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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Most successful investors agree that it’s a good idea to base investment decisions on facts rather than predictions. You can make mistakes with facts, of course, but predictions have a much higher failure rate. However, one little noticed obstacle to investment success is that it’s easy to mix the two up. Perhaps the best example of this is the tobacco industry. Starting a few decades ago, cigarette makers came under relentless attack from government, health authorities and lawsuits. Many investors took it for granted that the industry was doomed. Lots of smokers quit, and this hurt cigarette demand. But the obvious negatives stopped new competitors from entering the industry. Laws against cigarette advertising limited advertising expense for the industry, so profitability rose. Cigarette makers were able to pass the costs of litigation and regulation onto their customers. Meanwhile, tobacco use grew quickly in emerging markets....
Google Fi will offer cellphone/smartphone service that uses Wi-Fi networks whenever possible. When Wi-Fi is unavailable, it will switch users to one of two existing cell networks, T-Mobile or Sprint, whichever is stronger at the customer’s location. The company plans to add more cell-network alternatives as they become available. The service will initially cost $20 a month, plus $10 for each gigabyte (GB) of data. That’s much cheaper than most cellphone plans. Moreover, the service will refund the pro-rata cost of unused data each month, which is unheard of in the wireless industry. To top it off, Fi will offer service in more than 120 countries at a far lower cost than you can get by using a U.S.-based cellphone (and U.S. cell rates are well below Canadian rates). More important, Google Fi will be vastly more convenient for travellers than any current alternative. Google Fi is the Internet search giant’s plan to disrupt what it sees as the high cost and ineffectiveness of U.S. carriers like AT&T (symbol T and a recommendation of Wall Street Stock Forecaster), Verizon (symbol VZ on New York and also a recommendation of Wall Street Stock Forecaster), T-Mobile and Sprint....
Canadian Solar Inc., $33.18, symbol CSIQ on Nasdaq (Shares outstanding: 55.7 million; Market cap: $1.8 billion; www.canadiansolar.com), is an Ontario-based designer, maker and seller of solar modules, which convert sunlight into electricity. Its products are used in a range of residential, commercial and industrial power-generation systems. The company makes solar modules at plants in China, as well as two facilities in Ontario. To cut its reliance on solar modules, Canadian Solar has moved into designing and building solar power plants. It then resells these facilities to utilities, such as TransCanada Corp., or operates them itself under long-term power-purchase contracts. In 2014, this business supplied 45% of Canadian Solar’s revenue....
Whitecap Resources, $13.36, symbol WCP on Toronto (Shares outstanding: 298.0 million; Market cap: $4.0 billion; www.wcap.ca), produces and explores for oil and natural gas in Western Canada. Oil makes up 74% of its daily output; the remaining 26% is gas. In the three months ended March 31, 2015, acquisitions increased Whitecap’s average daily production by 44.7%, to 38,351 barrels of oil equivalent from 26,508 a year earlier. The higher output offset sharply lower oil and gas prices, and Whitecap’s cash flow increased 8.9%, to $109.9 million from $100.9 million. However, cash flow per share fell 15.7%, to $0.43 from $0.51, as Whitecap issued more shares to pay for its acquisitions....
Capstone Infrastructure Corp., $3.10, symbol CSE on Toronto (Shares outstanding: 93.7 million; Market cap: $302.2 million; www.capstoneinfrastructure.com), is an electricity producer with 449 megawatts of capacity. It operates gas, wind, hydro, biomass and solar facilities and is developing a total of 79 megawatts of wind projects. Capstone also invests in utilities, including a 33.3% stake in a municipal-heating business in Sweden and 50% of a regulated water utility in the U.K. The company plans to keep looking for acquisitions to boost its cash flow. But that adds risk, especially since it has previously added a wide range of operations, including solar and biomass, and made acquisitions in foreign markets like Sweden....
Shopify, $43.50, symbol SH on Toronto (Shares outstanding: 74.4 million; Market cap: $3.2 billion; www.shopify.com), offers cloud-based software that merchants of all sizes can use to design, set up and manage stores across multiple sales channels, including web, mobile, social media, brick-and-mortar locations and pop-up shops. The goal is to give merchants a snapshot of their entire business. Clients include more than 165,000 businesses in 150 countries, including Tesla Motors, Budweiser, Google and the L.A. Lakers. The company charges monthly subscription fees of $29 to $179, plus a charge for each credit card transaction. With the $179-a-month unlimited plan, the fee for each transaction is 2.25% + $0.30. That’s on top of the regular credit card fees the client pays....
Some investors believe that market timing—trying to figure out if the market will rise or fall—is or can be an aid to their investing decisions. However, most investors who try to time the market find that it costs them money in the long run. When it works, it may help them make some modest profits or avoid some modest losses. When it fails, on the other hand, it often does so in a bigger way. At times it leads to ghastly losses. The key risk in market timing is the “false signal”. That’s when the market does exactly the opposite of what the timer expected. In fact, some false signals may seem like sure things until they fail. Market timers may multiply the danger from false signals by making much bigger transactions that usual. They can also raise their risk by shifting to more aggressive and highly leveraged forms of trading—delving into stock options or futures trading, for instance....
Deere & Co., $91.61, symbol DE on New York (Shares outstanding: 333.9 million; Market cap: $30.8 billion; www.deere.com), started up in 1837 when its founder, John Deere, began making polished-steel plows at his blacksmith shop in Grand Detour, Illinois. Today, the company is the world’s largest maker of agricultural equipment, with plants in the U.S., Canada, France, Germany, Spain, South Africa, Mexico and Argentina. In addition to John Deere, its top brands include Frontier, Kemper, Green Systems and SABO. Deere mainly sells these products through independent dealers and home-improvement chains like Home Depot and Lowe’s. It has three divisions:...
Denison Mines Corp., $1.02, symbol DML on Toronto (Shares outstanding: 506.4 million; Market cap: $521.6 million; www.denisonmines.com), holds 22.5% of France-based Areva SA’s McClean Lake uranium-processing plant in Saskatchewan. It also has stakes in exploration properties in that province’s Athabasca Basin, including its 60%-owned project at Wheeler River. Internationally, Denison owns 100% of the Mutanga project in Zambia, roughly 90% of the Dome project in Namibia and an 85% stake in properties held by the Gurvan Saihan joint venture in Mongolia. In addition, the company decommissions mines and provides other environmental services through its DES division. It also manages Uranium Participation Corp. (symbol U on Toronto), which invests in uranium oxide (U3O8) in concentrates....
Sprouts Farmers Market Inc., $27.58, symbol SFM on Nasdaq (Shares outstanding: 153.3 million; Market cap: $4.5 billion; www.sprouts.com), opened its first organic and natural food store in Arizona in 2002. It now has 200 outlets, mainly in the western U.S. Sprouts first sold shares to the public at $18.00 each and began trading on Nasdaq in August 2013. The company has grown quickly in the past few years. In 2011, it merged with Henry’s Holdings, which operated 43 stores. It later purchased 37 outlets operating under the Sunflower Farmers Market banner....