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Some investors follow a “sector rotation” approach to investing. That’s when you try to hop from sector to sector, underweighting or overweighting your holdings in certain sectors of the stock market depending on a forecast of the stage of the economic cycle, or other factors. This approach can work in any one year, say. However, it’s difficult if not impossible to produce consistent longer-term returns. Here are two reasons why:

1. You need to guess right three times to profit in sector rotation: You have to pick the top sectors, then pick the stocks that will rise within those sectors, then sell before the sector stumbles. It’s virtually impossible to consistently succeed at all three over long periods. But that’s not the only problem with sector rotation.
2. Sector rotation can overweight you in the worst-performing sectors: There are many theories about which sectors will outperform at any given stage of the economic cycle. But trying to pick winning sectors — and staying out of other sectors — seldom works over long periods. Investors who attempt to do so often wind up with heavy holdings in the worst-performing sectors. That would be devastating to your portfolio, even if you confine your investments to well-established companies.

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A couple of our Successful Investor Wealth Management clients asked us about a Canadian real estate investing subject that can be sensitive for investors who are at or nearing retirement — when to sell the family home. The clients, a married couple, are both 59 and plan to begin collecting Canada Pension next year, at age 60. They recently sold their business and have a $450,000 investment portfolio. Their $700,000 home is mortgage-free and sits on 118 feet of lakefront in a vacation area north of Toronto. It’s a bigger home than they need, since their children are grown. They’ve thought about selling, though they’d prefer to stay put for a few years. Meanwhile, they hope their home will continue to appreciate. But they recognize that the boom in Canadian real estate investing won’t last forever, and that many baby boomers are also holding off on selling a larger-than-needed family home....

We display a price-to-sales or p/s ratio with every stock we cover in our newsletters, including our flagship publication, The Successful Investor. Price-to-sales is the ratio you get when you compare a stock’s price to its sales per share (you get sales per share by dividing total annual sales by the number of outstanding shares). ...

Gold is currently trading at around $1,183 U.S. an ounce. That’s up 4% from April 19, 2010, when it was trading at around $1,138 U.S. an ounce, but still short of gold’s all-time high of $1,214.80 U.S., which it reached in late 2009. Gold’s recent rise has partly been driven by investor fears about European sovereign debt — Greek debt in particular. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security. ...

Demand for wireless services is rising sharply in North America. That’s partly because device makers continue to release new cellphones and wireless devices, such as Apple’s iPad and Amazon’s Kindle e-book reader. As well, more customers are switching from traditional phones (or land lines) to wireless services. ...

Here are three common mistakes many investors make when selecting Canadian stock picks. All three can seriously hinder — or eliminate — your portfolio’s long-term profit potential. 1. Buying low-quality investments: Most of the bad deals in Canadian stock picks exhibit the usual tip-offs. For example, many lack a history of earnings or dividends. They may also spend way too much time publicizing themselves, and too little time building their businesses. To increase your stock market returns, we feel you should invest mainly in high-quality, dividend-paying companies. We also feel you should diversify by spreading your money out across the five main economic sectors (Resources & Commodities, Finance, Manufacturing & Industry, Utilities and Consumer)....

Investor concerns continue to mount over high debt levels in many European countries. That’s especially true of the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain). Right now, the European Union and International Monetary Fund are working on a bailout of Greece. However, negotiations are moving slowly, mainly because Germany, which would shoulder most of the bailout, is insisting that the Greek government sharply cut its spending before any restructuring can go forward. ...

The results are in and they couldn’t be clearer: The Successful Investor is Canada’s top investment advisory. That’s according to a recent analysis by the U.S.-based Hulbert Financial Digest, which is generally thought of as the bible of investment newsletter performance measurement. According to Hulbert, The Successful Investor outperformed all other Canadian newsletters over the past 5 years — and ranked fifth among all 140 newsletters that Hulbert tracks. Hulbert has been following The Successful Investor since 2002....

We designed our Successful Investor ratings (Highest Quality, Above Average, Average and Extra Risk) to help you quickly and easily identify the best investments for long term profits. These stocks have the asset size and investment quality to weather market downturns and changing industry conditions. You’ll find our rating next to each stock we recommend in our newsletters — including the safety-conscious stocks we recommend in Canadian Wealth Advisor, our newsletter for lower-risk investing. Here are three of the factors we consider when we assign a rating to a stock....

