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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IBM $141.63 (New York symbol IBM; Shares outstanding: 979.5 million; Market cap: $137.4 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.ibm.com) continues to transition from selling mainframes and consulting services to high-growth areas like cloud computing and analytics software, which processes huge amounts of data. IBM has successfully shifted from unprofitable businesses to fast-growing ones in the past, but investors remain cautious of the latest changes in a time of rapidly evolving technology and customer demands. That’s why the shares trade at just 9.5 times IBM’s forecast 2015 earnings. In the three months ended September 30, 2015, the company’s revenue fell 13.9%, to $19.3 billion from $22.4 billion a year earlier. Revenue from cloud computing and analytics jumped 27%, but consulting and mainframe sales fell....
Pennsylvania-based Vanguard Group is one of the world’s largest investment management companies. In all, it administers almost $3 trillion U.S. in 170 mutual funds. Vanguard, which went into business in 1975, offers low-fee index mutual funds. Generally speaking, Canadians can’t buy units of mutual funds that are registered in the U.S., because they aren’t registered with provincial securities commissions. For that matter, some Canadian funds aren’t available in all provinces. Canadians can, however, buy Vanguard exchange traded funds that trade on stock exchanges. We don’t recommend all of Vanguard’s ETFs, but here are two we do see as low-fee buys....
RIOCAN REAL ESTATE INVESTMENT TRUST $25.36 (Toronto symbol REI.UN; Units outstanding: 319.4 million; Market cap: $8.1 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust. In the three months ended September 30, 2015, RioCan’s cash flow rose 2.3%, to $0.44 a unit from $0.43 a year earlier. Revenue gained 4.5%, to $320.6 million from $306.9 million. The trust continues to do a good job of hanging onto tenants and renewing leases at higher rates: rents on renewals rose 8.6% in Canada and 9.8% in the U.S....
GREAT-WEST LIFECO $34.21 (Toronto symbol GWO; Shares outstanding: 997.4 million; Market cap: $34.1 billion; TSINetwork Rating: Above Average; Yield: 3.8%; www.greatwestlifeco.com) is one of Canada’s largest insurance firms. It also offers mutual funds and wealth management. Power Financial owns 67.1% of Great-West. In the three months ended June 30, 2015, Great-West’s earnings per share rose 6.5%, to $0.66 from $0.63 a year earlier. In recent years, Great-West has bought firms in Ireland and the U.S. that have added new business lines and boosted its profits. Growth by acquisition can be risky, but the company’s large size lets it take advantage of opportunities with strong chances of success....
ISHARES CDN REIT SECTOR INDEX FUND $15.10 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 15 Canadian real estate investment trusts in the S&P/TSX Capped REIT Index. iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 5.5%. The ETF’s largest holding is RioCan REIT at 20.1%, followed by H&R REIT (14.4%), Smart REIT (8.5%), Canadian Apartment Properties REIT (7.9%), Canadian REIT (7.7%), Allied Properties REIT (6.7%), Cominar REIT (6.1%), Dream Office REIT (5.6%), Boardwalk REIT (5.1%), Artis REIT (4.6%), Granite REIT (4.4%), Crombie REIT (2.5%), Dream Global REIT (2.4%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.5%)....
IMPERIAL OIL $44.63 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $37.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. It also operates three refineries and 1,700 Esso gas stations. Imperial recently finished the second phase of its 71%-owned Kearl oil sands project in northern Alberta. In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 192,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier. However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64. Imperial plans to keep expanding Kearl and Cold Lake, its two main oil sands properties. These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins....
PENGROWTH ENERGY $1.36 (Toronto symbol PGF; Shares outstanding: 540.7 million; Market cap: $789.4 million; TSINetwork Rating: Average; Dividend yield: 2.9%; www.pengrowth.com) continues to sell less important properties and focus on more promising operations. This includes its Lindbergh oil sands project in Alberta. The company has now agreed to sell its Bodo project in eastern Alberta for $95 million. Including this deal, it has now sold $300 million worth of properties in 2015 and expects to reach its full-year goal of $600 million. Pengrowth will use the proceeds to pay down its long-term debt, which stood at $1.9 billion on June 30, 2015. That’s a high 2.4 times its currently depressed market cap....
VERESEN $10.85 (Toronto symbol VSN; Shares outstanding: 293.1 million; Market cap: $3.2 billion; TSINetwork Rating: Average; Dividend yield: 9.2%; www.vereseninc.com) owns pipelines, power plants and gas-processing facilities across North America. A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable natural gas liquids plant and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C. In the three months ended September 30, 2015, Veresen’s cash flow per share rose 31.6%, to $0.25 from $0.19 a year earlier. In late 2014, Veresen paid $1.43 billion for 50% of the Ruby pipeline, which runs 1,100 kilometres from Wyoming to Oregon. Partner Kinder Morgan operates the line, which generates steady cash flow....
ALGONQUIN POWER & UTILITIES CORP. $10.09 (Toronto symbol AQN; Shares outstanding: 240.5 million; Market cap: $2.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.0%; www.algonquinpower.com) has agreed to jointly develop the 150-megawatt Deerfield wind project in central Michigan with Renewable Energy Systems Americas Inc. In all, Deerfield will cost $303 million U.S. to build. Wind farms are often risky because they rely on uncertain government subsidies. However, Algonquin only invests in renewable energy projects that have presold their power under long-term guaranteed contracts....
ISHARES INDIA 50 ETF $27.86 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) is an ETF that invests in the 50 largest, most liquid Indian securities. The fund’s top holdings are Infosys (information technology), 7.9%; Housing Development Finance, 7.0%; ITC Ltd. (conglomerate), 6.6%; ICICI Bank, 5.7%; Reliance Industries (conglomerate), 5.5%; HDFC Bank, 4.9%; Tata Consultancy Services (information technology), 4.5%; Larsen & Toubro (conglomerate), 4.1%; Sun Pharmaceutical Industries, 3.3%; and Tata Motors, 2.6%. The ETF has a 0.93% expense ratio. The iShares India 50 ETF rose as high as $30 early this year in the wake of Narendra Modi’s May 2014 election as prime minister. However, it has since moved down to today’s price along with the slowing global economy. Modi has also faced difficulties getting reforms through the upper house of parliament, where he doesn’t hold a majority, These reforms include a bill to make it easier for the government to expropriate land for transportation, industrial and urbanization projects; a goods and services tax; more flexible labour laws; and the sale of state-owned assets....