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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ISHARES MSCI JAPAN INDEX FUND $11.76 (New York Exchange symbol EWJ; buy or sell through brokers; us.ishares.com) is an ETF that tries to match the return of the Morgan Stanley Capital International (MSCI) Japan index.
The fund has now regained all of the ground it lost in the recent market downturn. Its latest rise came after the Japanese government and the Bank of Japan announced huge increases in their economic stimulus programs.
Under Prime Minister Shinzo Abe’s so-called “Abenomics” strategy, the Bank of Japan has pumped money into the country’s economy. However, consumer spending has remained sluggish, especially after the government raised the sales tax to 8% from 5% on April 1, 2014.
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The fund has now regained all of the ground it lost in the recent market downturn. Its latest rise came after the Japanese government and the Bank of Japan announced huge increases in their economic stimulus programs.
Under Prime Minister Shinzo Abe’s so-called “Abenomics” strategy, the Bank of Japan has pumped money into the country’s economy. However, consumer spending has remained sluggish, especially after the government raised the sales tax to 8% from 5% on April 1, 2014.
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RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 308.9 million; Market cap: $8.3 billion; Price-to-sales ratio: 5.8; Dividend yield: 5.2%; TSINetwork Rating: Average; www.riocan.com) continues to open new malls and, with partners, mixed-use properties with office and residential space. The trust is also selling less profitable properties.
In the third quarter of 2014, RioCan’s net leasable area shrank by 2.5%, to 71.6 million square feet from 73.5 million a year earlier. But thanks to strong demand from retailers, it’s renewing leases at higher rental rates. That’s why its cash flow rose 7.4% in the latest quarter, to $131 million from $122 million. Cash flow per unit gained 5.0%, to $0.42 from $0.40, on more units outstanding.
The units trade at a reasonable 15.9 times RioCan’s expected 2014 cash flow of $1.70 a unit. The $1.41 distribution yields 5.2%.
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In the third quarter of 2014, RioCan’s net leasable area shrank by 2.5%, to 71.6 million square feet from 73.5 million a year earlier. But thanks to strong demand from retailers, it’s renewing leases at higher rental rates. That’s why its cash flow rose 7.4% in the latest quarter, to $131 million from $122 million. Cash flow per unit gained 5.0%, to $0.42 from $0.40, on more units outstanding.
The units trade at a reasonable 15.9 times RioCan’s expected 2014 cash flow of $1.70 a unit. The $1.41 distribution yields 5.2%.
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LOBLAW COMPANIES LTD. $60 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 412.4 million; Market cap: $24.7 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.loblaw.ca) has sold 15 stores and one warehouse to Choice Properties Real Estate Investment Trust (Toronto symbol CHP.UN).
Loblaw received $211.9 million, which is equal to 57% of the $371.0 million, or $0.90 a share, that it earned in the three months ended October 4, 2014. That total included $112.2 million of Choice Properties’ units. As a result, Loblaw now owns 83.0% of this REIT.
Loblaw is a buy....
Loblaw received $211.9 million, which is equal to 57% of the $371.0 million, or $0.90 a share, that it earned in the three months ended October 4, 2014. That total included $112.2 million of Choice Properties’ units. As a result, Loblaw now owns 83.0% of this REIT.
Loblaw is a buy....
CANADIAN IMPERIAL BANK OF COMMERCE $104 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.0 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.cibc.com) is Canada’s fifth-largest bank, with $405.4 billion of assets.
CIBC prefers to focus on domestic banking instead of international expansion; Canada supplies about 85% of its revenue. The bank sold half of its Aeroplan accounts to TD Bank (see page 113) when TD took over the plan.
As a result, its earnings fell 2.5% in the three months ended July 31, 2014, to $908 million from $931 million a year earlier. Per-share earnings declined 1.3%, to $2.23 from $2.26, on fewer shares outstanding. These figures exclude unusual items, such as gains on investment sales.
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CIBC prefers to focus on domestic banking instead of international expansion; Canada supplies about 85% of its revenue. The bank sold half of its Aeroplan accounts to TD Bank (see page 113) when TD took over the plan.
As a result, its earnings fell 2.5% in the three months ended July 31, 2014, to $908 million from $931 million a year earlier. Per-share earnings declined 1.3%, to $2.23 from $2.26, on fewer shares outstanding. These figures exclude unusual items, such as gains on investment sales.
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BANK OF MONTREAL $82 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 649.0 million; Market cap: $53.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $586.8 billion of assets.