Investors sometimes ask us why we don’t publish price targets on the stocks we recommend in our newsletters and investment services. We don’t publish targets for several reasons. The main one is that they may lead investors to rely too heavily on predictions, which are the least reliable part of the investment decision-making process.

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In December, Nissan Motor Co. (symbol NSANY on Nasdaq) will ship the Nissan LEAF to selected U.S. dealers. The company aims to begin selling the car nationwide in 2011. The Nissan LEAF is the first electric car to be widely sold in the U.S. So far, 115,000 customers have paid a $99 reservation fee for the new car. The company aims to convert at least 25,000 of these reservations into firm orders by the time the car begins shipping. In light of recent developments surrounding this new electric car, we’ve updated our buy/sell/hold advice on Nissan in a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing....

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, and oil now trades at about $84 U.S. a barrel. We think oil prices could rise even further if the global economy continues to rebound, as we expect. Even so, we continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. However, you can profit nicely over long periods by investing a reasonable portion of your portfolio in well-established or well-managed Canadian oil stocks, especially those with high-quality reserves and rising production. These companies are well-positioned to profit during periods of high oil prices, and are able to at least partly offset price declines by producing more oil....

Many investors buy units of asset allocation mutual funds because they think these funds provide an easy and profitable way to diversify between stocks, bonds and cash equivalents. Asset allocation funds are mutual funds that can shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes.

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Last week, the U.S. Securities and Exchange Commission (SEC) announced that it was suing global investment bank and securities firm Goldman Sachs Group for defrauding investors. The SEC claims that Goldman Sachs misled investors about the risks of investing in certain mortgage-backed financial products. The SEC alleges that Goldman Sachs created these products with the help of a hedge-fund manager who then planned to sell short (or bet against them). Stock markets in the U.S. and Canada fell on the news of the SEC’s claims against Goldman Sachs. Shares of Canadian bank stocks also declined slightly, but they quickly recovered. That’s mainly because investors realize that the big-five Canadian banks had limited exposure to these types of complicated and risky financial products....

Standard & Poor’s and the TMX Group, which operates the Toronto Stock Exchange, recently launched the S&P/TSX Clean Technology Index. This new index consists of 21 TSX-listed green technology stocks that provide products and services that help solve environmental problems. A number of the companies on the S&P/TSX Clean Technology Index are speculative in nature. (However, the index does contain one established company that may have found a profitable niche in wind and solar-power generation. Read on for further details.)...

The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian consumer stocks are facing increasing competition from large U.S. discount retailers, like Wal-Mart and Costco.

As the competition between retailers continues to heat up, it’s more important than ever for investors to focus on Canadian consumer growth stocks with a proven ability to adapt and prosper in the fast-changing retail landscape....

CANADIAN UTILITIES LTD. (Toronto symbols CU (class A non-voting) $47 and CU.X (class B voting) $47; Income Portfolio, Utilities sector; Shares outstanding: 125.9 million; Market cap: $5.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.2%; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates 19 power plants: 15 in Canada, two in the U.K., and two in Australia, As well, Canadian Utilities sells engineering services to other utilities. ATCO Ltd. owns 52.3% of the company. Canadian Utilities’ 2009 revenue fell 7.0%, to $2.6 billion from $2.8 billion in 2008, partly due to lower electricity prices in Alberta. But thanks to improving efficiency and regulatory relief, its earnings rose 5.9%, to $3.40 a share (or a total of $427.6 million) from $3.21 a share (or $403.2 million). The company aims to fuel long-term growth with new projects. For example, it will soon begin work on a $1.65-billion power transmission line between Edmonton and Calgary....

TRANSALTA CORP. $22 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 218.4 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 5.3%; SI Rating: Average) operates roughly 80 unregulated power plants in Canada, the U.S. and Australia. Coal-fired plants account for about 57% of the power it generates. Hydroelectric and renewable sources account for 23%, and the remaining 20% comes from natural gas. In November 2009, TransAlta paid $755 million for Canadian Hydro Developers Inc., which owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. Adding Canadian Hydro will help TransAlta comply with the tougher environmental regulations that will likely come into force over the next few years. To help pay for this purchase, TransAlta raised $412.5 million by selling 20.5 million common shares for $20.10 each. That increased the total number of shares outstanding by 10%....

