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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SPDR S&P 500 ETF $119.95 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group. The index’s highest-weighted stocks are Exxon Mobil, Microsoft, Procter & Gamble, Apple, JP Morgan Chase & Co., Johnson & Johnson, IBM, Chevron, General Electric, Coca Cola, Google and AT&T. The fund’s expenses are just 0.10% of its assets....
ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.26 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of assets. The fund’s MER is 0.50%. It yields 5.3%. The fund’s top holdings are CIBC, 8.0%; Bank of Montreal, 6.4%; National Bank, 5.7%; TD Bank, 5.6%; Telus, 5.2%; Bank of Nova Scotia, 4.6%; Manitoba Telecom, 4.5%; IGM Financial, 4.2%; Royal Bank, 4.0%; Enbridge, 3.5%, TMX Group, 3.5%; and TransCanada Corp., 3.3%. The fund holds 60.1% of its assets in financial stocks. Utilities are next, at 23.0%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....
ISHARES S&P/TSX 60 INDEX FUND $18.24 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) (units split 4-for-1 in August 2008) is a good, low-fee way to buy the top stocks and income trusts on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include, such as Yellow Pages Income Fund. The index’s top holdings are: Royal Bank, 7.2%; TD Bank, 5.9%; Bank of Nova Scotia, 5.2%; Suncor Energy, 4.7%; Barrick Gold, 4.5%; Potash Corp., 4.0%; Canadian Natural Resources, 3.7%; Bank of Montreal, 3.1%; Goldcorp, 3.1%; CN Railway, 2.8%; CIBC, 2.8%; Research in Motion, 2.5%; and Trans- Canada Corp., 2.4%....
CANADIAN REIT $32 (Toronto symbol REF.UN; Units outstanding: 66.6 million; Market cap: $2.1 billion; SI Rating: Extra Risk; Dividend yield: 4.4%; www.creit.ca) owns over 160 properties. Its holdings include retail, industrial and office buildings located across Canada, and in the Chicago area. In all, these properties contain over 22 million square feet of leasable area. Canadian REIT’s occupancy rate is 97.1%. In the three months ended September 30, 2010, Canadian REIT’s revenue was $80.3 million. That’s up 1.6% from $79 million a year earlier. Cash flow per unit was unchanged at $0.57. The trust raised its monthly distribution by 2.2%, to $0.1175 from $0.1150, with the June 2010 payment. This is the ninth consecutive year that the REIT has raised its distribution. The units now yield 4.4%....
RIOCAN REAL ESTATE INVESTMENT TRUST $23.15 (Toronto symbol REI.UN; Units outstanding: 250.9 million; Market cap: $5.8 billion; SI Rating: Average; Dividend yield: 6.0%; www.riocan.com) is Canada’s largest REIT. RioCan has interests in 289 shopping malls across Canada, including 11 under development. In all, these properties contain over 66 million square feet of leasable area. The trust has a 97.1% occupancy rate. RioCan is Canada’s largest owner of neighbourhood shopping centres, which are enclosed malls in smaller cities. But the trust’s strongest growth is in its “New Format” malls, in the suburbs of larger cities. RioCan is Canada’s largest owner of these malls, which have lots of parking and room for new building, and mainly consist of big-box stores, or large stores that are usually part of a chain. RioCan also owns an 80% interest in 28 malls in the U.S. through joint ventures. As well, it owns 14% of Cedar Shopping Centers, a U.S. REIT that owns malls anchored by supermarkets and drug stores, mainly in the northeastern U.S....
GUGGENHEIM ALPHASHARES CHINA SMALL CAP INDEX ETF $32.72 (New York Exchange symbol HAO; buy or sell through brokers; www.guggenheimfunds.com) is the new name of Claymore/AlphaShares China Small Cap Index ETF. Guggenheim Partners bought Claymore Group in 2009, and has renamed the Claymore funds. This ETF aims to track the AlphaShares China Small Cap Index. This index is made up of all investable Chinese stocks with market caps between $200 million and $1.5 billion. The $496.6-million fund’s top holdings are PICC Property & Casualty, 2.6%; Focus Media Holdings, 2.1%; Air China, 2.0%; Weichai Power Co., 1.9%; Yangzijiang Shipbuilding, 1.8%; Cosco Pacific, 1.8%; Brilliance China Automotive Holdings, 1.8%; Shandong Wiegao Group Medical, 1.6%; Sohu.com, 1.6%; and ZTE Corp., 1.5%....
SPDR S&P CHINA ETF $83.37 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com), is an exchange-traded fund that aims to track the S&P China BMI Index. This index is made up of all of the publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 147 stocks. The $730.3-million fund’s top holdings are: China Construction Bank, 7.4%; China Mobile, 6.8%; Industrial & Commercial Bank of China, 5.2%; Bank of China, 4.4%; China Life Insurance, 4.4%; CNOOC Ltd., 4.2%; Baidu Inc., 4.0%; PetroChina, 3.4%; Tencent Holdings Ltd., 2.6%; and China Petroleum & Chemical, 2.2%. The fund’s breakdown by industry is as follows: Financials, 33.6%; Oil and Gas, 14.5%; Information Technology, 11.4%; Telecommunication Services, 8.9%; Consumer Discretionary, 7.2%; Basic Materials, 5.6%; Consumer Staples, 5.2%; Utilities, 2.0%; and Health Care, 1.0%....
BCE INC. $33.76 (Toronto symbol BCE; Shares outstanding: 755.6 million; Market cap: $25.5 billion; SI Rating: Above Average; Dividend yield: 5.4%; www.bce.ca) provides telephone and Internet services in Ontario and Quebec. It also sells wireless and satellite-TV services across Canada. In the three months ended June 30, 2010, BCE’s revenue rose 3.3%, to $4.4 billion from $4.3 billion in the prior year. Before one-time items, earnings rose 32.8%, to $0.77 from $0.58. Strong demand for wireless and television services offset falling revenue from the company’s traditional telephone operations. As well, the company bought “The Source” chain of electronics stores in 2009, as well as the remaining 50% of the Virgin Mobile Canada joint venture. BCE is buying full control of CTVglobemedia, the private company that owns the 27-station CTV Television Network. CTVglobemedia also owns 30 specialty channels, 34 radio stations and The Globe and Mail newspaper. Right now, BCE owns 15% of CTVglobemedia. It will pay $1.3 billion for the remaining 85%. Following the purchase, BCE will sell 85% of The Globe and Mail to Woodbridge Co....
In just under two months, on January 1, 2011, you will gain an additional $5,000 of contribution room in your tax free savings account (TFSA). The federal government first made tax free savings accounts (TFSAs) available to investors in January 2009. These accounts let you earn investment income — including interest, dividends and capital gains — tax free. You could contribute $5,000 in 2009 to start your tax free savings account. Every year, you can contribute an additional $5,000 to your TFSA. If you contribute less than $5,000 to your TFSA in any given year, you can carry the difference forward. That means your TFSA contributions for 2009 and 2010 total $10,000, rising to $15,000 in 2011, $20,000 in 2012 and so on....
Members of our Inner Circle service often ask for our advice on Canadian stock picks they are thinking of buying that we don’t cover in our newsletters. These companies range from the most speculative penny mines to large multinational corporations. For example, an Inner Circle member recently asked for our advice on athletic-clothing maker lululemon athletica. The Canadian stock pick’s revenue and earnings rose sharply in its latest quarter, but it operates in a very competitive market. To give you a sense of how the service works — and how you can profit from it — I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it. Q: Pat: what do you think of lululemon as a stock? My wife loves their clothes....