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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You can cut your investment risk and enhance your potential profit by investing in stocks with hidden assets. These are assets that most investors overlook. The classic example is real estate that is worth a lot more than its balance-sheet value (which is usually the purchase price, minus depreciation on the buildings). Another source of hidden value is successful research and development spending. These outlays get written off against current-year income, much like day-to-day expenditures such as rent and utilities. This accounting treatment depresses current earnings. But if the research turns up anything of value, it adds to long-term profit. This past week, we had examples of both kinds of hidden-value stocks, and the gains they can generate when their hidden values become apparent....
A number of Canadian bank chief executives have voiced concerns about the threat Apple Pay and similar services pose. Apple Pay lets users pay for items using bank-credit and debit cards stored on their iPhones and Apple watches. The CEOs believe these services might not only erode their fees but could interfere with the banks’ relationships with their customers. U.S. banks were quick to join up with Apple Pay, for fear of losing out to rival banks. But the rush happened before secure credit card systems could be set up, resulting in higher fraud rates from thieves using stolen card numbers on Apple Pay....
Kina Securities plans to undertake an initial public offering and list on the Australian Securities Exchange and Papua New Guinea’s Port Moresby Stock Exchange. The IPO aims to raise $97 million Australian ($93 million Canadian), giving the company a $164-million (Australian) market cap. Kina is one of Papua New Guinea’s largest financial institutions, offering services such as fund management, investment advice, corporate consulting, custodian and trustee services, and financial planning, in addition to a stock brokerage. It has over $2.5 billion (Australian) under management. The company will use part of the IPO funds to buy the Papua New Guinea subsidiary of Malaysia’s Maybank. This business is Papua New Guinea’s fourth-largest bank, offering commercial banking and advisory services, mostly in the timber and fisheries industries....
Tucows, $38.60, symbol TC on Toronto (Shares outstanding: 11.0 million; Market cap: $404.8 million; www.tucows.com), provides network access, domain names and other Internet services, such as email hosting, through its OpenSRS division. OpenSRS manages over 14 million domain names, while the company’s Ting subsidiary offers mobile phone service to individuals and small businesses. In the three months ended March 31, 2015, Tucows’ revenue rose 17.6%, to $40.5 million from $34.4 million a year earlier (all figures except share price in U.S. dollars). Earnings per share jumped to $0.25 from $0.04....
BHP Billiton (ADR), $39.13, New York symbol BHP (ADRs outstanding: 1.6 billion; Market cap: $64.3 billion; www.bhpbilliton.com), completed its plan to spin off some of its operations as a separate firm, called South32, in May 2015. BHP is a recommendation of our Wall Street Stock Forecaster newsletter. The South32 ADRs began trading on the Australian Securities Exchange on May 18, 2015, and on the U.S. over-the-counter market (symbol SOUHY) on the same date. BHP ADRs dropped about 7% on May 18, 2015, reflecting the value of the spun off South32 shares....
TransAlta, $9.24, symbol TA on Toronto (Shares outstanding: 278.7 million; Market cap: $2.7 billion; www.transalta.com), is one of Alberta’s biggest coal-fired power plant operators. The province’s premier, Rachel Notley, has called for an accelerated coal phase-out, both while she was NDP environment critic and during the election campaign. TransAlta is already cutting back on its coal-burning power plants in Alberta, with all but one scheduled to close by 2029; the NDP could force the company to speed up that plan....
Cymbria Corp., $38.40, symbol CYB on Toronto (Shares outstanding: 22.6 million; Market cap: $857.1 million; www.cymbria.com), is a closed-end fund that invests in a portfolio of mostly publicly traded stocks. Separately, the fund directly owns 20.7% of EdgePoint Wealth Management, a private firm that sells mutual funds and asset-management services, in addition to managing Cymbria’s stock portfolio. Cymbria and EdgePoint are run by Trimark Financial co-founder Bob Krembil and former Trimark managers Tye Bousada, Patrick Farmer and Geoff MacDonald....
A number of Inner Circle have asked two key questions about so-called “robo-advisors”—automated, Internet-based advisory/portfolio management services. Question 1. Will robo-advisors offer valuable new investment avenues for individual investors? They may offer beginning investors a more efficient, lower-cost investment approach, compared to what’s now open to them. Unfortunately, robo-advisors are likely to focus on the less reliable of the two main investment approaches....
ESSA Pharma Inc., $10.30, symbol EPI on Toronto (Shares outstanding: 18.2 million; Market cap: $187.5 million; www.essapharma.com), is a developer of cancer drugs, with a focus on advanced prostate cancer. The company first sold shares to the public and began trading on January 27, 2015. ESSA’s drugs aim to stop prostate-cancer cells from absorbing hormones, such as testosterone, that fuel their growth. It’s particularly focused on its EPI-506 compound, which has shown promise in slowing prostate tumour growth in cell cultures and mice in preclinical trials. ESSA now plans to undertake Phase I trials....
Savaria Corp., $6.05, symbol SIS on Toronto (Shares outstanding: 32.6 million; Market cap: $189.8 million; www.savaria.com), makes products for people with limited mobility. The company has two main divisions:
- Accessibility (84% of revenue) makes stairlifts, platform lifts and elevators for homes and businesses.
- Adapted Vehicles (16%) installs ramps and lowered floors in minivans so they can handle wheelchairs. This business serves both private vehicles and taxi fleets.