investment

I have a couple of problems with the term “blue chip.” First, I find it encourages sloppy thinking. The New York Stock Exchange defines a blue chip as stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good times and bad. The problem is that “reputation” plays a key role in the definition. Many companies acquire a blue-chip reputation by displaying the qualities that the definition suggests. Others get it through a strong public relations effort or by being in the right industry or business situation at the right time and place. Regardless of how it got there, this blue-chip label sticks with companies long after they quit living up to it. If you shop purely on reputation and fail to investigate before you buy, you can assume you’ll eventually get burned, regardless of whether you are looking for consumer goods or investments....

Uranium Participation Corp., $5.25, symbol U on Toronto (Shares outstanding: 106.4 million; Market cap: $558.6 million; www.uraniumparticipation.com), is a holding company that was created to invest almost all of its assets in uranium oxide (U3O8). Denison Mines (symbol DML on Toronto) manages Uranium Participation Corp. The company began trading in May 2005 after it issued 20 million units at $5 each to raise $100 million. Each unit consisted of one common share of Uranium Participation Corp. and one-quarter of one warrant. Each whole warrant entitled the holder to acquire one common share at $6.25 per share until May 2007. Uranium prices reached an all-time high of $136 U.S. a pound in 2007 on fears of shortages. As a result, Uranium Participation Corp. shares hit an all-time high of almost $19. However, the shortages never materialized. Uranium prices then steadily declined to a low of $40 U.S. a pound in 2009, then rebounded to $64 U.S. in February 2011. That rebound moved Uranium Participation Corp. units from roughly $6 a unit up to $9.50....

Verisante Technology Inc., $0.47, symbol VRS on Toronto (Shares outstanding: 53.5 million; Market cap: $25.1 million; www.verisante.com), is developing two products that it believes can help doctors detect cancer earlier: the Verisante Aura, for skin cancer detection, and the Verisante Core, for lung, colon and cervical cancer detection. The company is currently focused on the Verisante Aura, which it believes would eliminate many unnecessary biopsies. It designed this device to scan suspicious skin lesions for 21 different indicators of cancer and provide immediate, accurate results. Verisante held cash of $5.8 million on December 31, 2011. It is spending about $4 million a year to research and develop its devices, so it has the funds it needs for a year or more....

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. 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 one of the highlights from these Q&A sessions. This past week, one Inner Circle member asked about one of the dividend stocks in his portfolio. Pat replies with a look at whether this leader in diabetes products can sustain its growth with new products and expanded international markets. ...

J.C. PENNEY CO. INC., $26.29, New York symbol JCP, fell 23% this week after the company reported much-worse-than-expected quarterly earnings. It also suspended its $0.20-a-share quarterly dividend to conserve cash. Penney operates more than 1,100 department stores in the U.S. and Puerto Rico. It also sells goods over the Internet. The company recently began a major restructuring that includes shifting to an everyday pricing strategy. The company feels that predictable prices will spur customers to visit more often instead of waiting for items to go on sale....

CANADIAN PACIFIC RAILWAY LTD., $74.11, Toronto symbol CP, rose 1% this week after U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees. CP’s chairman, John Cleghorn, and chief executive officer, Fred Green, also resigned. Pershing Square will probably try to install Hunter Harrison, the successful former CEO of CN Rail, as CP’s new chief executive officer. Even if CP hires someone other than Mr. Harrison, the company will continue to work on improving its efficiency by purchasing new locomotives, upgrading its tracks and streamlining its schedules....

This is the latest in a series of video interviews in which Pat McKeough will give his investment advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This week, the topic is the ongoing crisis in Europe, and the apparently unsolvable problems of Greece. Is it time to take some money out of the market? On the contrary, says Pat, investors who remain calm are looking at modest risk and a lot of upward potential.
Q: Pat, a socialist president was elected in France and Greece took another turn for the worse. Is it time to be taking some money out of the stock market?...

Many people try to learn more about investing by gathering up loads of information. But you also need to learn how to absorb and organize your information, so that you recognize and remember the essential aspects of it. I’ve found that the best way to do that is by writing about it. That’s just the way your brain works. Writing about something forces you to think deeply about it—or at least more deeply than if you’re not writing about it. When I decide to write about an investment or an investment-related subject, I start by gathering up information—hard facts, plus other people’s opinions on those facts. By the time I start to write, I may have read, scanned or simply browsed through 20,000 or more words on the subject....

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. 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 one of the highlights from these Q&A sessions. This past week, an Inner Circle member wondered about one of Canada’s most successful growth stocks. The shares for this athletic wear firm have done very well for this investor, but he asks Pat if he should be cautious about the high share price....

J.P. MORGAN CHASE & CO., $36.96, New York symbol JPM, fell 9% on Friday after it announced an unexpected loss at its trading division. Morgan uses complex derivatives that act like insurance contracts on the corporate bonds it holds. Due to volatile bond prices, Morgan has lost $2 billion on these hedges since the start of April 2012. The bank is now trying to get out of them, but depending on bond prices, Morgan could lose another $1 billion before it is able to do so. To put these figures in context, Morgan earned $5.4 billion, or $1.31 a share, in the three months ended March 31, 2012....