stock prices
As they come closer to retirement, some investors decide that they are too old to assume any investment risk. That attitude is often abetted by advisors who recommend that they move a larger part of their investments from stocks to bonds and other fixed-return investments. To some extent, this is an understandable strategy, since bonds provide steady income and a guarantee to repay the principal at maturity....
After making a decision, people tend to look around for facts and arguments that support their decision. They tend to disregard opposing facts and arguments. This is as true in investing as in anything else. You need to keep this in mind when thinking about your own beliefs. It also helps to keep it in mind when weighing the beliefs of other investors, both professional and non-professional. For instance, some professionals are promoting a new way of looking at P/E’s (the ratio of stock prices to per-share earnings). In the past, investors generally looked at two versions of the “e”, or earnings, in the ratio. You could divide the current price per share by the total of earnings in the most recent 12 months (often referred to as the “trailing P/E”). Or you could divide the price by an estimate of earnings for the current or next fiscal year (often referred to as the “forward P/E”)....
Most stock markets have risen lately. But as always, they remain subject to unexpected downturns. Even so, the long-term outlook is for higher stock prices. One way to profit from rising markets is to add exchange traded funds (ETFs) that track major stock indexes to your portfolio. ETF’s trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You must pay brokerage commissions to buy and sell ETFs, but their low management fees still give them a cost advantage over most mutual funds....
Investment research has changed a great deal since I first got involved in it in 1964, at age 16, when I got a part-time job as an assistant to an investment writer. Back then, and for many years after, you had to call or write companies to get them to mail annual and quarterly reports. You had to dig through stacks of dusty newspapers to get stock prices and market index history. To compare statistics on companies, you used a clunky adding machine and went through lots of pencils and paper....
Here’s the text of the quarterly letter I sent to our Portfolio Management clients in late August: “Some of my long-time readers may recall an analysis I wrote in late 1991, for the front page of Investor’s Digest of Canada, entitled “The great bull market of the roaring nineties.” In it, I revealed that I was “more bullish than anybody I know.” I added that I was “as bullish as I’ve ever been.” My optimism back then was partly due to my view that the downfall of the Soviet Union was likely to lead to a big increase in the number of countries that were switching, or would soon switch, to some form of North American free enterprise and away from Soviet-style central planning. The former economic system has always proven way more productive than the latter. The outcome seemed obvious—more productive economies were likely to lead to higher corporate earnings and rising stock prices....
Most experienced investors recognize that it’s hard to outperform the market on a regular basis over long periods. However, only the successful minority recognize as well that it’s all too easy to underperform the market, often by a wide margin. Our advice is that the best way to try to outperform is to apply our three key investing principles: invest mainly in well-established companies; spread your money out across the five main economic sectors (Manufacturing, Resources, Consumer, Finance and Utilities); and downplay or avoid stocks in the broker/media limelight, where unpleasant surprises can lead to brutal declines. But applying these principles to buying stocks requires a good deal of judgment and attention. Even then, you won’t beat the market every year....
Some economists and advisors say they are puzzled as to why the U.S. stock market has kept on rising since mid-year. After all, negative predictions abound. Pessimists say the world is headed for a decade of slow growth, the eurozone is headed for a breakup, the U.S. and other nations are close to losing control of their growing national debts, and so on. These, however, are all just predictions, and predictions often flop. But investors do recognize that President Obama has done things that scare off business and stock market investors. If Obama loses in November, investor and business confidence could spring back quickly. For instance, early in the new president’s term, he tried to institute a policy called Card Check that would eliminate the legal requirement of a secret ballot in new union-certification votes. Instead of voting in a secret ballot to accept or reject union representation, workers would simply sign (or refuse to sign) a card in favour of accepting the union....
When a company splits its shares, it is simply cutting itself up into a different number of pieces without changing its fundamental value. It simply wants its stock to trade in a price-per-share range that seems reasonable to investors. Mechanics of a split: If a stock’s price rises much beyond $50 a share in Canada (or $100 a share in the U.S.), some investors may shun it, since it seems expensive. The company’s management may then declare a stock split of, say, two for one. This turns one “old” share into two “new” shares. If you owned 100 shares of a $60 stock, you now own 200 shares of a $30 stock. You don’t need to take any action. After a conventional stock split, good news often follows. Companies mainly split their shares when they want to draw attention to themselves—because they expect earnings to rise faster than normal, say. At such times, they may also raise their dividends. However, sometimes companies get overly optimistic. Their profits come in far below expectations, and they can’t keep paying the new, higher dividend. So a stock split can be good or bad, depending on the details....
Many consumers are still putting off buying big-ticket items like furniture. That’s hurting sales and profits at Leon’s and BMTC. Leon’s cross-Canada operations make it less risky than BMTC, which only has stores in Quebec. But both are holds for now. LEON’S FURNITURE LTD. $11.50 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.0 million; Market cap: $805.0 million; Dividend yield: 3.5%) has built its chain of over 76 furniture stores on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended June 30, 2012, Leon’s sales fell 1.1%, to $162.1 million from $163.9 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales....