investment

Your best chance of getting rich is by putting your money in your own business. But this can be risky investment advice. Many new businesses wind up failing.

Here’s the text of the quarterly letter I sent to our Portfolio Management clients in late February: “Investor reaction to economic statistics of the past couple of weeks tells us something about today’s investor psychology. The U.S. economy grew at an annual rate of 2.8% in the fourth quarter of 2011. That’s undoubtedly a modest rate of growth. However, the U.S. achieved it despite the depressing effect of today’s much-discussed negatives. These include the possibilities of Greek debt default and a breakdown of the euro, the continued weakness of the U.S. housing industry, the prospect of another $1 trillion budget deficit in the U.S., the Iranian nuclear program and so on. Taken in context, this fourth quarter growth seems somewhat impressive. But the most common response to the news was dismissive. In particular, many economists zeroed in on the idea that we need growth of 3% or more to bring down the rate of unemployment....

Pat McKeough responds to many personal questions on investing in stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of 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 member sought long-term advice on one of North America’s best-known big-box discount chains, which faces stiff competition in a race for retail revenue that has spread well beyond North America. ...

CANADIAN PACIFIC RAILWAY LTD., $75.25, Toronto symbol CP, continues to expand its rail network in the Bakken area, which could contain more than 500 billion barrels of oil. This region covers parts of Montana, North Dakota and Saskatchewan. Oil was first discovered at Bakken in 1951, but it has always been hard to extract from the shale rock. However, modern techniques, such as horizontal (or slant) drilling, have made this oil much easier to access. Texas-based U.S. Development Group LLC is currently building a new hub in North Dakota to handle Bakken’s rising production. This hub, which should begin operating in mid-2012, will transfer oil from trucks to trains, which will then ship it to market....

DUNDEE REIT $36.80 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 66.3 million; Market cap: $2.4 billion; Dividend yield: 6.0%) owns and manages 18.9 million square feet of office, industrial and retail space. The trust has a 95.6% occupancy rate.

In the three months ended December 31, 2011, Dundee’s revenue jumped 73.2%, to $136.3 million from $78.7 million a year earlier. Most of the increase came from properties the trust recently purchased.

The best way to assess a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 62.6% in the latest quarter, to $41.0 million from $25.2 million. Cash flow per unit rose 12.7%, to $0.62 from $0.55, due to more units outstanding (the trust issued new units to pay for the acquired properties).

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This is first of 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. Today he answers a question from a TSI reader on how to react when good stocks start to slide. Below is the transcription of Pat’s comments. ...

The arrival of new wireless providers has put pressure on Canada’s three main telecommunications companies (BCE, Telus and Rogers). To remain competitive, all three are offering subscribers better long-term deals. They are also making big investments in new wireless and high-speed Internet technologies. However, these moves are also dampening their profits. Still, demand for wireless services continues to rise, and we feel BCE’s broad geographic reach puts it in the best position to profit from that trend. The improving economy should also push up ad sales at its TV stations and other media businesses. Moreover, the company recently went through a significant restructuring. That will increase its long-term profits and give it more cash for dividends....

While BCE remains our favourite telco, we still have a high opinion of these three. Each faces unique challenges, and their concentration in certain regions adds risk. However, ongoing investments in their networks will continue to help them hang on to customers in the face of strong competition from cable companies and Internet-based phone services. That will also let them maintain or increase their dividends. TELUS CORP. (Toronto symbols T $57 and T.A $57; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 325.0 million; Market cap: $18.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings....

We were pleased to learn in November 2011 that Warren Buffett had made a major investment in IBM. Indeed, Mr. Buffett was recently quoted as saying that he was “late to the IBM party,” but even so he has committed a good deal of money to it. He now owns 6% of the company. We made IBM our #1 U.S. Stock of the Year in our Wall Street Stock Forecaster newsletter in 2010. The price was $126—yet it has risen over 60% since then. We think IBM will go still higher in years to come, and it appears Warren feels the same way....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice on a wide range of topics, including the best strategies to use in international stock markets. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “There are 3 convenient ways to invest in foreign growth without getting out of your comfort zone.”...