diversification
What is diversification?
Diversification involves the planned distribution of investments across various securities to minimize the risk exposure to a specific industry or geographic segment. However, the risk of over-diversification exists, in which an investor can at best expect to mirror the market returns, minus any brokerage fees or management expenses.
What is diversification?
Our investment advice is that your in-the-limelight holdings are the ones you need to watch most closely. When investor expectations are high, it pays to be skeptical and wary.
3M’s products go into a huge number of consumer and industrial goods. That cuts the company’s reliance on any specific product or industry, but it also means its sales tend to rise at the same pace as the overall economy, or gross national product (GNP). Some investors see this as a drawback....
AMAZON.COM $395.96 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 457.7 million; Market cap: $177.4 billion; No dividends paid) has expanded its AmazonFresh same-day grocery delivery service to San Francisco....
SHERRITT INTERNATIONAL $3.02 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $900.8 million; Dividend yield: 5.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas....
iShares MSCI EAFE Index Fund (CAD-Hedged) ETF, $21.12, symbol XIN on Toronto (Units outstanding: 47.6 million; Market cap: $1.0 billion; ca.ishares.com), is an exchange traded fund that tries to match the return of the Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index. The MSCI EAFE Index is used as a benchmark to measure international stock performance. It is made up of 22 MSCI country indexes representing developed markets in Europe, Australasia and the Far East. The fund is hedged against movements of foreign currencies against the Canadian dollar, so its value rises and falls with the stocks in its portfolio. Note, however, that such exposure adds to the diversification in your investments....
3M COMPANY $136 (New York symbol MMM; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 665.2 million; Market cap: $90.5 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.3m.com) began operating as the Minnesota Mining & Manufacturing Company in 1902.
3M started off making sandpaper and abrasives for industrial customers. It later developed a variety of other consumer and manufacturing-related goods, such as pressure- sensitive masking and packaging tape, recording tape, reflective highway markings and medical bandages. The company now makes more than 55,000 different items.
The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.
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3M started off making sandpaper and abrasives for industrial customers. It later developed a variety of other consumer and manufacturing-related goods, such as pressure- sensitive masking and packaging tape, recording tape, reflective highway markings and medical bandages. The company now makes more than 55,000 different items.
The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.
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CHEMTRADE LOGISTICS INCOME FUND, $18.45, symbol CHE.UN on Toronto, jumped almost 9% this week after it agreed to buy specialty chemicals maker General Chemical Corp. for $860 million. General makes a wide range of chemicals, including aluminum sulphate, aluminum chlorohydrate and ferric sulphate (all of which are used in water treatment), as well as ingredients for prescription drugs, nutritional supplements and veterinary products. The company also sells and regenerates sulphuric acid. In addition to water treatment and pharmaceuticals, its markets include oil refining, pulp and paper, agriculture and food and beverage. This is a huge acquisition for Chemtrade: it would more than double its $756.4-million market cap. A major purchase like this can always backfire, but it will likely be a good fit, offering Chemtrade both growth prospects and diversification....
SHERRITT INTERNATIONAL $3.02 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $900.8 million; Dividend yield: 5.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 356 megawatts of power generation capacity in Cuba, with an additional 150 megawatts starting up soon.
The company is a major nickel producer, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and is Canada’s largest thermal coal producer.
In the three months ended September 30, 2013, Sherritt’s revenue fell 16.2%, to $286.2 million from $341.5 million a year earlier. Lower nickel and coal prices were the main reasons for the drop. Cash flow per share declined 33.3%, to $0.20 from $0.30.
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The company is a major nickel producer, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and is Canada’s largest thermal coal producer.
In the three months ended September 30, 2013, Sherritt’s revenue fell 16.2%, to $286.2 million from $341.5 million a year earlier. Lower nickel and coal prices were the main reasons for the drop. Cash flow per share declined 33.3%, to $0.20 from $0.30.
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CHEMTRADE LOGISTICS INCOME FUND $18.94 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $777.2 million; Dividend yield: 6.3%) has confirmed that it has agreed to buy specialty chemicals maker General Chemical Corp. for $860 million.
This is a huge acquisition for Chemtrade: it will more than double its $777.2-million market cap. A major purchase like this can always backfire, but it will likely be a good fit, offering Chemtrade both growth prospects and diversification.
As well, Chemtrade estimates that General will add 17% to its cash flow per unit. That will let the fund maintain its dividend, which gives its units a high 6.3% yield.
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This is a huge acquisition for Chemtrade: it will more than double its $777.2-million market cap. A major purchase like this can always backfire, but it will likely be a good fit, offering Chemtrade both growth prospects and diversification.
As well, Chemtrade estimates that General will add 17% to its cash flow per unit. That will let the fund maintain its dividend, which gives its units a high 6.3% yield.
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Our view is that virtually all Canadian investors should have 20% to 30% of their portfolios in the U.S. stocks we recommend in Wall Street Stock Forecaster. These investments can provide all the foreign exposure most investors need. If you do want to add more foreign content, you could buy individual stocks. But for most investors, directly investing in foreign stocks can add an extra layer of risk and expense. As well, timely and accurate information about overseas companies is not always available, and securities regulations vary widely between countries. It can also be hard for your broker to buy shares on foreign markets without paying a premium. Tax rules and restrictions on transferring funds between nations add further uncertainty and cost. We think one of the best ways to invest in foreign (non-U.S.) markets is through exchange traded funds (ETFs). You could add some of these ETFs in reasonable quantities: perhaps 10% of your holdings if you’re a conservative investor (including 5% or so in higher-risk funds, such as emerging market ETFs)....