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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Arsenal Energy Inc., $1.76, symbol AEI on Toronto (Shares outstanding: 19.3 million; Market cap: $34.1 million; www.arsenalenergy.com), produces oil and natural gas in Alberta, British Columbia and North Dakota. Its output is 76% oil and 24% gas. In the three months ended June 30, 2015, Arsenal produced 3,846 barrels of oil equivalent a day, down 10.4% from 4,292 barrels a year earlier. That’s because the company shut down some of its less profitable wells in response to low oil prices. Overall cash flow fell 47.0%, to $6.2 million from $11.6 million, while cash flow per share dropped 52.1%, to $0.34 from $0.71, on more shares outstanding....
Athabasca Minerals, $0.30, symbol ABM on Toronto (Shares outstanding: 33.3 million; Market cap: $10.0 million; www.athabascaminerals.com), operates the Susan Lake aggregate operation, one of Canada’s largest gravel pits, about 85 kilometres north of Fort McMurray. The company also holds permits for 480,244 acres around Fort McMurray. It believes this land could contain a variety of industrial raw materials, such as sand, gravel, silica sand, salt and limestone. In the three months ended June 30, 2015, Athabasca’s revenue fell 8.1%, to $3.3 million from $3.6 million a year earlier. It lost $763,146, or $0.023 a share, compared to a loss of $538,704, or $0.017....
AltaGas Ltd., $33.50, symbol ALA on Toronto (Shares outstanding: 144.7 million; Market cap: $4.9 billion; www.altagas.ca), processes, transmits, stores and markets natural gas for producers; generates power from gas-fired, coal-fired, wind, biomass and hydroelectric plants; and operates natural gas utilities. In the three months ended June 30, 2015, AltaGas’s cash flow per share dropped 41.9%, to $0.50 from $0.86 a year earlier. Revenue fell 11.7%, to $416.0 million from $471.0 million. The declines mostly came from increased maintenance costs at its 33%-owned Petrogas liquids-storage business. In September 2015, the company agreed to buy three gas-fired power plants in northern California for $642 million U.S. These facilities have long-term contracts to sell their power to Pacific Gas & Electric, which cuts their risk. The purchase should increase AltaGas’s annual cash flow per share by 5%....
Purpose Core Dividend Fund ETF, $24.97, symbol PDF on Toronto (Units outstanding: 8.2 million; Market cap: $204.8 million; www.purposeinvest.com), holds U.S. and Canadian stocks its managers see as being able to sustain and grow their dividends. The ETF yields 3.3%. The fund holds mostly high-quality companies. Its holdings include Rogers Communications, Peyto Exploration, CIBC, SNC-Lavalin, BCE, Altria Group, Bank of Montreal, General Motors and Philip Morris. The Purpose Core Dividend Fund ETF holds 61.0% of its funds in Canadian stocks, 36.6% in U.S. stocks and 2.4% in cash. Its breakdown by industry is as follows: Financials, 14.9%; Utilities, 14.7%; Energy, 14.5%; Real Estate, 14.4%; Consumer Discretionary, 12.3%; Telecom Services, 10.0%, Industrials, 7.5%; Consumer Staples, 5.2%; and Materials, 4.2%....
“You get what you pay for” is a worthwhile tidbit of investment advice. But to profit from it, you have to understand how to apply it.
The adage should come to mind whenever you come across a stock that seems extraordinarily low-priced. For example, suppose you find a stock with a P/E (per-share price-to-earnings) ratio of, say, 6.0, at a time when seemingly comparable stocks are selling at P/Es of 12.0 or 15.0.
The you-get-what-you-pay-for rule tells you there’s always a reason for an unusually low P/E—just as there is for an unusually high dividend yield.
With doubts about earnings, this lower price shows up in a below-average P/E ratio. (The P/E is lower than average because “P” is the numerator or upper figure in the ratio.)
With doubts about dividends, this lower price shows up in an above-average dividend yield. The formula for dividend yield is D (dividend)/P (stock price). The yield goes up because the P or price is depressed and it is the denominator or lower figure in the ratio.
