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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MANULIFE FINANCIAL $39.51 (Toronto symbol MFC; SI Rating: Above-average) sells life and other forms of insurance, as well as mutual funds and investment management services. It operates in 19 countries and territories worldwide. Manulife has assets under administration of $399 billion. In the three months ended September 30, 2007, Manulife’s earnings rose 9.9%, to $1.1 billion or $0.70 a share, from $967 million or $0.62 a share a year earlier. Revenue rose 11.3%, to $9.4 billion from $8.4 billion. Manulife has raised its dividend 9.1%, to $0.24 from $0.22. The shares now yield 2.2%. Manulife’s operations are diversified among life and health insurance, segregated mutual funds, and reinsurance. Its geographic diversification in the U.S. and Asia, including China, offers growth prospects....
AIC DIVERSIFIED CANADA FUND $44.27 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds stocks of some U.S. firms. The $1.4 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, FedEx, Thomson Corporation, Brookfield Asset Management, Royal Bank of Canada, Manulife Financial and Royal Bank of Scotland. AIC Diversified Canada holds just 19 stocks. The fund holds 53.0% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 16.1%; Energy, 9.9%; Consumer discretionary, 7.4%; Health care, 7.0%; Industrials, 4.0%; and Conglomerates, 1.6%....
AIC AMERICAN ADVANTAGE FUND $6.20 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks, with over 99% of assets in the financial services area. The fund’s holdings in this segment break down as follows: Life & health insurance, 19.5%; Diversified banks, 13.0%; Multi-line insurance, 12.8%; Property & casualty insurance companies, 12.6%; Investment banking & brokerage, 10.7%; Wealth management, 7.0%; Diversified financials, 6.5%; Thrifts & mortgage finance, 6.2%; Insurance brokers, 5.8%; Consumer finance, 5.7%; and Conglomerates, 0.4%. The $85.0 million AIC American Advantage’s top 10 holdings are Toronto-Dominion Bank, Prudential Financial, JP Morgan Chase, American International Group, Manulife Financial, AFLAC, Hartford Financial Services, Northern Trust, Merrill Lynch and Willis Group Holdings. This fund holds just 21 stocks....
TELUS CORP. $48.42 (Toronto symbol T.A; SI Rating: Above average) provides local and long distance telephone service in B.C., Alberta and parts of Quebec, and wireless service across Canada. In the three months ended September 30, 2007, Telus’s earnings per share excluding unusual items rose 10.5%, to $0.95 from $0.86 a year earlier. Revenue rose 4.5%, to $2.31 billion from $2.21 billion. Strong gains at its wireless and high-speed Internet operations offset lower local and long-distance revenues. The company recently raised its dividend rate by 20%. The new annual rate of $1.80 yields 3.1%. Recent auctions of new radio frequencies (or wireless spectrum) to let new cell phone firms such as Videotron and Shaw Cable enter the market will increase competition. Ottawa will also force incumbents like Telus to lease towers and other equipment to these new competitors for five years while they build their own networks....
JAPAN SMALLER CAP FUND $10.89 (New York symbol JOF; CWA Rating: Aggressive) invests mainly in less-widely-followed Japanese over-the-counter stocks. The fund’s top holdings are Jupiter Telecom, Eagle Industry Co., Nichias Corporation, Tokai Rubber, Futuba Industrial, Aeon Delight, Disco Corp., Kansai Urban Banking, Suraga Corp. and Hisamitsu Pharmaceutical. Japan Smaller Cap Fund sells for a 0.4% premium above the current value of its assets. Our long-standing advice is that you only buy closed-end funds trading at close to or below net asset value. Japan Smaller Cap is a buy.
JAPAN EQUITY FUND $7.83 (New York symbol JEQ; CWA Rating: Aggressive) invests mostly in large capitalization stocks on the Tokyo Stock Exchange. The Japan Equity Fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Mizuho Financial, Sumitomo Corp., Nomura Holdings, Mitsubishi Corp., Canon, East Japan Railway, Komatsu Ltd., and Nippon Steel. Japan Equity Fund is available for 7% less than the current value of its assets. It’s a buy.
BANK OF NOVA SCOTIA $52.15 (Toronto symbol BNS: SI Rating: Above average) ranks second among Canada’s five big banks, with assets of $408.1 billion. It has over 1,000 branches in Canada. In the three months ended July 31, 2007, Bank of Nova Scotia earned $1.02 billion or $1.03 a share, up 9.5% from $928 million or $0.94 a share a year earlier. Net interest income rose 5.6%, to $1.8 billion from $1.7 billion. Other income (which includes wealth management) rose 18.4%, to $1.4 billion from $1.2 billion. The bank’s shares currently yield 3.5%. The bank expects to write down some of its asset-backed securities in its fiscal fourth quarter ended October 31, and take an after-tax charge of around $135 million. However, a $160 million after-tax gain from the Visa restructuring will offset the writedown....
SCOTIA CANADIAN GROWTH FUND $74.27 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $619.8 million Scotia Canadian Growth Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank, TD Bank, Research in Motion, Canadian Natural Resources, Sun Life Financial, CN Railway, Bank of Nova Scotia and EnCana. Scotia Canadian Growth currently holds 41.7% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 29.3%. Over the last 10 years, Scotia Canadian Growth posted a 6.8% annual rate of return. That’s less than the S&P/TSX’s return of 9.8%. The fund gained 19.2% over the past year, compared to a gain of 21.4% for the S&P/TSX. Scotia Canadian Growth’s MER is 2.12%....
CIBC CANADIAN EQUITY FUND $26.81 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and yet have growth potential. The $642.2 million fund’s top holdings are Petro- Canada, EnCana, Manulife Financial, Teck Cominco, Bank of Nova Scotia, TD Bank, Canadian National Railway, Suncor Energy and Research in Motion. CIBC Canadian Equity holds 36.6% of its portfolio in Financial services stocks and 23.6% in Resource sector stocks....
BMO EQUITY FUND $33.37 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) generally invests mostly in ‘blue-chip” Canadian companies. These stocks are selected based on the manager’s outlook for the industry they operate in, the earnings record of each company, the strength of management and the potential for growth. BMO Equity Fund’s 10 largest holdings are Manulife Financial, Suncor Energy, Royal Bank of Canada, TD Bank, EnCana Corporation, Canadian Natural Resources, Rogers Communications, Potash Corporation of Saskatchewan, CIBC and Bank of Nova Scotia. The $2.3 billion fund currently holds 41.9% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 28.4%....