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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TD BANK $54.90 (Toronto symbol TD; Shares outstanding: 1.8 billion; Market cap: $100.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.td.com) is Canada’s largest bank, with $1.03 trillion of assets. It also operates more branches in the U.S. than Canada (1,302 vs. 1,165) and owns 40.72% of TD Ameritrade (New York symbol AMTD), a leading online brokerage. Excluding one-time items, TD’s earnings per share rose 4.6% in its fiscal second quarter ended April 30, 2015, to $1.14 from $1.09 a year earlier. Revenue gained 4.4%, to $7.8 billion from $7.4 billion, as low interest rates continue to spur loan demand. The bank’s loan-loss provisions fell 4.3%, to $375 million from $392 million, because more U.S. credit card customers are repaying their loans on time....
CENOVUS ENERGY $20.58 (Toronto symbol CVE; Shares outstanding: 824.6 million; Market cap: $17.4 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta because forest fires in the area are hindering traffic on the main road to the site. Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of the company’s total oil production of 218,000 barrels. The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. This has pushed up the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue....
CANADIAN PACIFIC RAILWAY LTD. $208.00 (Toronto symbol CP; Shares outstanding: 164.0 million; Market cap: $34.0 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.cpr.ca) fell recently in response to Teck Resources’ decision to shut down its six Western Canadian coal mines for about three weeks in the third quarter of 2015. The company is closing the mines because China’s slowing economic growth has hurt sales to steelmakers, while Australia’s rising coal production has depressed prices. CP has an exclusive contract to ship coal from five of Teck’s southeastern B.C. mines to the Port of Vancouver. In the first quarter of 2015, coal shipments from Teck and other miners accounted for 10% of the railroad’s revenue. The company is aggressively cutting costs and improving efficiency. Its plans include speeding up trains and reducing the amount of time they spend at terminals. These moves should help CP offset the lost revenue....
MANITOBA TELECOM $28.10 (Toronto symbol MBT; Shares outstanding: 78.5 million; Market cap: $2.2 billion; TSINetwork Rating: Average; Dividend yield: 4.6%; www.mts.ca) recently completed a strategic review of its operations. As a result, it now plans to cut 25% of the workforce at its Allstream division, which sells telephone, Internet and other communication services to businesses across Canada. The company will also cut Allstream’s capital spending by 20% to 30% in 2015. Manitoba Telecom expects these moves to save it $50 million annually by the end of 2016. In addition, it will contribute $120 million to its underfunded employees’ pension plan, eliminating the need for additional payments over the next two years. The company will also cut its dividend by 23.5%. The new annual rate of $1.30 yields 4.6%....
One of the cardinal rules of successful investing is to invest mainly in simple, plain-vanilla investments. This rule limits your choices to two main categories: stocks and bonds. By confining yourself to these two investment categories, you still have all the investment choice you need. You also avoid the hidden risks and conflicts of interest that you’ll find in more complex products. The funny thing is that the promoters of complex investments describe the features of these investments as if they were benefits, disregarding the associated negatives. This marketing approach attracts investors who want to make a quick decision. These investors tend to accept the sales pitch at face value. Target-date funds provide an example. These mutual funds take advantage of the widely held view that bonds are inherently safer than stocks, so you should gradually shift your investments out of stocks and into bonds as you near retirement. Target date funds do this for you automatically....
BMO Low Volatility U.S. Equity ETF, $25.34, symbol ZLU on Toronto (Units outstanding: 11.5 million; Market cap: $291.4 million; www.etfs.bmo.com), aims to invest in a portfolio of low-beta U.S. stocks. The fund has a 0.30% MER and yields 2.0%. The ETF selects the 100 lowest-beta stocks from a universe of the largest, most liquid U.S. securities. The underlying portfolio is rebalanced in June and December. In this respect, it differs widely from conventional ETFs which are designed to minimize trading and trading expense. BMO Low Volatility U.S. Equity ETF’s top holdings are Newmont Mining, McDonald’s, Autozone, Verizon Communications, Quest Diagnostics, Dollar General, Family Dollar, AT&T, Laboratory Corporation of America and AmerisourceBergen Corp....
Canadian Banc Corp. is a split-share company with two types of stock: capital shares ($12.85, symbol BK on Toronto) and preferred shares ($10.26, symbol BK.PR.A on Toronto). The company holds shares of the six biggest Canadian banks. Split-share companies typically issue two classes of stock. Usually the capital shares get all or most of the capital gains and losses, as well as variable dividend income, and the preferred shares get a fixed amount of dividend income....
PowerShares International Dividend Achievers Portfolio ETF, $17.94, symbol PID on Nasdaq (Units outstanding: 85.4 million; Market cap: $1.5 billion; www.invescopowershares.com), aims to mirror the performance of the Nasdaq International Dividend Achievers Index. Its MER is 0.54%, and it yields 1.9%. The Nasdaq International Dividend Achievers Index only includes non-U.S. stocks (although it does contain foreign ADRs trading on U.S. exchanges) that have raised their dividends for five straight years. That means the index excludes a number of sound companies that pay dividends but haven’t increased them annually. The ETF also takes on a lot of risk with its holdings: Eight of its top 10 holdings are oil or energy-related stocks, including its second-largest investment, KazMunaiGas Exploration, Kazakhstan’s state-controlled energy giant. Others include Russian energy companies Rosneft and Lukoil....
Dynavax Technologies Corp., $22.22, symbol DVAX on Nasdaq (Shares outstanding: 28.9 million; Market cap: $667.2 million; www.dynavax.com), develops drugs and vaccines that aim to treat and prevent infectious diseases by strengthening the immune system. The company’s main focus is on Heplisav-B, a hepatitis B vaccine. Hepatitis refers to inflammation of the liver, as well as a group of viral infections that also affect the liver. Dynavax shares rose as high as $54 in 2012, when Phase III clinical trials—the stage prior to commercialization—showed some positive results....
Learning how to “time the market” is an impossible goal, at least on any consistent basis. If you knew how to time the market, you could routinely cash in on coming price trends in individual stocks, or the market as a whole. If so, you could, as the saying goes, “Make all the money in the world.” If this was humanly possible, somebody would have done it by now, in view of the many who have tried. You can get lucky from time to time, of course. But trying to time the market will wind up costing you money in the long run. Eventually, any market-timing skill you thought you had will fail you. It will often do so when it can hurt you most....