Tang powdered beverages. This business will have annual sales of $32 billion, with 42% of that coming from fast-growing markets, such as China, Brazil and India....
Texas Instruments Inc., symbol TXN on New York, is shifting its focus from digital chips for cellphones to faster-growing analog chips, which convert sound and images into digital signals that computers can understand. We analyze Texas Instruments in Wall Street Stock Forecaster, our newsletter that recommends companies for investors who invest in stocks in the U.S. markets. Revenue and earnings declined in the 2011 second quarter compared with a year earlier. This was mainly due to the disruption caused by the Japanese earthquake/tsunami in March. The earthquake reduced production at the company’s Japanese factories, and cost it $50 million to repair the damage....
Micromet Inc., $4.82, symbol MITI on Nasdaq is focused on discovering, developing and marketing new antibody-based cancer treatments.
Canadian National Railway Co., Toronto symbol CNR, operates Canada’s largest freight-rail network and serves 16 U.S. states. We analyze CN Rail in The Successful Investor, our investment advisory that recommends the best Canadian stocks for conservative investors. In the three months ended June 30, 2011, the Canadian stock’s earnings rose 0.7%, to $538.0 million from $534.0 million. Earnings per share rose 4.4%, to $1.18 from $1.13, on fewer shares outstanding....
During times of market turbulence like we’ve seen in the past few days, it’s easy for investors to panic and make mistakes. Here are three common ones we’ve noticed over the years:
- Overanalyzing: During the recent market turbulence, the media has been full of economic statistics and analyses of government economic policies. You may feel tempted to try to figure out what the economy will do next, and invest accordingly. But economic forecasting is hard enough. When you try to forecast market trends based on economic forecasts, you are virtually certain to fail. As Peter Lynch (the world’s top mutual-fund manager from the 1970s through the early 1990s) wrote, if you spend 12 minutes a year worrying about the economy, you’ve wasted 10 minutes.
Our general view is that if the U.S. tries to tax its way out of the economic hole it’s in, it might relieve uncertainty about its debt, but it would also depress growth potential. That’s because higher taxes would further scare off business investment. We could fall into 1970s-style stagflation—high interest rates, weak growth and high unemployment....
One of the key issues we examine in this new stock market investing report is how to decide whether you should invest through a full service stock broker
Hidden value is one of the key factors we look for when we’re looking for winning stock picks to recommend in our investment advisories, including Wall Street Stock Forecaster, our newsletter for investing in the U.S. markets. By hidden value, we mean valuable assets that are not getting the attention they deserve from investors. Here’s how that can translate into making winning stock picks: When a company’s assets are wholly or partially hidden, the stock trades for less than it’s really worth, so you get to buy at a bargain price....
When you learn more about stock market investment, you’ll realize there are two main ways a company can distribute its profits to shareholders. It can buy back its own shares, or it can pay dividends. Both dividends and buybacks pay off for investors. Here are 3 reasons why:
- A company boosts its per-share profit by buying back its shares back, because profits get divided among fewer shares.
- Boosting per-share profits can also push up share prices. Plus, buybacks let you defer taxes on those capital gains. That’s because you only pay capital-gains taxes when you sell. What’s more, you’ll pay tax at half the rate on capital gains than you would on ordinary income. And you can offset capital gains with capital losses.
- Dividends have tax advantages. You’ll pay tax on dividends in the year you get them, if you hold the shares outside your RRSP. However, dividends on Canadian companies receive favourable tax treatment in Canada, thanks to the dividend tax credit.
The federal government’s tax on income-trust distributions has now been in effect for a little more than six months, since January 1, 2011. However, Ottawa feels the income-trust business structure is still appropriate for real estate investment trusts (REITs), so it has exempted REITs from the new tax. That’s great news for Canadian income seekers. What’s more, as we predicted in our Canadian Wealth Advisor newsletter, most REITs have moved up in the past year—including our recommendations. That’s because REITs’ high yields have attracted a lot of investor attention as trusts converted to corporations, or cut their distributions in response to the new tax....
International Business Machines Corp., symbol IBM on New York, is the world’s biggest computer company. In the past few years, IBM has shifted its focus from making computers to designing computer systems and managing them on behalf of clients. We analyze IBM in Wall Street Stock Forecaster, our newsletter that gives you stock trading information and advice on U.S. companies. In the three months ended June 30, 2011, IBM earned $3.7 billion. That’s up 8.2% from $3.4 billion a year earlier. Earnings per share rose 14.9%, to $3.00 from $2.61, on fewer shares outstanding. If you exclude unusual items, mainly costs to integrate acquisitions, IBM’s earnings per share rose 17.9%, to $3.09 from $2.62. On this basis, the latest earnings beat the consensus estimate of $3.03 a share....