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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Replying to an investor seeking stock picks to buy and hold, we assess the long-term prospects of America’s biggest grocery store operator.
RIOCAN REIT $30.05 (Toronto symbol REI.UN; Units outstanding: 315.8 million; Market cap: $9.5 billion; TSINetwork Rating: Average; Dividend yield: 4.7%; www.riocan.com) continues to hit new all-time highs, even with the closure of the Future Shop chain.
Electronics retailer Best Buy (New York symbol BBY) recently closed 66 of its 131 Future Shop outlets in Canada and will convert the remaining 65 to Best Buy stores.
There are only 10 Future Shops in RioCan’s malls, so these closures and conversions should have little impact on its results. Combined, 32 Best Buy and Future Shop stores rent space from RioCan, accounting for just 1.5% of its 2014 rental revenue.
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Electronics retailer Best Buy (New York symbol BBY) recently closed 66 of its 131 Future Shop outlets in Canada and will convert the remaining 65 to Best Buy stores.
There are only 10 Future Shops in RioCan’s malls, so these closures and conversions should have little impact on its results. Combined, 32 Best Buy and Future Shop stores rent space from RioCan, accounting for just 1.5% of its 2014 rental revenue.
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CANADIAN REIT $45.51 (Toronto symbol REF.UN; Units outstanding: 72.6 million; Market cap: $3.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.8%; www.creit.ca) owns 198 properties, including retail, industrial and office buildings, across Canada and in Chicago. These holdings contain 24.9 million square feet of leasable area. The trust’s occupancy rate is 95.1%.
In the three months ended December 31, 2014, Canadian REIT’s revenue rose 1.7%, to $108.5 million from $106.7 million a year earlier. Cash flow per unit gained 4.2%, to $0.75 from $0.72.
In 2014, the trust added one industrial property in Toronto and another in Edmonton for a total of $42.3 million. That followed $199.1 million of purchases in 2013 and $401.9 million in 2012.
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In the three months ended December 31, 2014, Canadian REIT’s revenue rose 1.7%, to $108.5 million from $106.7 million a year earlier. Cash flow per unit gained 4.2%, to $0.75 from $0.72.
In 2014, the trust added one industrial property in Toronto and another in Edmonton for a total of $42.3 million. That followed $199.1 million of purchases in 2013 and $401.9 million in 2012.
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ENCANA $17.05 (Toronto symbol ECA; Shares outstanding: 741.2 million; Market cap: $14.0 billion; TSINetwork Rating: Average; Dividend yield: 2.1%; www.encana.com) has sold its natural gas pipelines and compression facilities in B.C.’s Montney region. The buyer is a partnership between Veresen (Toronto symbol VSN and a buy recommendation of Canadian Wealth Advisor) and investment firm KKR & Co. (New York symbol KKR).
The company received $461 million (Canadian) for these assets. The cash, along with the $1.4 billion (Canadian) it recently raised by selling new shares, will let Encana pay down its long-term debt of $7.3 billion U.S., which is a high 63% of its market cap.
Encana is still a buy.
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The company received $461 million (Canadian) for these assets. The cash, along with the $1.4 billion (Canadian) it recently raised by selling new shares, will let Encana pay down its long-term debt of $7.3 billion U.S., which is a high 63% of its market cap.
Encana is still a buy.
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ISHARES CANADIAN UNIVERSE BOND INDEX ETF $31.99 (Toronto symbol XBB; buy or sell through brokers) mirrors the performance of the Canadian Universe Bond Index. The 892 bonds in the portfolio have an average term to maturity of 10.35 years. The fund’s MER is 0.33%.
The bonds in the index are 68.5% government and 31.5% corporate.
The fund yields 2.8%, compared to the Short- Term Bond Fund’s 2.5%. Its yield to maturity is 1.82%, 0.69% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
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The bonds in the index are 68.5% government and 31.5% corporate.
The fund yields 2.8%, compared to the Short- Term Bond Fund’s 2.5%. Its yield to maturity is 1.82%, 0.69% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
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ISHARES CANADIAN SHORT-TERM BOND INDEX ETF $28.73 (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index.
This index consists of a range of investment-grade federal, provincial, municipal and corporate bonds with one- to five-year terms to maturity. The fund holds 407 bonds with an average term to maturity of 2.87 years. The bonds in the index are 64.2% government and 35.8% corporate. The fund’s MER is 0.27%.
The iShares Canadian Short-Term Bond Index Fund yields 2.5%, but this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, meaning the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
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This index consists of a range of investment-grade federal, provincial, municipal and corporate bonds with one- to five-year terms to maturity. The fund holds 407 bonds with an average term to maturity of 2.87 years. The bonds in the index are 64.2% government and 35.8% corporate. The fund’s MER is 0.27%.
The iShares Canadian Short-Term Bond Index Fund yields 2.5%, but this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, meaning the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.
