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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Patient Home Monitoring, $1.69, symbol PHM on Toronto (Shares outstanding: 231.8 million; Market cap: $391.7 million; www.phmhometesting.com), plans to keep buying small firms that serve chronically ill patients in their homes. It then aims to raise its per-patient revenue by offering these companies’ services to its growing client base. In the three months ended March 31, 2015, Patient Home Monitoring’s acquisitions boosted its revenue by 255% from a year earlier, to $10.0 million. Preliminary results show the company earned $1.6 million in the latest quarter. Patient Home Monitoring recently sold 39 million shares at $1.50 each to raise $58.5 million. It will use these funds to make more acquisitions....
ProMetic Life Sciences, $2.48, symbol PLI on Toronto (Shares outstanding: 554.2 million; Market cap: $1.4 billion; www.prometic.com), focuses on removing pathogens from blood and extracting harmful proteins from blood plasma. To this end, it recently opened a new plasma-purification facility in Laval, Quebec. The company also aims to develop its own plasma-derived treatments as a by-product of its filtering technology. Its leading candidate right now is PBI-4050, which is in clinical trials for patients with chronic kidney diseases, idiopathic pulmonary fibrosis (a disease in which tissue deep in the lungs becomes thick and stiff, or scarred, over time) and metabolic syndrome (a cluster of conditions including increased blood pressure, high blood sugar, excess fat around the waist and abnormal cholesterol levels that can result in type 2 diabetes). In 2014, ProMetic had revenue of $23.0 million, up 11.5% from $20.6 million in 2013. Cash flow was negative $24.7 million, or $0.05 a share, compared to negative $5.4 million, or $0.01 a share. The bigger cash outflow in 2014 was mostly due to higher research costs....
One of the more reassuring aspects of today’s stock market is that investors generally are uneasy. They are apt to sell and push prices down on very slight provocation. After that, prices seem to go back up again. Last week, for instance, U.S. Federal Reserve Chair Janet Yellen was having a conversation with International Monetary Fund Managing Director Christine Lagarde before an audience at IMF headquarters in Washington. Ms. Lagarde asked Ms. Yellen about the possibility that the Fed’s rock-bottom interest-rate policy would lead to bubbles in financial markets. Ms. Yellen started out by saying, “I would highlight that equity-market valuations at this point generally are quite high”. Then, perhaps realizing that this comment could have unfortunate repercussions on the stock market, Ms. Yellen added, “Not so high when you compare returns on equity to returns on safe assets like bonds, which are also very low, but there are potential dangers there.”...
Canadian Western Bank, $29.23, symbol CWB on Toronto (Shares outstanding: 80.4 million; Market cap: $2.4 billion; www.cwbank.com), offers business and personal banking services across the four western provinces. It’s the biggest Canadian bank headquartered in Western Canada and the country’s eighth-largest. The bank’s wholly owned subsidiaries include National Leasing Group, Canadian Western Trust Company, Valiant Trust Company, Canadian Direct Insurance and Canadian Western Financial. In the three months ended January 31, 2015, Canadian Western Bank’s earnings rose 6.8%, to $52.4 million, or $0.65 a share. A year earlier, it earned $49.1 million, or $0.61. Revenue improved 6.1%, to $150.9 million from $142.2 million....
Innergex Renewable Energy, $11.03, symbol INE on Toronto (Shares outstanding: 100.9 million; Market cap: $1.1 billion; www.innergex.com), is a recommendation of our Canadian Wealth Advisor newsletter. We place Innergex in the Utilities sector, a broad area that includes telecoms, pipelines, power generators and so on. The company generates electricity, but it focuses on renewable energy, including hydroelectric plants, wind farms and solar power. That puts it in something of a niche category among utilities that includes stocks like Algonquin Power & Utilities, $9.73, symbol AQN on Toronto, and Northland Power, $16.99, symbol NPI on Toronto....
Corus Entertainment, $17.73, symbol CJR.B on Toronto (Shares outstanding: 86.5 million; Market cap: $1.5 billion; www.corusent.com), operates specialty and pay TV channels, radio stations and subsidiaries in children’s book publishing and animation. Corus’s brands include YTV, Teletoon, ABC Spark, W Network, the Oprah Winfrey Network (Canada), HBO Canada, Historia and Séries+, as well as Nelvana (children’s animation), Kids Can Press, Toon Boom (animation software) and 39 radio stations, including CKNW AM 980, Rock 101, Country 105 and Q107. In its fiscal 2015 second quarter, which ended February 28, 2015, Corus’s revenue rose 2.0%, to $155.2 million from $152.1 million a year earlier. Excluding one-time items, earnings per share gained 3.1%, to $0.33 from $0.32....
Main Street Capital Corp., $30.59, symbol MAIN on New York (Shares outstanding: 49.0 million; Market cap: $1.5 billion; www.mainstcapital.com), is a specialty finance company that lends to, and invests in, small and mid-sized firms, with a focus on those with yearly sales between $10 million and $150 million. Main Street has benefited from a recent major upgrade to its bond rating: in September 2014, Standard & Poor’s assigned it a BBB rating with a stable outlook. A BBB rating is defined as having “adequate capacity to meet financial commitments but more subject to adverse economic conditions.” It’s enough to qualify Main Street’s debt as investment-grade, making financing much cheaper for the company than for many other specialty finance firms with lower, junk bond-level ratings....
Bird Construction Inc., $10.81, symbol BDT on Toronto (Shares outstanding: 42.5 million; Market cap: $459.4 million; www.bird.ca), focuses on projects in a number of markets, including industrial, commercial, institutional, civil construction and mining. The company began operating 95 years ago in Medicine Hat, Alberta. Today, it has offices in Toronto, Winnipeg, Calgary, Edmonton, Vancouver and Seattle. Bird’s industrial projects (which supplied 57% of its 2014 revenue) include work in the petrochemical, oil sands, mining, refinery and water- and wastewater-treatment sectors....
It’s generally a waste of time to obsess about the possibility of a short-term downward movement in the economy, stock market or both. These downward movements can occur for a wide variety of reasons, at any time, without warning. For every “real” short-term downturn, you can spot a dozen fake-outs – situations where the market or economy looked like it was going into a tailspin, but pulled out of the drop and began rising at the last minute. On the other hand, it pays to obsess about matters like portfolio diversification, investment quality, and the extent to which your portfolio suits your personal goals and temperament. Hidden assets are also worth a close look. As long-time readers know, we’ve had a great deal of success over the years in investments that come with hidden assets. These are assets that are worth substantially more than the value they carry on the company’s balance sheet, if they appear there at all. Buying stocks with hidden assets is a little like getting something for nothing, at least for patient investors....
A holding company is a company that owns all or a substantial part of a variety of different businesses. These businesses may be private companies, or publically traded. Holding companies may own all, or a majority or a minority, of companies in which they invest. The one thing most holding companies have in common is that they trade for less than the combined value of their holdings. This “holding company discount” is a well-known phenomenon in finance. It represents a special kind of hidden asset and potential profit for investors in holding companies. When holding companies sell assets or break themselves up into their constituent parts, much if not all of the discount may disappear. In other words, holding companies can usually sell their assets for fair market value, rather than at a discount. In addition, fair market value may turn out to be be more than analysts figured they were worth. Even without a break-up, buying a holding company at a discount to its asset value puts more assets to work for you for each dollar you invest....