investment
An investment is an asset or property acquired to generate income or gain appreciation. Appreciation is the increase in the value of an asset over time. It requires the outlay of a resource today, like time, effort, and money, for a greater payoff in the future or for generating a profit.
An investment involves using capital in the present to increase an asset’s value over time.
Investments may include bonds, stocks, real estate, or alternative investments.
Investments can be diversified to reduce risk, though this may reduce the amount of earning potential.
In business contexts, investments are financial; however, consider how some people spend time to make higher incomes in the future (i.e. invest in a college education).
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A great way to diversify your Finance sector holdings beyond the big banks is to buy shares of Great-West Lifeco and IGM Financial. Both companies lead their fields, trade at low multiples to earnings and have a history of rising dividends. GREAT-WEST LIFECO INC. $37 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 997.5 million; Market cap: $36.9 billion; Priceto- sales ratio: 0.9; Dividend Yield: 3.5%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is one of Canada’s largest insurance companies, with $1.2 trillion of assets under administration. It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.1% of Great-West. The company continues to expand in Ireland. In 2013, it paid $1.75 billion for Irish Life Group, a major pension manager and life insurance provider. It will also soon complete its purchase of the Irish operations of Legal & General Group for an undisclosed sum. This business provides investment and tax-planning services to wealthy individuals....
CANADIAN TIRE CORP. $134 (www.canadiantire.ca) has opened a new store in Edmonton that’s three times the size of its typical outlet. The company plans to use this location to test new features, such as a car simulator that lets customers test drive tires in different weather conditions. Other innovations include interactive display screens, and a drive-through area that makes it easier for customers to pick up online orders. Best Buy. CANADIAN NATIONAL RAILWAY CO. $73 (www.cn.ca) faces several challenges, including falling crude-by-rail volumes and higher safety-related costs. However, CN continues to improve its efficiency with new locomotives and tracks. That should help it reach its goal of increasing its dividend payout ratio to 35% of its earnings before one-time items, up from 27% in 2014. Buy. TORSTAR CORP. $6.04 (www.torstar.com) owns 16.1% of ecommerce website Shop.ca, which provides an online platform for over 500 merchants. Shop.ca doesn’t carry inventory or fulfill orders. Instead, it earns commissions on sales of merchandise through its site. Shop.ca will likely sell shares to the public in the next few months, which would help Torstar unlock the value of this investment. Buy.
BROADRIDGE FINANCIAL SOLUTIONS INC. $52 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 119.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.1%; TSINetwork Rating: Average; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. It processes 90% of all proxy votes in the U.S. and Canada. If you exclude one-time items, Broadridge earned $58.8 million, or $0.47 a share, in its fiscal 2015 third quarter, which ended March 31, 2015. That’s up 6.7% from $55.1 million, or $0.44 a share, a year earlier.
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CONAGRA FOODS INC. $44 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 427.1 million; Market cap: $18.8 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.conagrafoods.com) bought Ralcorp Holdings, the largest private-label food maker in the U.S., for $4.75 billion in January 2013.
The purchase has not worked out as well as ConAgra had hoped, as strong competition hurt Ralcorp’s sales and earnings. As a result, the company has had to write down this investment by $2.1 billion.
In response, ConAgra has launched a restructuring plan aimed at improving Ralcorp’s profitability. This strategy includes better packaging, speeding up deliveries and launching new products. It has also cut its private-label prices, which should help improve Ralcorp’s market share.
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The purchase has not worked out as well as ConAgra had hoped, as strong competition hurt Ralcorp’s sales and earnings. As a result, the company has had to write down this investment by $2.1 billion.
In response, ConAgra has launched a restructuring plan aimed at improving Ralcorp’s profitability. This strategy includes better packaging, speeding up deliveries and launching new products. It has also cut its private-label prices, which should help improve Ralcorp’s market share.
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Some investors believe that market timing—trying to figure out if the market will rise or fall—is or can be an aid to their investing decisions. However, most investors who try to time the market find that it costs them money in the long run. When it works, it may help them make some modest profits or avoid some modest losses. When it fails, on the other hand, it often does so in a bigger way. At times it leads to ghastly losses. The key risk in market timing is the “false signal”. That’s when the market does exactly the opposite of what the timer expected. In fact, some false signals may seem like sure things until they fail. Market timers may multiply the danger from false signals by making much bigger transactions that usual. They can also raise their risk by shifting to more aggressive and highly leveraged forms of trading—delving into stock options or futures trading, for instance....
BlackRock Inc., $353.45, symbol BLK on New York (Shares outstanding: 164.6 million; Market cap: $58.5 billion; www.blackrock.com), is one of the world’s largest publicly traded investment management firms. The company manages $4.8 trillion of assets on behalf of institutions and individuals through a variety of equity, fixed-income, cash-management, alternative-investment and advisory products. In the three months ended March 31, 2015, BlackRock’s earnings rose 8.9%, to $830 million, or $4.89 a share, from $762 million, or $4.43, a year earlier. Rising stock markets and strong demand from individual and institutional clients were behind the gain....
With $44 billion earmarked for new projects, Enbridge builds up its cash flow and keeps our rating as one of Canada’s best dividend stocks.
We think the big banks remain some of the strongest Canadian dividend stocks, but warn against buying them through this split share company.
INTEL CORP., $31.84, Nasdaq symbol INTC, has agreed to acquire Altera Corp. (Nasdaq symbol ALTR). Altera specializes in chips called field programmable gate arrays (FPGAs) that users can program to perform specific tasks. This helps make server computers faster. The company focuses on chip design; it outsources manufacturing to other firms, including Intel....
SNC-LAVALIN GROUP INC., $46.40, Toronto symbol SNC, gained 3% this week on speculation that larger engineering firms in Spain and Australia are interested in buying the company. The stock fell to $36.24 in March 2015 after the RCMP laid charges against SNC and two of its subsidiaries for using bribes to win construction contracts in Libya between 2001 and 2011. These are the same allegations that prompted the company to replace its senior executives in 2012 and bring in a new program to enforce ethical practices. SNC plans to fight these charges....