stock pickers

Aggressive investors need to be more skeptical and discriminating than conservative investors, because they take on greater risk. Conservative investors mainly buy well-established companies with a history of earnings and possibly dividends, and a secure hold on a growing, or at least stable, clientele. (In the latest issue of Stock Pickers Digest, our newsletter for aggressive investing, we’ve updated our buy/sell/hold advice on a home-security firm that has risen more than 30% for us in the past year. And its U.S. expansion could help push it even higher. Read on for further details.)

Cut risk by keeping aggressive investing picks to a reasonable portion of your overall portfolio

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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 advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Stock market software is a help, but successful investing calls for experienced human judgment.” Many investment firms manage money with the help of something called a “black box.” This is stock market software that picks stocks or makes other investment decisions, based on historical data. Individuals sometimes buy these programs over the Internet or from direct-mail advertising....

In the latest issue of The Successful Investor, we’ve updated our buy/sell/hold advice on grocery retailer Metro Inc. (symbol MRU.A on Toronto).

Metro: An aggressive pick that matured into a stock more suitable for conservative investing

Metro is a good example of a stock that has graduated from Stock Pickers Digest, our newsletter for aggressive investors, to The Successful Investor, which focuses on more conservative selections.

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METRO INC. $45 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 105.8 million; Market cap: $4.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.5%; SI Rating: Average) operates roughly 660 grocery stores in Quebec and Ontario. Its major banners include Metro, Metro Plus, Super C and Food Basics. As well, Metro operates 267 drug stores, including 81 inside its supermarkets. The company also owns roughly 23% of Alimentation Couche-Tard Inc. (Toronto symbol ATD.B), which operates over 6,000 convenience stores in Canada and the U.S. Couche-Tard is a recommendation of Stock Pickers Digest, our publication for aggressive investors. This investment accounts for about 5% of Metro’s annual earnings.

Big purchase still paying off

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Many Canadian firms have tried to expand into the U.S. over the years. Some, like Royal Bank of Canada (symbol RY on Toronto) have had difficulty in the United States. Other companies’ expansion efforts have failed miserably. Canadian Tire (symbol CTC.A on Toronto) provides a memorable example of a failed U.S. expansion. In 1982, the retailer bought a chain of Whites automotive-retail stores in Texas. By 1985, Canadian Tire had lost $300 million on this purchase. That’s when the company decided to sell the division and retreat to Canada. Its stock price has since gone up more than 360%. Canadian Tire is one of the stocks we cover in our Successful Investor newsletter.

This growth stock pick’s U.S. strategy builds on its Canadian roots

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BIRCHCLIFF ENERGY $9.60 (Toronto symbol BIR; SI Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 124.8 million; Market cap: $1.2 billion) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. In the three months ended June 30, 2010, Birchcliff’s production rose 9.3%, to 12,357 barrels of oil equivalent per day (this measurement includes natural gas) from 11,313 barrels a year earlier. Cash flow per share rose 5.6%, to $0.19 from $0.18. Birchcliff will now spend $227.2 million on exploration and development this year. It will fund these activities from its cash flow, as well as with debt. Currently, the company’s debt of $236 million is just 19.7% of its $1.2 billion market cap, so it can easily borrow more funds....

The U.S. restaurant industry is highly competitive. Restaurant operators range from large chains, like McDonald’s and Burger King, to independent businesses and smaller chains, like Ruby Tuesday (symbol RT on New York). We cover Ruby Tuesday in Stock Pickers Digest, our newsletter for aggressive investing. (Ruby Tuesday has shot up 42% for us in the past year, and a continued economic rebound could help push this hot stock pick’s share price even higher. See below for more on the company’s future prospects.) Overall, the U.S. restaurant industry has faced tough challenges in the past two years. That’s because the economic downturn has prompted more consumers to eat at home, or to spend less when they dine out....

WESTJET AIRLINES, $13.04, symbol WJA on Toronto, has reported higher revenue and earnings in the latest quarter. In the three months ended June 30, 2010, WestJet’s revenue rose 15.2%, to $612.1 million from $531.2 million a year earlier. Excluding one-time items, earnings jumped 154.3%, to $23.4 million, or $0.16 a share, from $9.2 million, or $0.07 a share. This was the company’s 21st consecutive quarter of profitability. The gains came mostly from improved demand for the company’s flights. WestJet has a new, fuel-efficient fleet and a low cost-structure. As well, it serves more cities than many of its competitors. It’s selectively adding to these destinations, and focusing on sunshine destinations where it can add to its earnings by selling customized vacation packages that include flights. These strengths put the company in a good position to profit from the economic recovery....

The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian retailers face rising competition from large U.S. discount retailers, like Wal-Mart and Costco. As well, consumer stocks are more exposed to swings in the overall economy than companies in some other sectors, such as utilities. That’s especially true when you indulge in aggressive investing in consumer stocks and buy small retailers. They tend to be less well-established than larger companies, such as Canadian Tire. However, aggressive investing in consumer stocks also holds the potential for spectacular gains. (In a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing, we update our buy/sell/hold advice on a retailer that has risen 36% for us in the past year — and could go even higher. Read on for further details.)...

Here are three easy-to-avoid errors that most investors make when investing money in the stock market. All three can seriously hinder your portfolio’s long-term results. 1. Taking an overly optimistic view of speculative investments: Some investors generally put too high a value on speculative ventures. They want to believe that innovations will succeed, and that they’ll get a fair chance to profit from investing money in these companies. Their innate politeness stops them from asking tough questions of smooth-talking promoters. Excess optimism plus a shortage of information leads them to pay too much. That’s why we focus on well-established companies rather than start-ups, even in Stock Pickers Digest, our advisory for investing money in aggressive stocks. Most of our Stock Pickers Digest buys are far better established than your average penny stock....