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The adage should come to mind whenever you come across a stock that seems extraordinarily low-priced. For example, suppose you find a stock with a P/E (per-share price-to-earnings) ratio of, say, 6.0, at a time when seemingly comparable stocks are selling at P/Es of 12.0 or 15.0.
The you-get-what-you-pay-for rule tells you there’s always a reason for an unusually low P/E—just as there is for an unusually high dividend yield.
With doubts about earnings, this lower price shows up in a below-average P/E ratio. (The P/E is lower than average because “P” is the numerator or upper figure in the ratio.)
With doubts about dividends, this lower price shows up in an above-average dividend yield. The formula for dividend yield is D (dividend)/P (stock price). The yield goes up because the P or price is depressed and it is the denominator or lower figure in the ratio.
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Scotia Global Dividend Fund is a mutual fund that invests in dividend-paying stocks worldwide.
Its top holdings are Citigroup, UBS Group AG, Wells Fargo & Company, Nestlé SA, Procter & Gamble, Roche Holdings AG, Novartis AG, Mondelez International, Apple and Bayer AG.
Scotia Global Dividend Fund’s geographic breakdown includes the U.S., 48.7%; Switzerland, 11.2%; Canada, 9.7%; the U.K., 9.0%; and Germany, 3.3%.
The fund’s MER is 2.64%. It yields 2.2%.
The Scotia Global Dividend Fund holds mostly large-capitalization multinational companies. We don’t see any particular advantage in investing solely in the world’s biggest stocks, and we have no reason to believe the fund’s managers can create any such advantage. With that in mind, we see little appeal in exposing yourself to a 2.64% MER, so we don’t recommend the Scotia Global Dividend Fund.
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Its top holdings are Citigroup, UBS Group AG, Wells Fargo & Company, Nestlé SA, Procter & Gamble, Roche Holdings AG, Novartis AG, Mondelez International, Apple and Bayer AG.
Scotia Global Dividend Fund’s geographic breakdown includes the U.S., 48.7%; Switzerland, 11.2%; Canada, 9.7%; the U.K., 9.0%; and Germany, 3.3%.
The fund’s MER is 2.64%. It yields 2.2%.
The Scotia Global Dividend Fund holds mostly large-capitalization multinational companies. We don’t see any particular advantage in investing solely in the world’s biggest stocks, and we have no reason to believe the fund’s managers can create any such advantage. With that in mind, we see little appeal in exposing yourself to a 2.64% MER, so we don’t recommend the Scotia Global Dividend Fund.
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Madalena Energy, $0.32, symbol MVN on Toronto (Shares outstanding: 542.1 million; Market cap: $176.2 million; www.madalenaenergy.com), is a Canadian oil and gas producer that mainly operates in Argentina, though it also has a presence in Alberta. Prior to June 2014, the company’s Argentine operations consisted of about 450 barrels of oil equivalent per day of production from one concession at Coiron Amargo. In June 2014, Madalena acquired all of the outstanding shares of Gran Tierra Energy’s Argentine business unit for $59.2 million. The company is now focused on four areas: the Loma Montosa oilfield, the Vaca Muerta shale, the Lower Agrio shale and the Mulichinco field, which is rich in natural gas liquids....
Multi-well pad drilling (or “octopus” drilling) is now common practice among major oil firms and is actively used by a number of companies we recommend, including Encana, Devon Energy, Cimarex, Pengrowth and Imperial Oil.
Traditionally, a company has needed a pad or land site for each well it drilled. However, multi-pad drilling lets producers drill as many as 50 wells from a single pad.
Here’s how the technology works: producers set up a well pad and then install a multi-well rig. The drill from that rig then literally “crawls” on hydraulic tentacles to numerous drill locations within its range. When drilling at each location is completed, it takes just two hours for the rig to move to a new location. With traditional horizontal drilling methods, it takes about five days to move from pad to pad and start drilling a new well.
