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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CENOVUS ENERGY $21.19 (Toronto symbol CVE; Shares outstanding: 833.3 million; Market cap: $17.7 billion; TSINetwork Rating: Average; Dividend yield: 3.0%; www.cenovus.com) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects.
Refining—which gains from lower oil prices— supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. (Phillips 66 owns the other 50%.)
In the three months ended September 30, 2015, the company’s production rose 5.7%, to 210,422 barrels a day from 199,089 a year earlier. However, lower oil prices cut its cash flow per share by 59.2%, to $0.53 from $1.30.
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Refining—which gains from lower oil prices— supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. (Phillips 66 owns the other 50%.)
In the three months ended September 30, 2015, the company’s production rose 5.7%, to 210,422 barrels a day from 199,089 a year earlier. However, lower oil prices cut its cash flow per share by 59.2%, to $0.53 from $1.30.
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IMPERIAL OIL $44.63 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $37.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. It also operates three refineries and 1,700 Esso gas stations. Imperial recently finished the second phase of its 71%-owned Kearl oil sands project in northern Alberta.
In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 192,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier.
However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64. Imperial plans to keep expanding Kearl and Cold Lake, its two main oil sands properties. These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins.
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In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 192,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier.
However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64. Imperial plans to keep expanding Kearl and Cold Lake, its two main oil sands properties. These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins.
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ISHARES CDN REIT SECTOR INDEX FUND $15.10 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 15 Canadian real estate investment trusts in the S&P/TSX Capped REIT Index.
iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 5.5%.
The ETF’s largest holding is RioCan REIT at 20.1%, followed by H&R REIT (14.4%), Smart REIT (8.5%), Canadian Apartment Properties REIT (7.9%), Canadian REIT (7.7%), Allied Properties REIT (6.7%), Cominar REIT (6.1%), Dream Office REIT (5.6%), Boardwalk REIT (5.1%), Artis REIT (4.6%), Granite REIT (4.4%), Crombie REIT (2.5%), Dream Global REIT (2.4%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.5%).
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iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 5.5%.
The ETF’s largest holding is RioCan REIT at 20.1%, followed by H&R REIT (14.4%), Smart REIT (8.5%), Canadian Apartment Properties REIT (7.9%), Canadian REIT (7.7%), Allied Properties REIT (6.7%), Cominar REIT (6.1%), Dream Office REIT (5.6%), Boardwalk REIT (5.1%), Artis REIT (4.6%), Granite REIT (4.4%), Crombie REIT (2.5%), Dream Global REIT (2.4%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.5%).
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SUN LIFE FINANCIAL $44.67 (Toronto symbol SLF; Shares outstanding: 610.6 million; Market cap: $27.2 billion; TSINetwork Rating: Above Average; Dividend yield: 3.5%; www.sunlife.ca) sells life insurance, savings, retirement and pension products to individuals and corporations. The company has $812.6 billion of assets under management and mainly operates in Canada, the U.S. and the U.K. It’s also expanding in Asia. In the three months ended September 30, 2015, Sun Life’s earnings per share rose 2.4%, to $0.86 from $0.84.
The company continues continues to expand in the U.S. At the same time, it’s cutting its risk by focusing on highly profitable niche markets with low capital reserve requirements.
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GREAT-WEST LIFECO $34.21 (Toronto symbol GWO; Shares outstanding: 997.4 million; Market cap: $34.1 billion; TSINetwork Rating: Above Average; Yield: 3.8%; www.greatwestlifeco.com) is one of Canada’s largest insurance firms. It also offers mutual funds and wealth management. Power Financial owns 67.1% of Great-West.
In the three months ended June 30, 2015, Great-West’s earnings per share rose 6.5%, to $0.66 from $0.63 a year earlier.
In recent years, Great-West has bought firms in Ireland and the U.S. that have added new business lines and boosted its profits. Growth by acquisition can be risky, but the company’s large size lets it take advantage of opportunities with strong chances of success.
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In the three months ended June 30, 2015, Great-West’s earnings per share rose 6.5%, to $0.66 from $0.63 a year earlier.
In recent years, Great-West has bought firms in Ireland and the U.S. that have added new business lines and boosted its profits. Growth by acquisition can be risky, but the company’s large size lets it take advantage of opportunities with strong chances of success.
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RIOCAN REAL ESTATE INVESTMENT TRUST $25.36 (Toronto symbol REI.UN; Units outstanding: 319.4 million; Market cap: $8.1 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust.
In the three months ended September 30, 2015, RioCan’s cash flow rose 2.3%, to $0.44 a unit from $0.43 a year earlier.
Revenue gained 4.5%, to $320.6 million from $306.9 million. The trust continues to do a good job of hanging onto tenants and renewing leases at higher rates: rents on renewals rose 8.6% in Canada and 9.8% in the U.S.
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In the three months ended September 30, 2015, RioCan’s cash flow rose 2.3%, to $0.44 a unit from $0.43 a year earlier.
Revenue gained 4.5%, to $320.6 million from $306.9 million. The trust continues to do a good job of hanging onto tenants and renewing leases at higher rates: rents on renewals rose 8.6% in Canada and 9.8% in the U.S.
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VANGUARD FTSE EMERGING MARKETS ETF $35.74 (New York symbol VWO; buy or sell through brokers) aims to track the Financial Times Stock Exchange (FTSE) Emerging Index, which is made up of common stocks of companies in developing countries. The fund’s MER is just 0.15%.