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CANADIAN PACIFIC RAILWAY LTD. $232.62 (Toronto symbol CP; Shares outstanding: 164.2 million; Market cap: $38.5 billion; TSINetwork Rating: Average; Div. yield: 0.6%; www.cpr.ca) has reported record first-quarter results.
In the three months ended March 31, 2015, the company earned $375 million, up 49.4% from $251 million a year earlier. Per-share profits jumped 59.2%, to $2.26 from $1.42, on fewer shares outstanding. Revenue rose 10.3%, to $1.67 billion from $1.51 billion.
CP saw strong gains from shipping grain, fertilizers, coal, forest products, chemicals and consumer goods. That offset fewer shipments of crude oil, automotive products and metals.
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In the three months ended March 31, 2015, the company earned $375 million, up 49.4% from $251 million a year earlier. Per-share profits jumped 59.2%, to $2.26 from $1.42, on fewer shares outstanding. Revenue rose 10.3%, to $1.67 billion from $1.51 billion.
CP saw strong gains from shipping grain, fertilizers, coal, forest products, chemicals and consumer goods. That offset fewer shipments of crude oil, automotive products and metals.
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VANGUARD GROWTH ETF $108.87 (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 large U.S. companies. The fund’s MER is just 0.09%.
The $47.8-billion Vanguard Growth ETF’s top holdings are Apple, Google, Coca-Cola, Facebook, Oracle, Home Depot, Comcast, Amazon.com, Gilead Sciences and Walt Disney Co.
The fund’s breakdown by industry is as follows: Technology, 24.0%; Consumer Services, 21.3%; Health Care, 13.4%; Financials, 13.0%; Industrials, 11.7%; Consumer Goods, 9.4%; Oil and Gas, 5.3%; Materials, 1.5%; Telecommunication Services, 0.3%; and Utilities, 0.1%.
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The $47.8-billion Vanguard Growth ETF’s top holdings are Apple, Google, Coca-Cola, Facebook, Oracle, Home Depot, Comcast, Amazon.com, Gilead Sciences and Walt Disney Co.
The fund’s breakdown by industry is as follows: Technology, 24.0%; Consumer Services, 21.3%; Health Care, 13.4%; Financials, 13.0%; Industrials, 11.7%; Consumer Goods, 9.4%; Oil and Gas, 5.3%; Materials, 1.5%; Telecommunication Services, 0.3%; and Utilities, 0.1%.
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ISHARES CDN REIT SECTOR INDEX FUND $17.31 (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 4.7%.
The ETF’s largest holding is RioCan REIT at 20.0%, followed by H&R REIT (13.5%), Canadian REIT (7.1%), Canadian Apartment REIT (7.0%), Allied Properties REIT (6.6%), Calloway REIT (6.6%), Dream Office REIT (6.4%), Cominar REIT (4.4%), Boardwalk REIT (5.0%), Chartwell REIT (4.5%), Artis REIT (4.3%), Granite REIT (4.3%), Crombie REIT (2.2%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.7%).
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iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 4.7%.
The ETF’s largest holding is RioCan REIT at 20.0%, followed by H&R REIT (13.5%), Canadian REIT (7.1%), Canadian Apartment REIT (7.0%), Allied Properties REIT (6.6%), Calloway REIT (6.6%), Dream Office REIT (6.4%), Cominar REIT (4.4%), Boardwalk REIT (5.0%), Chartwell REIT (4.5%), Artis REIT (4.3%), Granite REIT (4.3%), Crombie REIT (2.2%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.7%).
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PENGROWTH ENERGY $4.09 (Toronto symbol PGF; Shares outstanding: 534.6 million; Market cap: $2.1 billion; TSINetwork Rating: Average; Dividend yield: 5.9%; www.pengrowth.com) produces oil and natural gas, mostly in Western Canada. It recently started up its Lindbergh oil sands project in eastern Alberta, which should produce 16,000 barrels a day by the end of 2015.
In the three months ended December 31, 2014, Pengrowth’s cash flow rose 10.0%, to $0.22 a share from $0.20. The company sharply cut its operating costs, offsetting a 7.2% production decline, to 71,802 barrels of oil equivalent a day from 77,371.
The company will spend $200 million on exploration and development in 2015, down 74.0% from $770 million last year. Even so, it expects to produce 73,000 to 75,000 barrels a day in 2015, up about 1.5% from 2014.
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In the three months ended December 31, 2014, Pengrowth’s cash flow rose 10.0%, to $0.22 a share from $0.20. The company sharply cut its operating costs, offsetting a 7.2% production decline, to 71,802 barrels of oil equivalent a day from 77,371.
The company will spend $200 million on exploration and development in 2015, down 74.0% from $770 million last year. Even so, it expects to produce 73,000 to 75,000 barrels a day in 2015, up about 1.5% from 2014.
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