In July 2011, the bank paid $4.1 billion for Milwaukee-based Marshall & Ilsley. The move doubled the size of its U.S. retail banking business, which now supplies 15% of its total earnings. Thanks to cost cuts and an improving U.S.
economy, this division will likely earn $686 million in fiscal 2014, up 8.7% from 2013. The bank aims to raise that to at least $750 million in 2015.
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In July 2011, the bank paid $4.1 billion for Milwaukee-based Marshall & Ilsley. The move doubled the size of its U.S. retail banking business, which now supplies 15% of its total earnings. Thanks to cost cuts and an improving U.S.
economy, this division will likely earn $686 million in fiscal 2014, up 8.7% from 2013. The bank aims to raise that to at least $750 million in 2015.
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TORONTO-DOMINION BANK $57 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $102.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.td.comtarget=”_blank”) is Canada’s largest bank, with $921.8 billion of assets.
TD continues to benefit from its recent deal with Aimia (Toronto symbol AIM) to become the main credit card issuer for the popular Aeroplan travelreward program. The bank’s insurance operations also benefited from a 32% drop in claims in the latest quarter.
As a result, TD’s earnings jumped 36.8% in the three months ended July 31, 2014, to $2.2 billion from $1.6 billion a year earlier. Per-share profits gained 40.2%, to $1.15 from $0.82. These figures exclude unusual items, such as costs related to the new Aeroplan business.
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TD continues to benefit from its recent deal with Aimia (Toronto symbol AIM) to become the main credit card issuer for the popular Aeroplan travelreward program. The bank’s insurance operations also benefited from a 32% drop in claims in the latest quarter.
As a result, TD’s earnings jumped 36.8% in the three months ended July 31, 2014, to $2.2 billion from $1.6 billion a year earlier. Per-share profits gained 40.2%, to $1.15 from $0.82. These figures exclude unusual items, such as costs related to the new Aeroplan business.
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SUNCOR ENERGY INC., $40.52, Toronto symbol SU, plans to spend between $7.2 billion and $7.8 billion to expand and upgrade its operations in 2015. To put these figures in context, the company’s cash flow was $7.6 billion in the first nine months of 2014. Suncor will invest 55% of the 2015 estimate, or $4.3 billion, in its oil sands and other growth projects. The remaining 45% will go to refineries and conventional oil and gas properties. The midpoint of the 2015 range is 10.3% higher than the $6.8 billion the company expects to spend this year—even though oil prices have fallen by more than 20% in the past six months. Suncor feels its new oil sands projects can still generate positive cash flow at today’s prices....
PETSMART INC., $78.70, Nasdaq symbol PETM, operates 1,387 pet stores in the U.S. and Canada. It also has 201 in-store PetsHotel boarding facilities for dogs and cats. In its fiscal 2015 third quarter, which ended November 2, 2014, PetSmart’s earnings declined 0.1%, to $92.16 million from $92.22 million a year earlier. However, earnings per share rose 4.5%, to $0.92 from $0.88, on fewer shares outstanding. Activist investment firms Jana Partners and Longview Asset Management each own about 9% of the company’s stock. Under pressure from these investors, PetSmart is now lowering its overhead and other costs, with the goal of cutting $200 million from its annual expenses by the end of fiscal 2016....
Pat McKeough responds to many requests from members of his Inner Circle for specific stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday.
This week an Inner Circle Member asked us about a Canadian company that’s an international leader in the aircraft parts industry. Héroux-Devtek is the world’s third-largest maker of landing gear for aircraft, with clients such as Boeing, Embraer and Bombardier. Pat considers the company’s rising earnings in light of a recent acquisition and a new contract with Boeing. He also looks at the impact of shrinking military budgets around the globe on Héroux-Devtek’s prospects.
Q: Pat: What is your opinion on Héroux-Devtek Inc.? Best regards.
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This week an Inner Circle Member asked us about a Canadian company that’s an international leader in the aircraft parts industry. Héroux-Devtek is the world’s third-largest maker of landing gear for aircraft, with clients such as Boeing, Embraer and Bombardier. Pat considers the company’s rising earnings in light of a recent acquisition and a new contract with Boeing. He also looks at the impact of shrinking military budgets around the globe on Héroux-Devtek’s prospects.
Q: Pat: What is your opinion on Héroux-Devtek Inc.? Best regards.
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Every Thursday we bring you our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. Procter & Gamble’s sales have slowed in recent years, mainly due to competition from cheaper generic brands. In response, the company is eliminating less profitable household goods and cutting costs. It’s also doing a good job of developing new products and finding new markets for existing ones. These moves will give Procter more room to adjust its prices without hurting its profit margins. They’ll also provide more cash for share buybacks and dividend hikes....
