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
Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....
NEWMONT MINING $22.52 (New York symbol NEM; Shares outstanding: 529.0 million; Market cap: $11.9 billion; TSINetwork Rating: Average; Dividend yield: 0.4%; www.newmont.com) is buying the Cripple Creek & Victor gold mine in Colorado from AngloGold Ashanti (New York symbol AU) for $820 million. Cripple Creek will produce 350,000 to 400,000 ounces of gold a year once it finishes an expansion in 2016. To put that in context, Newmont expects to produce 4.6 million to 4.9 million ounces this year. The mine should last until at least 2026. To help pay for Cripple Creek, the company will sell 29.0 million common shares for a total of $682 million. Newmont also recently agreed to sell its Waihi gold mine in New Zealand for $101 million....
LOBLAW COMPANIES $63.46 (Toronto symbol L; Shares outstanding: 412.6 million; Market cap: $26.3 billion; TSINetwork Rating: Above Average; Dividend yield: 1.6%; www.loblaw.ca) has sold 38 of its stores to Choice Properties Real Estate Investment Trust (Toronto symbol CHP.UN). Loblaw received $201.3 million, which is equal to 66.9% of the $301.0 million, or $0.73 a share, it earned in the three months ended March 28, 2015. That total included $102.2 million worth of Choice Properties’ units. As a result, Loblaw now owns 83.1% of this REIT. It also accounts for 91.0% of Choice’s earnings....
SUN LIFE FINANCIAL $41.43 (Toronto symbol SLF; Shares outstanding: 612.1 million; Market cap: $25.6 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.sunlife.ca) sells life insurance, savings, retirement and pension products to individuals and corporations. It has $812.6 billion of assets under management and mainly operates in Canada, the U.S. and the U.K. It’s also expanding in Asia. In the three months ended March 31, 2015, Sun Life’s revenue rose 2.2%, to $3.72 billion from $3.64 billion a year earlier. Earnings per share gained 16.7%, to $0.84 from $0.72. The company continues to expand its asset management business, which generates high profit margins and requires little capital investment. It recently paid $560 million for Bentall Kennedy Group, which manages more than $27 billion in real estate for over 550 institutional clients across the U.S. and Canada....
TELUS $43.67 (Toronto symbol T; Shares outstanding: 60750 million; Market cap: $26.6 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.telus.com) is closing its remaining 59 Black’s photography stores. Telus paid $28 million for the 113-store Black’s chain in 2009. It felt these outlets would help it sell more mobile phones and service plans. However, digital camera sales have suffered as more people take pictures with their smartphones. The company will transfer many Black’s employees to its other retail outlets, so any severance costs will be low....
PENGROWTH ENERGY $2.89 (Toronto symbol PGF; Shares outstanding: 539.7 million; Market cap: $1.6 billion; TSINetwork Rating: Average; Dividend yield: 8.3%; www.pengrowth.com) plans to sell $600 million worth of less important properties by the end of 2015. The company will use the cash to pay down its total debt of $2.0 billion, which is a high 1.3 times its $1.6-billion market cap. Pengrowth is still a buy for aggressive investors....
TRANSCANADA CORP. $49.92 (Toronto symbol TRP; Shares outstanding: 708.9 million; Market cap: $35.9 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%; www.transcanada.com) expects to start building a 900-kilometre pipeline in the next few months to pump natural gas from northeastern B.C.’s Montney region to a planned liquefied natural gas (LNG) terminal near Prince Rupert, B.C. This terminal, owned by a consortium led by Malaysian energy company Petronas, will convert the gas to a liquid. Tankers will then ship it to Asian markets. TransCanada will spend $5 billion on this pipeline. The LNG terminal still needs certain environmental and regulatory approvals, but TransCanada expects to have the line ready by 2020....
Here’s the text of the quarterly letter I recently sent to our Portfolio Management clients:
“Most investors find they improve their investment results when they invest conservatively. Speculating can pay off from time to time. But the gains are generally too small and/or too rare to offset the losses, and still provide a reasonable rate of return. More often, investors find they have a net loss on their speculative activities over a period of years. However, it is possible to get lucky.
