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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Small cap stocks are companies with a “market cap” (the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. (In the latest Wall Street Stock Forecaster, we updated our buy/sell/hold advice on a former U.S. small cap stock that has jumped that’s 89.1% since we first recommended it in May 2007. At the time, the company’s market cap was $1.6 billion. But it has more than doubled since, to $3.4 billion today. See below for further details.) Small cap stocks have the potential for strong gains, but they are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. That’s why we view even the best small cap stocks as aggressive, and advise investors not to overindulge in small caps....
Saputo Inc. (symbol SAP on Toronto) is Canada’s largest producer of dairy products, including milk, butter and cheese. The company also makes snack cakes and tarts. Aside from Saputo, the Canadian stock pick’s main brands include Neilson, Stella and Dairyland. The company also has operations in the U.S., Argentina and Europe. Saputo is one of the stock picks we analyze in our Successful Investor newsletter. In its third quarter, which ended December 31, 2010, Saputo earned $111.8 million, or $0.55 a share. That fell short of the consensus earnings forecast of $0.57 a share. Even so, the latest earnings are up 7.2%, from $104.3 million, or $0.50 a share, a year earlier. The company reported revenue of $1.54 billion in the latest quarter, up 3.0% from $1.48 billion....
ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $21.54 (Toronto symbol AP.UN; Units outstanding: 42 million; Market cap: $904.4 million; TSINetwork Rating: Extra Risk; Dividend yield: 6.1%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 6.3 million square feet of leasable area. Class I refers to 19th and early 20th-century light industrial buildings that have been restored and converted to office and retail space. These properties usually feature high ceilings, natural light, exposed beams, interior brick and hardwood floors. The trust added four new properties in 2010. It now has 60 mainly Class I properties in Toronto (these contain 49.4% of Allied’s leasable area). It also has 10 Class I buildings in Montreal (34.2%), eight in Winnipeg (6.4%), five in Quebec City (2.9%), two in Kitchener-Waterloo (4.2%), two in Calgary (1.4%) and one in Vancouver (1.5%)....
ISHARES DEX UNIVERSE BOND INDEX FUND $29.48 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. This index consists of a wide range of investment-grade Canadian government and corporate bonds with terms to maturity of more than one year. The 406 bonds in the portfolio have an average term to maturity of 9.05 years. The fund’s MER is 0.30%. The bonds in the index are 69.6% government and 30.4% corporate. The fund sticks with high-quality government bonds from issuers such as Canada Housing Trust, Government of Canada and Province of Ontario, plus high-quality corporate bonds from issuers such as Bank of Montreal, TransCanada Pipelines, Bank of Nova Scotia and Bell Canada....
ISHARES DEX SHORT TERM BOND INDEX FUND $28.78 (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 221 bonds with an average term to maturity of 2.86 years. Top issuers include the Government of Canada, Canada Housing Trust and the Province of Ontario. The bonds in the index are 69.2% government and 30.8% corporate. The fund’s MER is 0.25%....
TELUS CORP. $47.65 (Toronto symbol T.A; Shares outstanding: 320.7 million; Market cap: $15.6 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%; www.telus.com) is Canada’s second-largest telephone company, after BCE Inc. Telus has 6.9 million wireless subscribers across Canada. Its traditional phone business has 3.8 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.2 million Internet subscribers. Its new “Telus TV” service, which operates through phone lines, has just 266,000 subscribers. In the three months ended September 30, 2010, Telus’ earnings rose 6.0%, to $0.89 a share from $0.84 a year earlier. The company earned higher profits from wireless and Internet services. That offset a decline in local and long-distance customers. Telus gets 51% of its earnings from wireless. It added 53,000 wireless subscribers in the latest quarter, up 22.4%. High-profit-margin smartphones account for 28% of its wireless subscribers, up from 18%....
If you haven’t yet visited our new Facebook page — www.tsinetwork.ca/facebook — you really should. We guarantee the free, risk-cutting investing advice we post there will make you a better investor. We hope our Facebook page will become a place where Canadian investors go to share their thoughts on a range of financial topics. If you like the information and advice we post on our Facebook page, you can easily let us know. And of course, we welcome your thoughts if you disagree, or have suggestions for improvements. To make our Facebook page as interactive as possible, we’ve added discussion boards. They let you discuss today’s most important financial issues with friends and other investors, including Pat and his investment team. You also get to read other investors’ responses....
Adding a stock market pick from the Consumer sector can add stability to your portfolio. That’s because these companies sell items, like food, that consumers must buy regardless of the direction of the economy. The best consumer stocks have built brands that have strong customer loyalty and produce steady, predictable revenue streams. In a just-published issue of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks, we’ve updated our buy/sell/hold advice on a stock market pick that has a number of strong brands, Kraft Foods Inc. (symbol KFT on New York). Kraft is the world’s second-largest food company, after Switzerland-based Nestle. This stock market pick cut its costs during the recession, including selling or discontinuing less-profitable brands, closing plants and cutting jobs. It has used these savings to improve the quality of its existing products and develop new ones....
Here are three common errors most investors make when stock market investing. All three can seriously hinder your portfolio’s long-term results. (You can get Pat McKeough’s latest lower-risk investing strategies in his new free report, Stock Market Investing Strategy: Pat McKeough’s Conservative Investing Guide for Making Money & Cutting Risk. Click here to download your copy right away.)
- Disregarding subtle signs of high stock market investing risk: These include an unusually high dividend yield or an unusually low p/e (the ratio of a stock’s price to its per-share earnings). High yields and low p/e’s are good, but only within limits....
Canadian National Railway Co. (Toronto symbol CNR) operates Canada’s largest freight rail network, and serves 16 U.S. states. CN is one of the Canadian stock picks we analyze in our Successful Investor newsletter. In 2010, CN earned $2.1 billion, or $4.48 a share. That’s up 13.5% from $1.8 billion, or $3.92 a share, in 2009. Excluding one-time items in both years, such as an after-tax gain of $131 million on the sale of a southern Ontario rail line, the company earned $1.9 billion, up 28.7% from $1.5 billion in 2009. Earnings per share rose 29.6%, to $4.20 from $3.24, on fewer shares outstanding. Revenue rose 12.6% to $8.3 billion from $7.4 billion in 2009. Sharply higher freight volumes were the main reason for the revenue increase. The company also raised its fuel surcharges and shipping rates....