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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How To Invest Library Archives
BCE INC. $54.16 (Toronto symbol BCE; Shares outstanding: 847.9 million; Market cap: $45.7 billion; TSINetwork Rating: Above Average; Dividend yield: 4.8%; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. It also offers satellite and Internet TV across the country. In the three months ended June 30, 2015, BCE’s earnings per share rose 6.1%, to $0.87 from $0.82 a year earlier. Revenue increased 2.0%, to $5.33 billion from $5.22 billion. BCE gained 22,110 wireless subscribers, net of losses, in the latest quarter. It signed up 61,033 new users under long-term contracts, up 72.5% from a year earlier. That’s important, as these customers tend to use smartphones, which generate higher monthly fees than regular cellphones....
TORSTAR $4.45 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $351.4 million; TSINetwork Rating: Average; Dividend yield: 11.8%; www.torstar.com) has purchased 56% of VerticalScope, a private firm that operates over 600 online forums and a variety of websites, including AutoGuide.com, Motorcycle.com, ATV.com and PetGuide.com. The online forums attract 80 million unique visitors and 500 million page views per month. Much of VerticalScope’s website traffic comes from the U.S. This purchase should help Torstar offset slowing advertising revenue at its newspapers as advertisers shift their spending to the Internet....
CANADIAN REIT $41.55 (Toronto symbol REF.UN; Units outstanding: 72.8 million; Market cap: $3.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.creit.ca) owns 198 properties, including retail, industrial and office buildings, across Canada and in Chicago. These holdings contain 24.9 million square feet of leasable area. The trust’s occupancy rate is 94.7%. In the three months ended June 30, 2015, Canadian REIT’s revenue rose 5.5%, to $111.5 million from $105.7 million a year earlier. Cash flow per unit gained 2.7%, to $0.76 from $0.74. Canadian REIT generally aims to grow by developing its own properties rather than through large acquisitions. Over the next few years, it’s spending $660 million to add about 3.1 million square feet of space. To cut its risk, the trust takes on partners to help it carry out big projects....
ISHARES CDN REIT SECTOR INDEX FUND $15.79 (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 5.1%. The ETF’s largest holding is RioCan REIT at 20.1%, followed by H&R REIT (14.6%), Smart REIT (7.9%), Canadian Apartment Properties REIT (7.9%), Canadian REIT (7.3%), Allied Properties REIT (6.7%), Cominar REIT (6.5%), Dream Office REIT (6.1%), Boardwalk REIT (5.3%), Granite REIT (4.5%), Artis REIT (4.3%), Dream Global REIT (2.5%), Crombie REIT (2.3%), Pure Industrial REIT (2.1%) and Northern Property REIT (1.6%)....
BONAVISTA ENERGY $4.63 (Toronto symbol BNP; Shares outstanding: 206.6 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.1%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C. Its output is 75% gas and 25% oil. In the three months ended June 30, 2015, Bonavista’s cash flow per share fell 34.3%, to $0.44 from $0.67 a year earlier. Most of that drop came from lower oil and natural gas prices; the company’s output fell only slightly, to 73,736 barrels of oil equivalent a day from 74,273 barrels....
POWER CORP. $31.00 (Toronto symbol POW; Shares outstanding: 414.0 million; Market cap: $14.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.0%; www.powercorporation.com) is a diversified holding company. It holds its financial assets through 65.7%-owned Power Financial. These financial assets include 69.5% of Great-West Lifeco, one of Canada’s largest life insurers, and 58.7% of IGM Financial, a leading Canadian mutual fund provider. As well, Power Financial owns 50% of holding company Parjointco, which holds a 55.5% stake in Switzerland-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European firms. Power Corp. also has interests in Asia....
TD BANK $52.25 (Toronto symbol TD; Shares outstanding: 1.8 billion; Market cap: $97.6 billion; TSINetwork Rating: Above Average; Dividend yield: 3.8%; www.td.com) owns 41.01% of TD Ameritrade Holding Corp. (Nasdaq symbol AMTD), one of the largest online brokerage firms in the U.S. TD has announced that Ameritrade would contribute $92 million (Canadian) to its earnings in its 2015 third quarter, which ends July 31, 2015, up 21.1% from $76 million a year earlier. To put these figures in perspective, TD earned $2.2 billion, or $1.14 a share, in its fiscal second quarter, which ended April 30, 2015. Ameritrade’s average daily trading volumes rose 8.0% in the second quarter, mainly due to an increase in derivatives trading....
IBM $157.90 (New York symbol IBM; Shares outstanding: 984.7 million; Market cap: $155.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.3%; www.ibm.com) continues to transition from selling mainframes and consulting services into high-growth areas like cloud computing and analytics software, which can process 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 9.9 times IBM’s forecast 2015 earnings. In the three months ended June 30, 2015, the company’s revenue fell 13.4%, to $20.8 billion from $24.1 billion. However, if you adjust for foreign exchange rates and the sale of IBM’s server business, revenue fell 1%....
You can find a lesson about acquisitions in our latest edition of Wall Street Stock Forecaster, which we sent out last week.
Investors often under-estimate the hidden risk of a corporate strategy of growth-by-acquisition. This strategy is inherently risky. It’s a little like buying new stock issues.
Acquisitions generally come on the market when it’s a good time to sell. That may not be, and often isn’t, a good time to buy. Insiders and managers at the selling company know a lot more than the buyers about the company itself, and its business strengths and weaknesses.
Some takeovers work out well for the buyers, of course. This doesn’t diminish the inherent risk. More important, risk multiplies as takeovers become a habit.
Takeovers are more likely to succeed when the buyer is already a successful company and is under no pressure to buy anything. That way, the buyer can take its time and wait for a truly attractive, low-risk opportunity to come along.
...
Investors often under-estimate the hidden risk of a corporate strategy of growth-by-acquisition. This strategy is inherently risky. It’s a little like buying new stock issues.
Acquisitions generally come on the market when it’s a good time to sell. That may not be, and often isn’t, a good time to buy. Insiders and managers at the selling company know a lot more than the buyers about the company itself, and its business strengths and weaknesses.
Some takeovers work out well for the buyers, of course. This doesn’t diminish the inherent risk. More important, risk multiplies as takeovers become a habit.
Takeovers are more likely to succeed when the buyer is already a successful company and is under no pressure to buy anything. That way, the buyer can take its time and wait for a truly attractive, low-risk opportunity to come along.
...
VeriFone Systems Inc., $32.58, symbol PAY on New York (Shares outstanding: 114.3 million; Market cap: $3.7 billion; www.verifone.com), designs and sells point-of-sale terminals and software for security and encryption. These systems process various payment types, including signature and PIN-based debit cards, credit cards and contactless payment systems. The company started up in 1981. It first sold shares to the public on May 4, 2005, for $10.00 each. VeriFone’s customers include banks, retailers and government agencies. It gets 65% of its revenue by selling hardware; the remaining 35% comes from software support, installation, maintenance and related services....