Mr. W., one of our portfolio-management clients, loves his job as a high-school guidance counselor. But he recognized early in his career that it was never going to finance the lifestyle he wanted to provide for his family. So for the first couple of decades of his investing career, he tried to make his fortune as a speculator. He tried buying penny stocks, selling short, options trading and futures trading. That worked out as it does for most investors. His gains were enough to keep him in the game, but too little to provide a worthwhile financial return, much less justify the time he spent.
In middle age, he quit speculating and began dabbling in various small business ventures. Gains were irregular here as well. Then he bought a downtown Toronto rooming house. A couple of years later, an offer from a property developer put a highly rewarding end to his sideline as a rooming house operator. He then hired us to build and manage a conservative investment portfolio for him.
Then lightning really struck. Mr. W. has just acquired a large holding in a well-known Canadian gold mining company. He got the stock as a result of the success of an investment he made in a grubstaking syndicate after he sold the rooming house. When added to his portfolio, the stock made up 20% of its total value. This left Mr. W. with a dilemma: Should he hold on to the stock, even though it left him with an inappropriate and risky portfolio balance? Or should he sell all or part of it, and pay capital-gains tax?
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“Most investors find they improve their investment results when they invest conservatively. Speculating can pay off from time to time. But the gains are generally too small and/or too rare to offset the losses, and still provide a reasonable rate of return. More often, investors find they have a net loss on their speculative activities over a period of years. However, it is possible to get lucky.
Mr. W., one of our portfolio-management clients, loves his job as a high-school guidance counselor. But he recognized early in his career that it was never going to finance the lifestyle he wanted to provide for his family. So for the first couple of decades of his investing career, he tried to make his fortune as a speculator. He tried buying penny stocks, selling short, options trading and futures trading. That worked out as it does for most investors. His gains were enough to keep him in the game, but too little to provide a worthwhile financial return, much less justify the time he spent.
In middle age, he quit speculating and began dabbling in various small business ventures. Gains were irregular here as well. Then he bought a downtown Toronto rooming house. A couple of years later, an offer from a property developer put a highly rewarding end to his sideline as a rooming house operator. He then hired us to build and manage a conservative investment portfolio for him.
Then lightning really struck. Mr. W. has just acquired a large holding in a well-known Canadian gold mining company. He got the stock as a result of the success of an investment he made in a grubstaking syndicate after he sold the rooming house. When added to his portfolio, the stock made up 20% of its total value. This left Mr. W. with a dilemma: Should he hold on to the stock, even though it left him with an inappropriate and risky portfolio balance? Or should he sell all or part of it, and pay capital-gains tax?
...
The Renaissance Optimal Income Portfolio Fund seeks to generate income, mainly by investing in units of the mutual fund company’s Canadian and global funds. The $2.9-billion fund has a 1.92% MER (which reflects the MERs the individual funds charge). It yields 4.0%. The fund has the following holdings: Renaissance Canadian Bond, 30.1%; Renaissance Canadian Dividend, 24.7%; Renaissance Global Infrastructure, 14.9%; Renaissance Global Bond, 10.1%; Renaissance High-Yield Bond, 9.9%; Renaissance Floating Rate Income, 5.1%; and Renaissance Real Return Bond, 4.9%. The managers of the individual funds include Ares Management, headquartered in Los Angeles; Brandywine Global, based in Philadelphia and a subsidiary of Legg Mason; CIBC Asset Management; and Sydney, Australia-based RARE Infrastructure Ltd....
Tourmaline Oil, $37.01, symbol TOU on Toronto (Shares outstanding: 216.3 million; Market cap: $8.2 billion; www.tourmalineoil.com), has identified over 9,500 oil and natural gas drilling locations in Western Canada, and it has the funds for exploration. That should let it keep raising its production. In the three months ended March 31, 2015, Tourmaline’s daily output averaged a record 143,725 barrels of oil equivalent (87% gas and 13% oil), up 40.1% from 102,563 a year earlier. Cash flow per share fell 21.1%, to $1.01 from $1.29, as sharply lower oil and gas prices offset the higher production. The company just raised $195.4 million by selling 4.9 million shares at $39.50 each. This will let it spend $1.35 billion on exploration and development this year, up 11.3% from its previous estimate of $1.2 billion. It will now operate 18 drilling rigs, up from 16....