CANADIAN TIRE CORP. $56 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.5%; SI Rating: Above Average) sells automotive, household and sporting goods through 479 stores. These account for roughly 65% of its revenue, and 55% of its earnings. Canadian Tire owns 70% of its stores, but franchisees operate all of them. The company also owns other retail chains, including 378 Mark’s Work Wearhouse casual-clothing stores, 273 gas stations (some of which have car washes and convenience stores), and 87 PartSource auto-parts stores. Canadian Tire’s sales rose 18.2%, from $7.7 billion in 2005 to $9.1 billion in 2008. In 2009, sales fell 4.8%, to $8.7 billion. Same-store sales at the main retail division, which includes Canadian Tire and PartSource stores, fell 4.2%. Weak electronics sales offset higher sales of cleaning, kitchen and pet-care goods. As well, a lack of snow in Ontario and Quebec hurt sales of winter merchandise, such as snow shovels....

ATCO LTD. (Toronto symbols ACO.X (class I non-voting) $50 and ACO.Y (class II voting) $51; Income Portfolio, Utilities sector; Shares outstanding: 58.2 million; Market cap: $2.9 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; SI Rating: Above Average) is a holding company. Its main subsidiary is 52.3%-owned Canadian Utilities. ATCO recently reorganized its operations into three main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); and Structures & Logistics (which provides services to energy-exploration and construction companies). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%....

EMERA INC. $24 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 113.0 million; Market cap: $2.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.7%; SI Rating: Average) owns Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. Nova Scotia Power supplies 94% of Emera’s revenue. The remaining 6% comes from investments in power companies in the U.S. and Caribbean. Emera is diversifying into other businesses. For example, its Brunswick Pipeline, which carries natural gas from Saint John, New Brunswick, to the U.S. border, began operating on July 16, 2009. The pipeline contributed $14.0 million to Emera’s 2009 earnings. That’s the main reason why its 2009 earnings rose 21.9%, to $175.7 million from $144.1 million in 2008. Emera also benefited from higher power rates in Nova Scotia. Earnings per share rose 20.6%, to $1.52 from $1.26, on more shares outstanding. Revenue rose 10.0%, to $1.5 billion from $1.3 billion....

FORTIS INC. $28 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 170.7 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.0%; SI Rating: Above Average) is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, as well as the U.S., Belize and the Cayman Islands. As well, Fortis operates hotels and other businesses in Atlantic Canada. The company has been working to lower its reliance on Atlantic Canada. Much of its growth has come from the assets it bought as part of this plan. In May 2004, Fortis bought regulated electrical utilities in Alberta and B.C. for $1.5 billion in cash and stock. In May 2007, it paid $3.7 billion for the regulated gas-distribution business of Terasen Inc. (formerly called BC Gas), which has 939,600 customers in B.C. Fortis issued $1.15 billion of new common shares to help pay for this purchase....

There’s no limit to the range of investment questions that members of Pat McKeough’s Inner Circle get to ask me and my investment associates.

Many members ask us about specific investments (such as stocks, exchange-traded funds and income trusts), that they are thinking of buying or selling....

We’ve long recommended these 4 safe investing strategies in our newsletters and investment services. They can help you cut risk — and increase profits — in your stock portfolio. (Our special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada,” is full of safe investing strategies that you can easily put into practice right away. Click here to download your copy today.) 1. Look beyond a company’s share price: It’s a mistake to base your decision to buy or sell a stock on past stock-price performance alone. Rising and falling trends come in many shapes and sizes, depending on what’s going on in a company, its industry and the world....

When we’re picking stocks to recommend in our newsletters, including Wall Street Stock Forecaster, our publication that covers the U.S. markets, we like to see companies that benefit from steady revenue streams from high-quality assets, long-term contracts or other reliable sources. That’s because this type of revenue helps cut a stock’s risk. It also cuts its exposure to the ups and downs of the economic cycle. ...