investment

From time to time, we look at the negative side of investing, on the theory that successful investors learn from mistakes. If you’re more aware of critical errors, you may be able to avoid them altogether or at least cut your losses. Today we examine three common mistakes that most investors will fall into at some time.

• Error #1: Trying to time the market. Our view is that nobody guesses right every time about the direction of the stock market. Some of the most prominent people in the investment world owe their notoriety to a series of correct guesses that could end at any time....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice and insights, such as how we select our top stock picks. 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: “Use our TSINetwork rating system to pick winning stocks.”...

If you Google “Black Friday”, 172 million references come up. This tells you something about the broad use of the term, which has been used to describe days of upsetting financial news for at least the past 150 years. According to recent headlines, the latest Black Friday happened on Friday, January 13. That’s when Standard & Poor’s cut its credit rating on France and eight other eurozone countries. Some investors fear this might set off a new round of European debt turmoil and a new slump in the stock market. I think the downgrades merely sum up the current state of affairs in European finances. That’s what rating agencies do: gather up all available info on the creditworthiness of a borrower or the investment quality of a security. They don’t predict how likely it is that a borrower or security will default on its obligations. They just analyze the information and boil it down into a rating that conveys the agency’s assessment of the risk....

BROADRIDGE FINANCIAL SERVICES INC. $24 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 124.1 million; Market cap: $3.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.7%; TSINetwork Rating: Average; www.broadridge.com) serves the investment industry in three areas: investor communications, securities processing and transaction clearing.

In its fiscal 2012 first quarter, Broadridge earned $19 million. That’s up 46.2% from $13 million a year earlier. Earnings per share rose 50.0%, to $0.15 from $0.10, on fewer shares outstanding. Revenue rose 13.1%, to $476.4 million from $421.4 million.

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INTERNATIONAL BUSINESS MACHINES CORP. $192 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $230.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.ibm.com) is the world’s oldest computer company (it began operating in 1911), with operations in over 170 countries.

The company continues to profit from its move away from mainframe computers and toward designing computer systems and managing them on behalf of its clients. The resulting long-term maintenance contracts give it more dependable revenue streams. IBM now gets 55% of its revenue from services.

The company continues to rapidly grow its software business. Right now, it is particularly focused on developing analytics software, which helps businesses and government agencies gather and analyze a wide variety of data. In addition, IBM makes software for applications ranging from traffic management to power grids and food production. Software now supplies 25% of IBM’s overall revenue.

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Whether they’re near to retirement or still some years away, many investors have one prevailing fear. Once they stop working, there won’t be enough income coming in. This underlines the fact that retirement investing should begin well before you approach retirement age. And there is a plan you can adopt during your working years that is particularly effective in smoothing the path to retirement. ...

CANADIAN PACIFIC RAILWAY LTD., $70.77, Toronto symbol CP, is our “Stock of the Year” for 2012. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2012. We’ve had great success with CP since we recommended it in the first issue of The Successful Investor in January 1995. In October 2001 the old CP broke up into five separate companies: CP Rail, CP Ships, Fording Coal, Pan Canadian and Fairmont Hotels. In 2002, PanCanadian merged with Alberta Energy to form EnCana, which broke up into Encana and Cenovus in December 2009. All of these mergers and breakups unlocked significant shareholder value. Railways are highly cyclical. Unpredictable factors, such as weather, also add risk: in 2011, avalanches in B.C. and spring floods in the Prairies delayed CP’s trains and hurt its earnings....

Pat McKeough responds to many personal questions on specific stocks and other investing 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 every Friday, we offer you one of the highlights from these Q&A sessions. One question this week concerned energy stocks, specifically one stock that expects to benefit as the search for new oil production increasingly leads to the deposits found deep in the world’s oceans....

We’ve chosen Canadian Pacific Railway as our “Stock of the Year” for 2012. Railways are highly cyclical. CP’s stock got as low as $30 in mid-2004, then shot up to briefly peak at $90 in mid-2007. It then fell to a low of $33 by March 2009, as the recession cut deeply into freight volumes. The stock more than doubled to $68 by February 2011 as the economy recovered. However, avalanches in B.C. and spring floods in the Prairies hurt CP’s volumes and earnings in 2011. The stock fell as low as $46 in September. It then began to rise in October, as the economic outlook and the stock market both improved. The company now has a new plan for dealing with bad weather and raising its efficiency. The recent involvement of a prominent American hedge fund may speed up CP’s earnings growth, and spur further gains in its stock price....

DUNDEE CORP. $24 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 51.7 million; Market cap: $1.2 billion; Price-to-sales ratio: 6.6; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) is buying the 51% of Dundee Capital Markets Inc. (Toronto symbol DCM) that it does not already own. This business sells investment-management and brokerage services. This purchase will cost Dundee roughly $89 million, which is slightly more than the $88.6 million, or $1.29 a share, that it earned in the three months ended September 30, 2011. Taking full control will let Dundee lower this business’s administrative and other costs. The deal needs shareholder and regulatory approvals, but it should close in the first half of 2012. Dundee is a buy.