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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A stop is an order to sell a stock if it falls to a specific price. If an investor owns an $18 stock, for example, they might tell their broker to sell it “on stop” if it hits $16. This may limit their losses if they paid more than $16; if they paid less, it may preserve some of their profits. However, the triggering of the $16 stop-loss order merely means the investor will automatically put in a sell-at-market order. There’s no guarantee that anyone will bid anywhere near $16 for the stock. As well, if other holders put in stops at $16, and multiple sell-at-market orders hit the market at the same time, everyone may wind up selling for far below $16. The funny thing about this stock trading strategy is that after all the stop-loss generated sell orders have been filled, the market may turn around and push the stock back up to $16 or higher....
H&R REAL ESTATE INVESTMENT TRUST $8 (Toronto symbol HR.UN; Units outstanding: 147.4 million; Market cap: $1.2 billion; SI Rating: Extra Risk) holds interests in 34 office properties, 124 industrial properties and 122 retail properties comprising over 41 million square feet. Over half of H&R’s properties are in the Greater Toronto Area. The rest are elsewhere in Ontario, Quebec, western Canada and the U.S. H&R now has an industry leading portfolio occupancy rate of 99.5%. Revenue in the three months ended September 30, 2008, was $153.2 million, up 6.1% from $144.7 million a year earlier. Cash flow per unit fell 2.6%, to $0.38 from $0.39, due to reorganization costs and more units outstanding. H&R’s units yield 9.0%. H&R REIT is a buy.
CANADIAN REIT $20.90 (Toronto symbol REF.UN; Units outstanding: 61.1 million; Market cap: $1.3 billion; SI Rating: Extra Risk) owns a portfolio of more than 160 income properties, consisting of retail, industrial and office properties across Canada and in the Chicago, Illinois, area. Occupancy is at 96.5%. Revenue in the three months ended September 30, 2008, was $79.6 million, up 10.0% from $72.3 million a year earlier. Cash flow per unit rose 7.4%, to $0.58 from $0.54. The units yield 6.5%. CREIT buys properties in prime locations, usually near major cities, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income....
RIOCAN REAL ESTATE INVESTMENT TRUST $14.30 (Toronto symbol REI.UN; Units outstanding: 221.2 million; Market cap: $3.2 billion; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 238 retail malls across Canada, including 14 under development. These contain over 58 million square feet of leasable area. Portfolio occupancy stands at 97.0%. RioCan’s revenue in the three months ended September 30, 2008, was $185.5 million, up 7.6% from $172.5 million a year earlier. Cash flow per unit rose 2.8%, to $0.37 from $0.36. RioCan’s annual distribution of $1.38 gives the units a yield of 9.7%. RioCan recently agreed to buy six shopping centres in Montreal for $67.5 million. The properties are over 99% occupied, and have an average lease term of 14.5 years....
MANULIFE FINANCIAL $20.15 (Toronto symbol MFC; Shares outstanding: 1.5 billion; Market cap: $30.1 billion; SI Rating: Above-Average) sells life and other forms of insurance, as well as mutual funds and investment-management services. Manulife operates in 19 countries and territories worldwide, and adminsters $385.3 billion in assets. In the three months ended September 30, 2008, Manulife’s earnings fell 52.7%, to $503 million, or $0.34 a share, from $1.1 billion, or $0.70 a share a year earlier. Sharp global stock-market declines reduced earnings in the latest quarter by $574 million. As well, losses due to exposure to defaulting issuers in turbulent credit markets totalled $253 million. This included losses on investments with Lehman Brothers ($156 million), AIG ($32 million) and Washington Mutual ($4 million)....
TRIMARK CANADIAN RESOURCES FUND $11.19 (CWA Rating: Aggressive) (Invesco Trimark, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. Tel: 1-800-631-7008; Web site: www.invescotrimark.com. Buy or sell through brokers.) includes firms we’d rate as Speculative in its top picks. However, we like Trimark Canadian Resources Fund’s value-seeking, conservative approach to picking stocks in the volatile resource sector. The $356.5-million fund’s top holdings are En- Cana Corporation, IAMGold Corp., West Fraser Timber Co. Ltd., Husky Energy, Nexen, Halma plc, Mayr-Meinhof Karton AG, Goldcorp Inc., Umicore S.A. and Central Fund of Canada. Trimark Canadian Resources Fund is broken down by sector as follows: Energy, 42.8%; Metals & Minerals, 31.5%; and Industrials, 10.2%....
TD RESOURCE FUND $17.79 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario, M5W 1P9. Tel: 1-800-386-3757; Web site:www.tdcanadatrust.ca. No load: deal directly with the bank.) invests in companies with superior asset bases, proven management and the ability to internally finance growth. The $129.1-million TD Resource Fund’s top stock holdings are mostly of “Average” quality or higher. The fund’s holdings include EnCana Corporation, Suncor Energy, Talisman Energy Inc., Goldcorp, Yamana Gold, Petro-Canada, Red Back Mining, BHP Billiton, Husky Energy, Chevron Corporation, Marathon Oil Corporation and Nexen. TD Resource Fund’s industry breakdown is: Energy, 59.3%; and Metals & Minerals, 38.5%. Its MER is 2.15%....
ISHARES CANADIAN BOND INDEX FUND $28.83 (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 diversified range of investment grade Canadian government and corporate bonds, with a term to maturity of more than one year. The index holds 71.8% government bonds and 26.9% corporate bonds. 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 and Bank of Nova Scotia....
ISHARES CANADIAN SHORT BOND INDEX FUND $28.85 (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 diversified range of investment grade federal, provincial, municipal and corporate bonds, with terms to maturity of between one and five years. Top issuers include the Government of Canada, Canada Housing Trust, Bank of Nova Scotia, the Province of Ontario and the Province of Quebec. The bonds in the index are 68.6% government bonds and 29.2% corporate bonds....
ENERPLUS RESOURCES FUND $26.42 (Toronto symbol ERF.UN; Shares outstanding: 165.3 million; Market cap: $4.4 billion; SI Rating: Speculative) is one of North America’s largest oil and gas trusts. Production is currently weighted 60% toward natural gas and 40% to oil. Enerplus continues to focus on building a well diversified portfolio balanced between low-risk, shorter- term assets that generate steady cash flow such as conventional oil and gas and shallow gas properties, and higher-risk, longer-term assets including tight gas and oil sands. Enerplus’ long-term debt of $522.8 million is low at 11% of market cap. To conserve cash, Enerplus lowered its quarterly distribution with the January, 2009 payment by 34.2%, to $0.25 from $0.38. It now yields 11.4%....