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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Calian Technologies, symbol CTY on Toronto, operates in two areas: the business and technology services division, which accounts for 74% of Calian’s revenue, provides engineers, health-care workers and other skilled professionals to clients on a contract basis. The small cap stock’s systems-engineering division contributes the remaining 26% of revenue, and sells hardware and software that is used for testing, operating and managing satellite and other communications systems. In the three months ended March 31, 2011, the small cap stock’s revenue rose 11.9%, to $59.4 million from $53.1 million a year earlier. Earnings rose 6.5%, to $3.3 million from $3.1 million. Earnings per share rose 5.0%, to $0.42 from $0.40, on more shares outstanding. Calian earned higher profit margins on the business and technology service division’s contracts. That pushed up the company’s overall earnings. The strong Canadian dollar held back the systems-engineering division’s earnings....
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Aeropostale Inc., symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 974 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 57 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children. We analyze Aeropostale in Stock Pickers Digest, our newsletter for aggressive stock trading. In the three months ended April 30, 2011, Aeropostale’s sales rose 1.2%, to $469.2 million from $463.6 million. Same-store sales declined 7%, compared with an increase of 8% a year earlier. Sales from the company’s e-commerce business jumped 18.5%, to $28.2 million from $23.8 million....
DUNDEE REIT, symbol D.UN on Toronto, owns and manages 14.7 million square feet of office, industrial and retail space, including 88 office buildings and 49 industrial properties. The real estate investment trust’s occupancy rate is 96.1%. In the three months ended March 31, 2011, Dundee’s revenue rose 57.4%, to $91.0 million from $57.8 million a year earlier. Most of the rise came from properties the trust recently purchased. The best way to look at a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 72.9% in the latest quarter, to $28.8 million from $16.6 million. Cash flow per unit rose just 1.9%, to $0.55 from $0.54, due to more units outstanding. (The trust issued new units to pay for the acquired properties.)...
ISHARES DEX UNIVERSE BOND INDEX FUND $29.98 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. The 473 bonds in the portfolio have an average term to maturity of 9.02 years. The fund’s MER is 0.32%. The bonds in the index are 68.8% government and 31.2% corporate. The fund yields 3.8%, compared to the Short Term Bond Fund’s 3.2%. Its yield to maturity is 3.02%, 1.00% above the Short Term Fund. That reflects the added risk of holding long-term bonds....
ISHARES DEX SHORT TERM BOND INDEX FUND $28.98 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 252 bonds with an average term to maturity of 2.73 years. The bonds in the index are 67.4% government and 32.6% corporate. The fund’s MER is 0.26%. iShares DEX Short Term Bond Index Fund yields 3.2%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. But as a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields....
MANITOBA TELECOM SERVICES INC. $34.01 (Toronto symbol MBT; Shares outstanding: 64.7 million; Market cap: $2.3 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.mts.ca) gets 53% of its revenue from its MTS division, which mainly sells traditional and wireless telephone services to consumers in Manitoba. The remaining 47% comes from its Allstream division, which sells communication services to businesses across Canada. In the three months ended March 31, 2011, Manitoba Telecom’s revenue fell slightly, to $439.3 million from $442 million a year earlier. The MTS division’s revenue rose 3%. Allstream’s revenue fell 4.5%, mostly because it is closing less-profitable businesses. Earnings per share jumped 59.5%, to $0.67 from $0.42. The gains came from cost-saving measures, including layoffs. More important, its restructured Allstream division is showing improved results....
Investors continue to be concerned about high debt levels in many European countries. That’s especially true of the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain). Portugal recently accepted a 78-billion euro ($107 billion Canadian) bailout package from the European Union and International Monetary Fund. That’s in addition to previous bailouts for Ireland (67 billion euros) and Greece (110 billion euros). Worries persist that Greece, in particular, may not be able to cut its spending enough to avoid defaulting on its debt.
Why we recommend that you focus on Canadian stocks—and limit your European holdings
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Macy’s Inc., New York symbol M, operates 850 Macy’s and Bloomingdale’s department stores in 45 states. It also sells goods over the Internet. Macy’s is one of the companies we cover in Wall Street Stock Forecaster, our newsletter for U.S. stock market investing. In its 2012 first quarter, which ended April 30, 2011, the company’s earnings jumped 233.3%, to $0.30 a share from $0.09 a year earlier. That easily beat the consensus earnings estimate of $0.18 a share....