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 CANADIAN EQUITY FUND $30.40 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify undervalued companies with strong growth potential. TD Canadian Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Suncor Energy, Royal Bank, TD Bank, Rogers Communications, Canadian Oil Sands Trust, CN Railway, Tim Hortons, Canadian Natural Resources and Teck Cominco. The $2.9 billion fund currently holds about 28.0% of its portfolio in Financial services shares. It also has a bias towards Energy stocks, with 21.7% of its holdings in that sector....
ISHARES CANADIAN BOND BROAD INDEX FUND $28.97 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) (formerly the iUnits Government of Canada 10 Year Bond Fund) mirrors the performance of the Scotia Capital 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. At last report, the bonds in the index were 45.3% Government of Canada bonds, 26.1% Provincial Government bonds, 1.2% Municipal bonds and 24.7% Corporate bonds....
ISHARES CANADIAN SHORT BOND INDEX FUND $28.12 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the Scotia Capital Short 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 Canada Mortgage and Housing, TD Capital Trust, Province of Quebec, GreatWest Lifeco, Bell Canada and Bank of Nova Scotia....
AIC DIVERSIFIED CANADA FUND $46.74 (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 $1.7 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Loblaw, Thomson Corp., Brookfield Asset Management, Royal Bank, Manulife Financial and Royal Bank of Scotland. The fund holds just 23 stocks. The fund holds 47.8% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 19.4%; Energy, 8.6%; Consumer discretionary, 7.6%; and Health care, 5.5%....
AIC AMERICAN ADVANTAGE FUND $8.21 (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. This segment breaks down as follows: Investment banking & brokerage, 14.2%; Multi-line insurance, 13.5%; Property & casualty insurance companies, 12.9%; Life & health insurance, 12.6%; Diversified banks, 10.4%; Insurance brokers, 8.0%; Regional banks, 7.9%; Diversified financials, 7.3%; Wealth management, 6.1%; Consumer finance, 2.8%; Thrifts & mortgage finance, 2.3%; and Conglomerates, 1.2%. The $119.3 million AIC American Advantage’s top 10 holdings are Progressive Corp., ING Canada, AFLAC, Morgan Stanley, Hartford Financial Services, TD Bank, Northern Trust, Merrill Lynch, JP Morgan Chase and Willis Group Holdings. This fund holds just 18 stocks....
RIOCAN REAL ESTATE INVESTMENT TRUST $24.49 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.5 billion consisting of ownership interests in a portfolio of 204 retail properties across Canada, including 8 under development. These properties contain over 50.7 million square feet of leasable area. RioCan is Canada’s largest owner of neighbourhood shopping centres. These are enclosed malls in smaller urban centres. But where it’s showing the strongest growth is as the largest owner of ‘New Format’ malls. These are in the suburbs of larger cities, and are made up largely of ‘Big Box’ stores with lots of parking and room for new building. RioCan’s revenue in the three months ended September 30, 2006 was $160.7 million, up 7.3% from $149.8 million a year earlier. Cash flow per unit rose 29%, to $0.40 from $0.31. Portfolio occupancy is at an all-time high of 97.5%. RioCan’s annual distribution of $1.32 gives it a current yield of 5.4%....
FORDING CANADIAN COAL TRUST $24.06 (Toronto symbol FDG.UN; SI Rating: Average) holds a 60% interest in Elk Valley Coal in B.C., the world’s second-largest supplier of metallurgical coal, a key ingredient in steelmaking. Elk Valley supplies approximately 21% of the global market. Fording has vast reserves of coal. Mining could continue at current rates for 25 years; with further development, its reserves could last 100 years. In the three months ended September 30, 2006, Fording’s revenues fell 20.8%, to $451.8 million from $570.8 million. Cash flow per unit fell 44.9%, to $0.92 from $1.67....
PEMBINA PIPELINE INCOME FUND $16.03 (Toronto symbol PIF.UN; SI Rating: Extra risk) has interests in 14 feeder pipeline systems with a total length of 8,350 kilometres. This includes the Pembina System, in operation since 1954. The company also holds a 50% interest in the Fort Saskatchewan Ethylene Storage Limited Partnership. Pembina’s total network is the largest feeder operation in Canada. These pipelines bring oil and gas from fields in northeastern B.C. and western and northern Alberta to refineries, or feed into major pipelines such as the Enbridge Pipeline System....
PENGROWTH ENERGY TRUST $19.42 (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 September 30, 2006, Pengrowth’s revenue fell 5.5%, to $287.8 million from $304.5 million. However, cash flow per unit rose 8%, to $1.08 from $1.00. Pengrowth’s average daily production of 58,344 barrels of oil equivalent is weighted 44% toward oil and liquids, and 56% to natural gas. In the latest quarter, the company’s average realized price for oil was $72.61 U.S. and $6.29 U.S. for natural gas....
LEGACY HOTELS REIT $9.43 (Toronto symbol LGY.UN; SI Rating: Extra Risk) owns 25 luxury hotels with over 10,700 guestrooms in Canada and the United States, including The Fairmont Royal York in Toronto and the Fairmont Le Château Frontenac in Quebec City. In the three months ended September 30, 2006, Legacy’s revenues rose slightly, to $223 million from $221.6 million. Cash flow per unit rose 5.9%, to $0.36 from $0.34. Legacy’s Canadian hotels get about a third of their revenue from U.S. tourists. Proposed new rules that would force U.S. travelers to carry a passport could hurt its revenue. However, a drop in the Canadian dollar would cut the cost of travel for U.S. tourists, offsetting the passport requirement. Meanwhile, the trust should generate enough cash to maintain its $0.32 distribution, which yields 3.4%....