How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
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Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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McGill University recently came out with a report that looked at the possibility that powdered metal fuels—made of iron or aluminum particles—could be an effective replacement for fossil fuels. That would simultaneously cut carbon emissions and environmental costs. McGill’s goal was to come up with an alternative fuel considering the limitations of solar and wind power. Neither provides enough electricity to directly drive a car. While battery technology can fill this gap to some extent, improvements aren’t growing fast enough to fully replace gasoline as a fuel. The major announcement from McGill was that its research team has demonstrated that a stable flame can be sustained in a flow of metal particles suspended in the air....
Enercare Inc., $15.82, symbol ECI on Toronto (Shares outstanding: 88.0 million; Market cap: $1.4 billion, www.enercare.ca), owns a portfolio of about 1.1 million installed gas-fired water heaters. These are mainly rented to residential customers in Ontario. The company also owns Enercare Connections Inc., a leading sub-metering business, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada. In the three months ended December 31, 2015, Enercare’s revenue rose 12.4%, to $141.6 million from $126.0 million a year earlier. Cash flow per share jumped, to $0.34 from $0.20. The increase is the result of stronger revenue and lower costs for the disposal of used equipment....
Electronic Arts Inc., $62.54, symbol EA on Nasdaq (Shares outstanding: 309.3 million; Market cap: $19.5 billion; www.ea.com), makes video games for a variety of devices, including computers, consoles (such as the Sony PlayStation, Microsoft Xbox and Nintendo Wii) and mobile devices (including the iPhone and iPad). The company sells a number of sports-based titles that get reissued every year. It has licensing deals with most major professional sports organizations, including the National Football League, National Basketball Association, National Hockey League, FIFA (soccer) and PGA Tour (golf). Electronic Arts also develops its own game franchises and constantly releases sequels and new versions that give it ongoing revenue. Top-selling examples include The Sims (a life-simulation game), Need for Speed (car racing), Battlefield (war), Plants vs. Zombies (strategy) and Dragon Age (a fantasy role-playing game). In addition, Electronic Arts makes games based on popular movies such as Star Wars....
Orange SA (ADR), $17.06, symbol ORAN on New York (ADRs outstanding: 2.6 billion; Market cap: $45.1 billion, www.orange.com), is a telecommunications company controlled by the French government. It was formerly called France Telecom SA. Now operating in 28 countries—including Poland—Orange has a total client base of over 263 million customers worldwide. This includes 200 million mobile customers and 18 million fixed broadband subscribers. In early April 2016, Orange dropped from $17.40 to as low as $16. The decline came after the company failed to conclude a merger with its smaller rival Bouygues Telecom. The deal would have reduced the number of major French telecom operators from four to three. Orange is number one in the market....
In the 1980s, the Vancouver Stock Exchange was a world centre for trading speculative stocks. I used to advise buying some Vancouver stocks that seemed like they had a chance of success, and recommend selling or avoiding others. I noted a recurring pattern: when I advised selling a stock, the company hardly ever responded in any way. Assuming they knew about the sell recommendation, it seemed they just wanted to avoid any unfavourable attention. The rare exceptions were companies that were particularly successful in promoting their stock, but seemed to have the least likelihood of success as a business. Rather than ignoring our sell advice, promoters of these successful-promotions/doomed business ventures would send incredibly long, detailed, indignant letters. They would insist that I explain how I came to such a ridiculous conclusion, and demand a retraction. Sometimes I would print an update or clarification about the company’s business. But I never did find reason to change any of these recommendations. So I’d add at the end of the piece, “We still think it’s a sell.”...
A: Daktronics Inc., $8.30, symbol DAKT on Nasdaq (Shares outstanding: 44.0 million; Market cap: $365.0 million; www.daktronics.com), is one of the world’s leading suppliers of electronic scoreboards, large electronic display systems and digital messaging systems. Its products range from small scoreboards that cost less than $1,000 to large custom displays that sell for over $40 million. Customers include stadiums, arenas and numerous U.S. state transportation departments. Daktronics’s sales rose 39.4%, from $441.7 million in 2011 to $615.9 million in 2015 (fiscal years ended April 30). Even so, the company’s profit is erratic. Due to higher research spending, its earnings fell from $0.34 a share (or a total of $14.2 million) in 2011 to $0.20 a share (or $8.5 million) in 2012. Earnings turned around in 2013 to $0.53 a share (or $22.8 million), but fell to $0.51 a share (or $22.2 million) in 2014. They dropped again in 2015, to $0.47 a share (or $20.9 million)....
A: Carmanah Technologies Corp., $4.72, symbol CMH on Toronto (Shares outstanding: 24.6 million; Market cap: $116.2 million; www.carmanah.com), sells solar-powered LED lighting as well as other solar-powered systems. The company contracts out most of its manufacturing. Carmanah’s light beacons are used for marine navigation and on runways and roads. Other uses include school-zone flashers, transit stops and internally lit traffic signs. The company also makes lighting for industrial users, including warning lights, equipment-marking lights, and railway-track and bridge markers. Since Carmanah began operating in 1996, it has sold lighting for over 400,000 installations in 110 countries....
Pat: What is your recommendation on Loral Space & Communications? I believe it owns Telesat. Thanks.
A: Loral Space & Communications Ltd., $36.51 symbol LORL on Nasdaq (Shares outstanding: 30.9 million; Market cap: $1.1 billion, www.loral.com), is a holding company with interests in two satellite communication providers: Loral holds 62.8% of Ottawa-based Telesat. (Canada’s Public Sector Pension Investment Board owns the remaining 37.2%.) This business owns 15 satellites that distribute video signals for broadcasters, cable networks and satellite TV providers. Its clients include major broadcasters in Canada and the U.S. as well as satellite TV providers such as Bell TV in Canada and EchoStar/DISH Network in the U.S. In Addition, Telesat provides data and voice transmission services to businesses and government departments. Loral also owns 56.0% of XTAR, a joint venture with a group of Spanish telecommunications providers. XTAR provides satellite communication services to U.S. and European military and diplomatic clients....
A: Innophos Holdings Inc., $35.61, symbol IPHS on Nasdaq (Shares outstanding: 19.3 million; Market cap: $689.2 million, www.innophos.com), makes specialized phosphate-based ingredients for food makers, drug manufacturers and industrial clients. These additives improve the quality of a broad range of products such as enhancing the flavour of soft drinks and the cleaning power of detergents. The company operates plants in the U.S., Canada, Mexico and China. Innophos first sold shares to the public in November 2006 and began trading on the Nasdaq exchange at $12.00. The company’s sales rose 4.2%, from $810.5 million in 2011 to $844.1 million in 2013. Sales then fell to $839.2 million in 2014, and to $789.1 million in 2015. That’s mainly because the higher U.S. dollar has made the company’s products more expensive in other countries. China has also cut or dropped certain taxes to spur its exports of fertilizer and other phosphate products. That has forced down global prices....
You have to learn a lot of things to become a successful investor, and few people learn them all in any logical progression. Instead, most of us move from one subject of interest to another, with a lot of zigs and zags in between. That’s why some investors go through a phase when they know just enough about a particular investment to be a danger to themselves and others. All investments come with a mix of risk and potential reward. The greatest danger comes when you understand the mechanics of an investment, but you’re missing some of the details. Your understanding of the potential reward can make you greedy, while the gaps in your knowledge limit your natural, healthy sense of skepticism....