stock prices

Things are going well for Canada’s big five banks. Low interest rates continue to spur strong demand for new loans. As well, loan defaults should fall as the economy improves. Despite strong gains in their stock prices since last March’s lows, all five continue to trade at attractive multiples to earnings. Canadian and international banking regulators are working on new rules that will help the global banking industry avoid another credit crisis. In response, Canada’s banks are prudently conserving their cash instead of raising dividends. We feel the banks will resume their pattern of annual dividend hikes when the new rules take effect in 2011. Every investor should aim to hold at least two banks in the Finance segment of their portfolio. Bank of Nova Scotia, which has a strong presence in fast-growing regions, such as Asia and Latin America, remains our favourite for new buying....

Lower oil and natural gas prices weighed on the cash flow and stock prices of these two resource trusts in 2009. However, recent announcements should improve their prospects in 2010. PENGROWTH ENERGY TRUST $11 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 289.5 million; Market cap: $3.2 billion; Price-to-sales ratio: 1.9; Dividend yield: 7.6%; SI Rating: Average) produces oil and natural gas, mainly from properties in western Canada. Natural gas accounts of 60% of its production; oil supplies the remaining 40%. The extra exposure to gas has hurt the trust lately, as gas prices are down more than oil prices. In 2010, Pengrowth will spend $285 million on exploration, developing its current properties, and buying new properties. That’s up 29.5% from $220 million in 2009. About 70% of this spending will go to oil projects, including $15 million for its Lindbergh oil-sands project. Lindbergh could account for 40% of Pengrowth’s reserves when it begins producing crude oil in six years. The trust will also spend $12 million on its the promising Horn River shale-gas discovery in B.C....

It’s particularly easy for investors to make costly mistakes during the year-end tax-loss selling season. That’s because the lure of a lower tax bill can be a temptation to dump high-quality stocks that are near the end of a downturn, and are set to move back up. A similar pitfall exists during the end-of-the-year rush to take advantage of certain tax shelters, including charitable donations. In our view, you should be as selective about giving money to charity as you are about buying stocks. In fact, bad charities tend to have something in common with bad stocks. ...

Some investors rely on chart reading (or technical analysis), when they’re aiming to add hot stock picks to their portfolios. That’s because relying on charts seems much simpler than delving into and weighing a company’s fundamentals. We always look at charts when we select stocks to recommend in our newsletters, including Stock Pickers Digest, which focuses on more aggressive investments. And some successful investors find it helps to know a little about charts. But if you rely on charts at all, you should view them as just one of many things to consider when you make investment decisions. ...

If you feel stocks have become overpriced lately, you might want to take advantage of this by short selling stocks — that is, selling borrowed shares in hopes of a drop in price. We advise against this strategy, mainly because of the perennial drawbacks of short selling. Short selling is when you borrow stock from a broker and then sell it. However, you eventually have to buy back the stock on the market to return it to its owner. If the stock falls in price while you are “short,” you can buy it back at a lower price. You have then made a profit. But if the stock rises in price, you must buy it back at a higher price than you sold it, and you lose money. [ofie_ad]...

Financial institutions that create and/or sell ETFs have done a superb job of shaping the terms of reference surrounding these investments. Every new ETF that comes on the market spurs lengthy discussions about the undeniable advantages of low-MER ETFs, compared to high-MER conventional mutual funds. This, though, is beside the point. It makes far more sense to compare low-MER ETFs to low-MER index funds. Focusing on ETFs or index funds can save you one or two percentage points a year, compared to investing in conventional mutual funds with yearly MERs in the 2.0% to 2.5% range. But these cost cuts do nothing to protect you against what I’d call the three deadliest and three most common investor mistakes:...

A market slump like the one we’ve experienced since 2007 demonstrates the appeal of a conservative, risk-averse portfolio investing philosophy like ours. While the well-established companies we invest in may not fly as high as speculative stocks when the market is soaring, they hold up much better in market downturns.

As part of our portfolio investing strategy, we diversify by spreading the investments of clients of our Successful Investor Wealth Management service out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; Utilities), even when much of the market’s action is concentrated in one or two industries or sectors.

That’s because the market’s hottest segments can unpredictably jump from hot to cold....

As investors near retirement, their advisors often recommend that they move a larger part of their portfolios from stocks and mutual funds to bonds and other fixed-return investments. To some extent, this is an understandable retirement investing strategy, since bonds provide steady income and a guarantee to repay the principal at maturity. ...

When investors ask us about our conservative investing strategy, they often wonder when they should dump a weak stock from their portfolio and replace it with something new. Knowing when to sell is part of our conservative investing strategy that we cover in our new special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada. ...

These four financial companies tend to be more volatile than Canada’s big-five banks. But they are all leaders in their niche fields, and offer strong growth prospects, particularly as the economy begins to recover. We feel that conservative investors should diversify their finance-sector holdings with Great-West Lifeco and IGM Financial. More aggressive investors should consider Home Capital Group. However, we still see Dundee Corp. as a worthwhile hold. GREAT-WEST LIFECO INC. $25 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 944.3 million; Market cap: $23.6 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) is Canada’s largest insurance company, with $441.9 billion of assets under administration. Great-West also provides retirement-planning and wealth-management services. It gets about 60% of its earnings from Canada, followed by Europe (25%) and the United States (15%). Power Financial Corp. (Toronto symbol PWF) owns 68.7% of Great-West’s shares....