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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IVY ENTERPRISE FUND $4.23 invests in small and medium-sized companies. The $139.9 million fund has an MER of 2.38%. The fund’s overall choice of stocks doesn’t inspire our confidence. Its top holdings are Richie Brothers Auctioneers, National Instruments, CH Robinson Worldwide, Idexx Laboratories, Hibbett Sports, Astral Media, Canadian Western Bank, Daktronics Inc., Henry Schein and Stratasys Inc. The fund has lost 6.8% over the last year. We think investors can do better by buying some of the other small-cap funds we recommend in Canadian Wealth Advisor....
IVY CANADIAN FUND $24.81 (CWA Rating: Conservative) invests in high-quality, large capitalization stocks. The $2.6 billion fund’s top holdings include Shoppers Drug Mart, Toronto-Dominion Bank, Manulife Financial, Canadian National Railway, Becton Dickinson & Co., Enbridge, McDonald’s Corp., Thomson Reuters, Imperial Oil and Nestle SA. Ivy Canadian’s breakdown by industry is: Consumer staples, 30.4%; Financials, 18.8%; Consumer discretionary, 13.5%; Energy, 10.9%; Industrials, 9.7%; Health care, 6.7%; and Information technology, 4.7%....
IVY EUROPEAN FUND $12.72 (CWA Rating: Aggressive) holds mostly good quality stocks, although it has underperformed the longer-term benchmark Morgan Stanley indexes. We don’t see any reason to hold a mutual fund that concentrates in Europe. If you want European exposure, consider Ivy Foreign Equity Fund (see above), or the closed-end EUROPEAN EQUITY FUND $7.11 (New York symbol EEA; CWA Fund Rating: Conservative). European Equity Fund sells for an 18% discount from the current value of its assets. European Equity Fund is a buy. Ivy European Fund is a sell.
IVY FOREIGN EQUITY FUND $26.81 (CWA Rating: Conservative) outperformed the Morgan Stanley benchmark international index over the last 10 years. The fund gained 5.0%, and that was better than the Morgan Stanley benchmark’s gain of 1.7%. Ivy Foreign Equity Fund lost 2.2% over the last year. The fund invests in companies based outside of Canada, but cuts risk by avoiding direct investment in emerging markets. Ivy Foreign Equity is one of our top foreign fund recommendations. Still, we think non-U.S. international funds should make up at most 10% of the holdings of a conservative investor. The fund’s top holdings are PepsiCo (U.S. food & beverage), Reckitt Benckiser plc (UK household & healthcare products), McDonald’s Corp., Synthes Inc. (Swiss health care equipment), Walgreen Co. (U.S. pharmacies), Diageo plc (UK alcoholic beverages), Becton Dickinson (U.S. medical technology), Nestle SA, Henry Schein Inc., (U.S. healthcare) and Danaher Corp. (U.S. tools & controls)....
IVY GROWTH AND INCOME FUND $20.21 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 5.7% annually for the 10 years. It lost 0.8% over the last year. The fund’s MER is 2.09%. The fund’s top stock holdings are Shoppers Drug Mart, Manulife Financial, Enbridge, Canadian National Railway, McDonald’s Corporation, Thomson Reuters Corp., Toronto-Dominion Bank and Imperial Oil. The $2.4 billion Ivy Growth & Income Fund holds 22% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, and some of their principal besides....
TEMPLETON EMERGING MARKETS FUND $15.32 (New York symbol EMF; CWA Fund Rating: Speculative) is a closed-end fund that invests in equities from emerging economies. The fund’s manager is Franklin Templeton. Templeton Emerging Market Fund provides broad geographic diversification. Although volatile, it provides access to fast-growing economies such as Brazil, China, India and others. The $445.4 million fund’s regional allocation is Asia (58.2%), Europe (18.7%) and Latin America (23.1%)....
NEW GERMANY FUND $10.41 (New York symbol GF; CWA Fund Rating: Speculative) is a closed-end fund that invests mostly in middle-market (small and mid-cap) German equities. The fund’s manager is Deutsche Asset Management. The $378 million fund’s 51 holdings are currently in Germany (95%) and the Netherlands (5%). The New Germany Fund’s focus on mid-tier German stocks provides investors with access to some of Germany’s fastest-growing companies. The New Germany Fund’s top holdings are K+S (chemicals), 12.9%; Fresenius (health care equipment & supplies), 6.0%; SGL Carbon (electrical equipment), 4.7%; Salzgitter (metals & mining), 4.2%; Q-Cells (solar cell manufacturing), 3.9%; GEA Group (chemicals), 3.8%; Bilfinger Berger (construction & engineering), 3.3%; Stada Arzneimittel (pharmaceuticals), 3.0%; European Aeronautical Defense (Dutch-based aerospace and defense), 2.9%; and United Internet (Internet service provider), 2.6%....
KOREA FUND $15.09 (New York symbol KF; CWA Fund Rating: Speculative) is a closed-end fund that invests at least 80% of its assets in Korean equities. Currently, 99% of its assets are in South Korean stocks. The fund’s manager is RCM Asia Pacific. The fund’s top holdings are Samsung Electronics at 9.1%; Posco (steel), 6.5%; KT&G Corporation (cigarette maker), 4.3%; Shinhan Financial, 3.7%; Daewoo International (computers & peripherals), 3.4%; KT Corporation (telecommunications), 3.3%; Dongkuk Steel Mill, 3.3%; Hyundai Engineering & Construction, 3.1%; Samsung C&T Corporation (engineering & construction), 3.1%; and Hynix Semiconductor (computer chips, formerly Hyundai Electronics), 3.0%. The industry exposure of the 38 stocks in the Korea Fund’s $467.3 million portfolio is as follows: Industrials, 25%; Information technology, 17%; Financial services, 15%; Materials, 11%; Consumer staples, 11%; Telecommunications services, 8%; Health care, 3%; Consumer discretionary, 3% and Energy, 1%....
CENTRAL EUROPE AND RUSSIA FUND $30.15 (New York symbol CEE; CWA Fund Rating: Speculative) is a closed-end fund that invests mostly in larger cap stocks from Russia and central Europe. The fund’s manager is Deutsche Asset Management International. The $940 million fund’s 67 holdings are currently invested in Russia (59%), Poland (20%), Turkey (7%), Czech Republic (5%) and Hungary (4%). Central Europe and Russia Fund’s top holdings are Gazprom (a Russian gas utility) at 11.4%; Lukoil (Russian oil and gas), 8.0%; Rosneft Oil Company (Russian oil and gas), 6.2%; Powszechna Kasa Oszczednosci (Polish bank), 5.4%; MMC Norilsk Nickel (Russian metals and mining), 5.2%; Cez (Russian electric utility), 5.2%; Bank Pekao (Polish bank), 4.9%; Sberbank (Russian bank), 4.9%; KGHM Polska Miedz (Polish metals & mining), 3.5%; and Telekomunikacja Polska (Polish telecom), 3.1%....
POWER CORPORATION $31.55 (Toronto symbol POW; SI Rating: Above average) is a diversified holding company. Power Corp. controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great-West Lifeco, one of the largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, including 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of Parjointco, which in turn owns a 54.3% interest in Swiss-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials). In the three months ended June 30, 2008, Power Corp.'s earnings excluding one-time items rose 3.5%, to $382 million or $0.82 a share, from $369 million or $0.79. Great-West Lifeco contributed $254 million to earnings and IGM Financial contributed $88 million....