The Vanguard FTSE Emerging Markets ETF’s top holdings include Taiwan Semiconductor (Taiwan: computer chips), Tencent Holdings (China: Internet), China Mobile, China Construction Bank, Naspers Ltd. (South Africa: media), Industrial & Commercial Bank of China, Bank of China, Hon Hai Precision Industry (Taiwan: electronics), Infosys (India: information technology) and Housing Development Finance (India: banking).
The $49.7-billion fund’s breakdown by country is as follows: China, 27.2%; Taiwan, 14.4%; India, 13.3%; South Africa, 9.4%; Brazil, 7.2%; Mexico, 5.5%; Russia, 4.5%; Malaysia, 4.0%; Thailand, 2.7%; Indonesia, 2.2%; Philippines, 1.9%; Poland, 1.8%; Turkey, 1.6%; and others, 4.3%.
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The Vanguard FTSE Emerging Markets ETF’s top holdings include Taiwan Semiconductor (Taiwan: computer chips), Tencent Holdings (China: Internet), China Mobile, China Construction Bank, Naspers Ltd. (South Africa: media), Industrial & Commercial Bank of China, Bank of China, Hon Hai Precision Industry (Taiwan: electronics), Infosys (India: information technology) and Housing Development Finance (India: banking).
The $49.7-billion fund’s breakdown by country is as follows: China, 27.2%; Taiwan, 14.4%; India, 13.3%; South Africa, 9.4%; Brazil, 7.2%; Mexico, 5.5%; Russia, 4.5%; Malaysia, 4.0%; Thailand, 2.7%; Indonesia, 2.2%; Philippines, 1.9%; Poland, 1.8%; Turkey, 1.6%; and others, 4.3%.
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VANGUARD GROWTH ETF $110.65 (New York symbol VUG; buy or sell through brokers) aims to track the Center for Research in Security Prices (CRSP) U.S. Large Cap Growth Index, a broadly diversified index that mainly consists of big U.S. companies. The fund’s MER is just 0.09%.
The $48.1-billion Vanguard Growth ETF’s top holdings are Apple, Alphabet, Coca-Cola, Facebook, Visa, Home Depot, Comcast, Amazon.com, Gilead Sciences and Walt Disney Co. The fund’s breakdown by industry is as follows: Technology, 23.9%; Consumer Services, 22.2%; Health Care, 13.7%; Financials, 12.5%; Industrials, 11.9%; Consumer Goods, 10.1%; Oil and Gas, 4.0%; Materials, 1.3%; and Telecom Services, 0.3%.
Vanguard Growth ETF is a buy.
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The $48.1-billion Vanguard Growth ETF’s top holdings are Apple, Alphabet, Coca-Cola, Facebook, Visa, Home Depot, Comcast, Amazon.com, Gilead Sciences and Walt Disney Co. The fund’s breakdown by industry is as follows: Technology, 23.9%; Consumer Services, 22.2%; Health Care, 13.7%; Financials, 12.5%; Industrials, 11.9%; Consumer Goods, 10.1%; Oil and Gas, 4.0%; Materials, 1.3%; and Telecom Services, 0.3%.
Vanguard Growth ETF is a buy.
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IBM $141.63 (New York symbol IBM; Shares outstanding: 979.5 million; Market cap: $137.4 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.ibm.com) continues to transition from selling mainframes and consulting services to high-growth areas like cloud computing and analytics software, which processes huge amounts of data.
IBM has successfully shifted from unprofitable businesses to fast-growing ones in the past, but investors remain cautious of the latest changes in a time of rapidly evolving technology and customer demands. That’s why the shares trade at just 9.5 times IBM’s forecast 2015 earnings.
In the three months ended September 30, 2015, the company’s revenue fell 13.9%, to $19.3 billion from $22.4 billion a year earlier. Revenue from cloud computing and analytics jumped 27%, but consulting and mainframe sales fell.
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IBM has successfully shifted from unprofitable businesses to fast-growing ones in the past, but investors remain cautious of the latest changes in a time of rapidly evolving technology and customer demands. That’s why the shares trade at just 9.5 times IBM’s forecast 2015 earnings.
In the three months ended September 30, 2015, the company’s revenue fell 13.9%, to $19.3 billion from $22.4 billion a year earlier. Revenue from cloud computing and analytics jumped 27%, but consulting and mainframe sales fell.
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CANADIAN PACIFIC RAILWAY $181.50 (Toronto symbol CP; Shares outstanding: 161.0 million; Market cap: $27.8 billion; TSINetwork Rating: Above Average; Yield: 0.8%; www.cpr.ca) ships freight over a 22,000-kilometre rail network between Montreal and Vancouver and links with hubs in the U.S. Midwest and northeast.
In the three months ended September 30, 2015, CP’s earnings per share rose 16.5%, to $2.69 from $2.31 a year earlier. Revenue increased 2.3%, to $1.71 billion from $1.67 billion.
CP’s operating ratio improved to a record 59.9% from 62.8% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) It continues to benefit from its efficiency improvements, including speeding up trains. The company saw higher revenue from shipping forest products, potash, grain, chemicals and automotive products. But lower shipments of oil and metals offset these gains.
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In the three months ended September 30, 2015, CP’s earnings per share rose 16.5%, to $2.69 from $2.31 a year earlier. Revenue increased 2.3%, to $1.71 billion from $1.67 billion.
CP’s operating ratio improved to a record 59.9% from 62.8% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) It continues to benefit from its efficiency improvements, including speeding up trains. The company saw higher revenue from shipping forest products, potash, grain, chemicals and automotive products. But lower shipments of oil and metals offset these gains.
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