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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BANK OF NOVA SCOTIA $59.55 (Toronto symbol BNS: Shares outstanding: 1.0 billion; Market cap: $61.9 billion; TSINetwork Rating: Above Average; Div. yield: 3.5%, www.scotiabank.com) is the third largest of Canada’s five big banks, with assets of $541.3 billion. In the three months ended January 31, 2011, the bank earned a record $1.2 billion, or $1.07 a share. That’s up 18.8% from $988 million, or $0.91 a share, a year earlier. Bank of Nova Scotia continues to set aside less money to cover bad loans because of the improving economy. Loan-loss provisions fell 27.5%, to $269 million from $371 million a year earlier....
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. In the three months ended December 30, 2010, the stock pick’s sales fell 1.0%, to $539.5 million from $545.3 million a year earlier. The home furnishing division’s sales declined 19.6%. That’s mainly because of slower sales in the U.S. The juvenile division’s sales dropped 5.0%, mainly due the rising Canadian dollar and lower sales in the U.S. However, the stock pick’s recreational/leisure division’s sales climbed 17.2%, due to strong sales of new products, including a new Schwinn bike....
RioCan Real Estate Investment Trust, symbol REI.UN on Toronto, operates 297 retail properties in Canada, mainly outdoor shopping malls. It also owns 31 malls in the U.S. through joint ventures, including its partnership with Cedar Shopping Centers Inc. (New York symbol CDR). RioCan owns 80% of the joint venture with Cedar, and 14% of Cedar itself. In 2010, the real estate investment trust’s revenue rose 17.0%, to $887.0 million from $758.0 million in 2009. The real estate investment trust’s earnings jumped 166.0%, to $303.0 million from $113.9 million in 2009. Earnings per unit rose 151.0%, to $1.23 from $0.49, on more units outstanding. The increase was mostly due to a one-time non-cash reversal of future income tax charges. In 2010, RioCan acquired 19 properties in Canada and 29 in the U.S. for a total of $986 million....
RuggedCom, symbol RCM on Toronto, makes computer networking equipment that is used in harsh environments. The small cap stock’s products include ethernet switches, network routers, wireless devices, and software. The company’s products are designed to reliably operate under high levels of electromagnetic interference. They can also cope with wide variations in temperature and humidity, as well as vibration and exposure to dust. They also work while exposed to such things as corrosive gases and water. In the three months ended December 31, 2010, RuggedCom’s revenue was $25.6 million. That’s up 24.2% from $20.6 million a year earlier. Sales to clients in the transportation industry jumped 76%, and sales to the electric-power market rose 32%....
There’s no limit to the types of investment questions Inner Circle members can ask Pat and his team of investment experts. Members often ask for Pat’s advice on Canadian stock market investments they are thinking of buying that we don’t cover in our newsletters. These companies range from large multinational firms to the most speculative penny mines. Members also frequently ask about specific investment strategies, or how headline-making events could affect their portfolios. For example, the TMX Group, which operates a number of Canadian stock exchanges, recently announced that it had agreed to merge with the London Stock Exchange (LSE). An Inner Circle member recently asked for our recommendation on TMX Group, and what impact such a merger would have on Canadian investors. To give you a sense of how the Inner Circle works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it....
Aeropostale Inc., symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 965 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 47 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children. In the fiscal year ended January 29, 2011, Aeropostale’s sales rose 7.6% to $2.4 billion from $2.2 billion the previous year. Same-store sales rose only 1%, compared to a gain of 10% in the prior year, but online sales rose 24.2% to $160.2 million from $129.0 million. The company’s earnings rose 0.8%, to $231.3 million from $229.5 million. Earnings per share rose 9.7%, to $2.49 from $2.27, on fewer shares outstanding. In the latest fiscal year, Aeropostale bought back 10.3 million shares for $257.5 million....
Transcontinental Inc., symbol TCL.A on Toronto, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines. Transcontinental also has over 250 web sites. These web sites will become more important to the Canadian stock’s growth in the next few years, as advertisers spend more on the Internet than print products. In the three months ended January 31, 2011, Transcontinental earned $29.9 million, or $0.37 a share. That’s up 10.3% from $27.1 million, or $0.34 a share, a year earlier. These figures exclude writedowns and other non-recurring items. On this basis, the Canadian stock’s latest earnings beat the consensus estimate of $0.36 a share. Revenue rose 3.6%, to $530.1 million from $511.6 million....
J.C. Penney, symbol JCP on New York, operates 1,100 department stores in the U.S. and Puerto Rico. It also sells its goods over the Internet. In its 2010 fiscal year, which ended January 29, 2011, the U.S. stock pick’s sales rose 1.2%, to $17.8 billion from $17.6 billion in 2009. Its same-store sales increased 2.5%. The company launched a number of new brands in 2010. As well, online sales rose 4.4%, to $1.5 billion from $1.3 billion. The stock pick’s earnings per share jumped 48.6%, to $1.59 from $1.07 in 2009. Penney is doing a good job of managing its inventories. That cuts the need for costly clearance sales. It is also renovating about a third of its stores, including building more in-store boutiques devoted to specific brands....
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, based on our stock market research. Each Investor Toolkit update gives you a fundamental piece of investment strategy, and shows you how you can put it into practice right away. Tip of the week: “Goodwill should play an important role in your stock market research” When we’re looking for stocks to recommend in our newsletters and investment services, we put a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet....
Canada Bread Company Ltd., symbol CBY on Toronto, is Canada’s second-largest producer of baked goods after Weston Bakery. It also makes specialty pastas and sauces. The company’s main brands include Dempster’s, New York Bakery, Tenderflake, and Olivieri. Earnings fell 21.3% to $61.0 million, or $2.40 a share, in the fiscal year ended December 31, 2010. In 2009, it earned $77.5 million or $3.05 a share. If you exclude one-time items, such as restructuring expenses and costs to build a new bakery in Hamilton, Ontario, earnings per share fell 10.9% to $2.85 from $3.20. The new facility is expected to begin operating by July 1, 2011. Sales fell 6.9% to $1.6 billion from $1.7 billion. The strength of the Canadian dollar against the British pound and the U.S. dollar lowered the contribution of the company’s operations in the U.K. and the U.S. Prices of its ingredients, especially wheat, are also rising. However, the company is increasing its selling prices to offset rising costs....