The practice of placing several wells on one pad has many benefits:
Traditionally, a company has needed a pad or land site for each well it drilled. However, multi-pad drilling lets producers drill as many as 50 wells from a single pad.
Here’s how the technology works: producers set up a well pad and then install a multi-well rig. The drill from that rig then literally “crawls” on hydraulic tentacles to numerous drill locations within its range. When drilling at each location is completed, it takes just two hours for the rig to move to a new location. With traditional horizontal drilling methods, it takes about five days to move from pad to pad and start drilling a new well.
The practice of placing several wells on one pad has many benefits:
- It reduces the impact of drilling multiple wells, which is especially important in populated areas.
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Element Financial Corp., $18.57, symbol EFN on Toronto (Shares outstanding: 383.9 million; Market cap: $7.1 billion; www.elementfinancial.ca), is a leading independent North American equipment-finance company.
Element operates across the continent through four segments: Commercial and Vendor Finance, Aviation Finance, Fleet Management and Rail Finance.
Commercial and Vendor Finance focuses on equipment for markets ranging from transportation and construction to industrial, health care, golf and office products.
Aviation Finance provides loans for helicopters, simulators, business aircraft and related gear. Fleet Management mainly leases vehicles, and Rail Finance provides railcar leasing.
The company has grown rapidly. In June 2013, it paid $570 million for GE Fleet Canada, which it has combined with its Fleet Management segment. In December 2013, Element bought $348 million U.S. worth of helicopter and railcar leases from GE Capital and Trinity Industries (symbol TRN on New York).
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Element operates across the continent through four segments: Commercial and Vendor Finance, Aviation Finance, Fleet Management and Rail Finance.
Commercial and Vendor Finance focuses on equipment for markets ranging from transportation and construction to industrial, health care, golf and office products.
Aviation Finance provides loans for helicopters, simulators, business aircraft and related gear. Fleet Management mainly leases vehicles, and Rail Finance provides railcar leasing.
The company has grown rapidly. In June 2013, it paid $570 million for GE Fleet Canada, which it has combined with its Fleet Management segment. In December 2013, Element bought $348 million U.S. worth of helicopter and railcar leases from GE Capital and Trinity Industries (symbol TRN on New York).
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HSBC Holdings plc (ADR), $39.85, symbol HSBC on New York (ADRs outstanding: 3.9 billion; Market cap: $156.8 billion; www.hsbc.com), is one of the world’s largest banks, with 6,100 offices in just over 70 countries.
The U.K.-based bank has 40% of its assets in Asia, followed by Europe (30%), North America (18%), Latin America (7%) and the Middle East (5%). HSBC’s commercial banking division accounts for about 33% of its operating earnings; the global banking and markets business supplies 35%; and retail banking and wealth management contribute 25%.
Like many global banks, HSBC is selling non-core assets, including recent sales in Turkey and Brazil. In addition to cutting costs and streamlining its operations, these moves are helping the bank respond to tighter regulations and higher capital requirements.
HSBC also plans to use cash from these sales to expand in what it sees as higher-growth markets in Asia, including Indonesia, China, Vietnam, India and Malaysia.
Meantime, the bank expects to cut more jobs, with plans to eliminate 10% of its full time positions, or 22,000 to 25,000 workers, by the end of 2017.
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The U.K.-based bank has 40% of its assets in Asia, followed by Europe (30%), North America (18%), Latin America (7%) and the Middle East (5%). HSBC’s commercial banking division accounts for about 33% of its operating earnings; the global banking and markets business supplies 35%; and retail banking and wealth management contribute 25%.
Like many global banks, HSBC is selling non-core assets, including recent sales in Turkey and Brazil. In addition to cutting costs and streamlining its operations, these moves are helping the bank respond to tighter regulations and higher capital requirements.
HSBC also plans to use cash from these sales to expand in what it sees as higher-growth markets in Asia, including Indonesia, China, Vietnam, India and Malaysia.
Meantime, the bank expects to cut more jobs, with plans to eliminate 10% of its full time positions, or 22,000 to 25,000 workers, by the end of 2017.
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