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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TD SCIENCE & TECHNOLOGY FUND $14.94 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W1P9. 1-800-461-3863; Web site: www.tdcanadatrust.com. No load — deal directly with the company) invests mostly in U.S. firms. The fund’s gain in Canadian dollars over the last year was 3.4%. The Nasdaq index rose 7.4% in Canadian funds. The $122.6 million fund’s manager is well-respected U.S. mutual fund manager T. Rowe Price Associates. Its MER is 2.78%. TD Science & Technology’s top holdings include: Microsoft, Juniper Networks, Broadcom, Yahoo!, American Tower, Google, Foxconn International Holdings, Cisco Systems, Hewlett-Packard and Adobe Systems. TD Science & Technology Fund is a buy for aggressive investors only.
FIDELITY FOCUS TECHNOLOGY FUND $9.79 (CWA Rating: Aggressive) invests mainly in technology companies. This includes computer services, computer software and systems, communications systems, electronics, office equipment, scientific instruments and computer chips. The fund looks for stocks with strong earnings growth that appear undervalued. Fidelity Focus Technology Fund’s top holdings now include Microsoft Corporation, Cisco Systems,Canon Inc., Apple Computer, Nokia, Qualcomm, Google, Hewlett-Packard, First Data and Taiwan Semiconductor. The $107.7 million Fidelity Focus Technology Fund is broken down by sector as follows: 18.9% in Semiconductors (computer chips) & semiconductor equipment, 17.4% in Communications equipment, 15.0% in Software, 14.9% in Computers & peripherals and 7.1% in IT services....
FIDELITY FOCUS FINANCIAL SERVICES FUND $25.79 (CWA Rating: Aggressive) invests mostly in financial services companies in brokerage and investment management, investment banking, life insurance, personal loans, property and casualty insurance, and savings and loans. Fidelity Focus Financial Services Fund now holds a higher percentage of international stocks than in the past. Geographically, its holdings are allocated: the U.S., 31.4%; Japan, 16.2%; the UK, 9.3%; Italy, 9.0%; Germany, 5.1%; Bermuda, 4.2%; South Korea, 3.9%; the Netherlands, 3.5%; Switzerland, 2.9% and Brazil, 2.4%. The top holdings of this $96.4 million fund are Fannie Mae, Munich Reinsurance, CitiGroup, Unicredito Italiano, ABN Amro Holdings, Dollar Financial, T&D Holdings, American International Group, Intesa Sanpaolo and Wachovia....
FIDELITY FOCUS CONSUMER INDUSTRIES FUND $18.65 (CWA Rating: Aggressive) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) invests mainly in U.S. consumer goods and services companies. Consumer spending is a key part of the U.S. economy, accounting for approximately two-thirds of activity. Fidelity Focus Consumer Industries Fund’s top holdings include Procter & Gamble, Nestle SA, Coca-Cola, Altria Group, Toyota Motor, Esprit Holdings, PepsiCo, Groupe Danone, Reckitt Benckiser and Time Warner. The $10.6 million fund is broken down by industry as follows: 12.6% in Food products, 10.1% in Beverages, 10.1% in Specialty retail, 9.6% in Media and 8.6% in Household products....
TRIMARK U.S. COMPANIES FUND $5.88 (CWA Rating: Conservative) invests in U.S. companies that the managers see as inexpensive in relation to earnings, cash flow and other valuation measures. The top holdings of this $107.7 million fund are Merrill Lynch, Wells Fargo & Co., Target Corporation, Ametek Inc., KLA-Tencor, Paxair, Affilitated Managers Group, Omnicom Group, PepsiCo and General Electric. The fund’s one-year gain in Canadian dollars is 7.5%, compared to the S&P 500’s gain of 13.8% in Canadian funds. Its MER is 2.59%. Trimark U.S. Companies Fund is still a buy.
TRIMARK CANADIAN FUND $25.19 (CWA Rating: Conservative) (AIM Funds Management, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.aimfunds.ca. Buy or sell through brokers.) uses a bottom-up stock-picking style, focusing on fundamentals like earnings, cash flow and low debt. The $1.2 billion fund’s 10 largest holdings are TD Bank, Bank of Nova Scotia, Power Corp., Royal Bank, Alimentation Couche-Tarde, Toromont Industries, Loblaw, Molex Inc., Willis Group Holdings and Manulife Financial. Trimark Canadian made 8.2% annually over the last 10 years. It made 14.3% in the past year, compared to the S&P/TSX’s gain of 12.7%. The fund’s MER is 1.64%. Trimark Canadian Fund is still a buy.
PENN WEST ENERGY TRUST $33.70 (Toronto symbol PWT.UN; SI Rating: Speculative) is one of the largest conventional oil and gas trusts in North America. It operates in Saskatchewan, Alberta and British Columbia. In the three months ended December 31, 2006, Penn West’s revenues rose 4.3%, to $578.5 million from $554.5 million. Cash flow per unit fell 39.4%, to $1.23 from $2.03. Penn West’s average daily production in the fourth quarter of 2006 was 129,915 barrels of oil per day equivalent, weighted 55% toward oil and 45% toward natural gas. Its average realized price for oil was $57.43 U.S. and $6.97 U.S. for natural gas....
SHININGBANK ENERGY INCOME FUND $14.13 (Toronto symbol SHN.UN; SI Rating: Speculative) focuses on natural gas production in west-central Alberta. Shiningbank’s revenues fell 25.5% in the three months ended December 31, 2006, to $107.7 million from $144.5 million a year earlier. Cash flow per unit fell 55.1%, to $0.62 from $1.38. Shiningbank’s debt is 45% of shareholders’ equity. Shiningbank’s average daily production of 25,710 barrels of oil equivalent is weighted 24% toward oil and liquids and 76% natural gas. In the latest quarter, the company’s average realized price for oil was $56.22 U.S. and $7.19 U.S. for gas....
PENGROWTH ENERGY TRUST $19.26 (Toronto symbol PGF.B; SI Rating: Average) produces oil and gas in western Canada, as well as offshore Nova Scotia. In the three months ended December 31, 2006, Pengrowth’s revenue fell slightly, to $350.9 million from $353.9 million. However, cash flow per unit fell 45.8%, to $0.64 from $1.18. Pengrowth’s average daily production of 77,614 barrels of oil equivalent is weighted 50% toward oil and liquids and 50% natural gas. In the latest quarter, the company’s average realized price for oil was $60.35 U.S. and $7.12 U.S. for natural gas....
ISHARES MCSI CANADA INDEX FUND $26 (American Exchange symbol EWC; buy or sell through brokers) invests in most of the stocks in the Morgan Stanley Capital International Canada Index. These stocks represent Canada’s largest and most-established public companies, accounting for about 60% of the market capitalization of all publicly traded stocks. These shares are managed by Barclays Global Investors. There are now 27 different MCSI index funds. This fund has an MER of 0.84%. That’s a lot higher than the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. It’s also no better than most open-end index funds, which have MERs as low as 0.54%. We think MCSI Canada’s high MER defeats the main advantage of index funds. The spread between iShares MCSI Canada’s high MER and that of a low-fee fund may not appear to make a lot of difference in a single year, but there is no point in paying more than you need to. We don’t recommend iShares MCSI Canada Index Fund.