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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AltaGas Ltd., $42.02, symbol ALA on Toronto (Shares outstanding: 134.4 million; Market cap: $5.7 billion; www.altagas.ca), processes, ships, stores and markets natural gas for producers; generates power from gas-fired, coal-fired, wind, biomass and hydroelectric plants; and operates natural gas distribution utilities. In the three months ended December 31, 2014, the company’s cash flow per share rose 15.8%, to $1.17 from $1.01. Revenue increased 14.8%, to $667.0 million from $581.0 million. AltaGas has a number of growth plans underway, with a focus on regulated utilities and projects with long-term sales contracts in place. That gives it stable cash flow....
Hercules Offshore Inc., $0.74, symbol HERO on Nasdaq (Shares outstanding: 161.1 million; Market cap: $126.2 million; www.herculesoffshore.com), provides shallow-water drilling and marine services to companies that produce and explore for oil and natural gas. Hercules operates around the world. Producers have sharply cut capital spending in response to lower oil and gas prices, hurting most offshore drillers. Drilling companies with modern gear, contractually protected backlogs and well-capitalized customers will cope more easily with the downturn. Hercules, however, will see a sharp decline in earnings as contracts expire on its mostly older-generation rigs....
To deal with the fragmented-portfolio syndrome, you need to look at all your holdings as if they were in one big account. Today, many households and even some individuals have five or 10 separate investment accounts. These accounts may include RRSPs (regular and spousal), TFSAs and other registered accounts, personal and joint accounts, corporate accounts, LIRAs from past employment, children’s accounts, trust accounts and so on. In addition, some investors have one or more of what you might call “legacy” accounts. These are accounts with brokers you no longer do business with, but you never quite get around to transferring....
Pat: Can I have your quick opinion on two computer chip companies: Broadcom and Qualcomm? Thank you.
Broadcom, $44.26, symbol BRCM on Nasdaq (Shares outstanding: 549.7 million; Market cap: $26.8 billion; www.broadcom.com), develops chips for wireless and wired data transmission. The company’s products go into devices like cable TV set-top boxes, cable modems, high-speed networks, mobile phones, GPS devices and Blu-ray disc players. Many high-end smartphones and tablets continue to use Broadcom’s Wi-Fi chips, including Apple’s iPhone 6 and Samsung’s new Galaxy S6. The company also aims to expand in the field of devices or machines connected to the Internet, a trend generally known as the Internet of Things. Broadcom’s role in this market will probably focus on processors for the home....
Green Timiskaming, the issuer of Northern Solar Bonds, was established in 2009 as a community-owned, not-for-profit co-operative devoted to building a “greener way of life” for the people of Timiskaming, in Northern Ontario. The bonds will finance a 250-kilowatt solar system to be installed at the Armstrong Township Arena in Earlton, Ontario, and another nine 500-kilowatt projects in Chamberlain Township. Northern Solar Bonds have very high yields: investors buying five-year bonds will get a yield of 4.5% annually (in contrast, a five-year GIC yields 1.80%); the 20-year bond has an effective rate of around 7% annually....
Firan Technology Group Corp., $1.83, symbol FTG on Toronto (Shares outstanding: 17.8 million; Market cap: $40.1 million; www.ftgcorp.com), makes electronic circuit boards for clients in the defence and aerospace industries. The company works closely with its clients to custom design these boards for specific uses. Circuit boards supply 74% of Firan’s revenue. It gets the remaining 26% by making electronic components for aircraft manufacturers, including illuminated cockpit panels, keyboards and bezels (metal rims that hold transparent coverings, as on a watch, clock or headlight). Firan has plants in Toronto, California and Tianjin, China. Major clients include Bombardier, Rockwell Collins and Bell Helicopter....
Ecolab Inc., $115.90, symbol ECL on New York (Shares outstanding: 297.4 million; Market cap: $34.6 billion; www.ecolab.com), makes chemicals for a variety of industrial uses, including cleaning, food purification, pest control and water treatment. The company sells these products through three main divisions:
- Global Industrial (35% of 2014 revenue) serves customers in the water, food and beverage, paper and commercial laundry businesses
- Global Institutional (30%) sells its products to restaurants, hotels, schools and hospitals;
- Global Energy (30%) makes chemicals for oil and natural gas exploration firms, oil refineries and pipeline operators.
Gluskin Sheff + Associates, $27.25, symbol GS on Toronto (Shares outstanding: 31.7 million; Market cap: $839.5 million; www.gluskinsheff.com), is a Toronto-based wealth management firm that serves high-net-worth individuals and institutional investors. It has around $8.2 billion in assets under management. In August 2014, the company acquired Blair Franklin Asset Management Holdings, which specializes in fixed-income investments and has $635 million in assets under management. In the three months ended December 31, 2014, Gluskin earned $27.2 million, or $0.93 a share, down 54.9% from $60.3 million, or $2.10, a year earlier. Revenue fell 42.7%, to $69.3 million from $120.9 million....
“Averaging down” and “averaging in” sound similar, but a wide gap separates the two. Mixing them up can cost you money. Averaging down is the well-known trader’s tactic of buying more shares of a stock you own as the price falls. The idea is that this will cut your average cost per share. That way, you make more money (per share, at least) when the stock turns around and goes up. One problem with averaging down is you are betting you were right when you bought the stock the first time. You assume the $20 stock you bought is an even better buy at $15. You may be right. You may be ignoring warning signs, because you don’t want to admit you were wrong....
NXP Semiconductors NV, $101.31, symbol NXPI on Nasdaq (Shares outstanding: 230.8 million; Market cap: $23.3 billion; www.nxp.com), makes computer chips for a range of products, such as automotive components, wireless infrastructure, lighting, industrial technology, mobile devices and computers.
Netherlands-based NXP is one of the world’s largest suppliers of near-field communication (NFC) chips. This technology lets devices that are close to one another transmit data—including financial transactions—securely.
NXP’s shares have risen lately because Apple is using the company’s chips in its iPhone 6, iPhone 6 Plus and Apple Watch for its new wireless payment system, called Apple Pay.
With this service, users add their credit card information to their phones. They can then use them to pay for goods at any tap-and-pay-enabled cash register and for some online purchases. To prevent fraudulent transactions, the phone will scan the user’s fingerprint to confirm their identity.
NXP’s customers also include Google, Samsung and ZTE Corp., China’s second-biggest maker of telecommunications equipment.
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Netherlands-based NXP is one of the world’s largest suppliers of near-field communication (NFC) chips. This technology lets devices that are close to one another transmit data—including financial transactions—securely.
NXP’s shares have risen lately because Apple is using the company’s chips in its iPhone 6, iPhone 6 Plus and Apple Watch for its new wireless payment system, called Apple Pay.
With this service, users add their credit card information to their phones. They can then use them to pay for goods at any tap-and-pay-enabled cash register and for some online purchases. To prevent fraudulent transactions, the phone will scan the user’s fingerprint to confirm their identity.
NXP’s customers also include Google, Samsung and ZTE Corp., China’s second-biggest maker of telecommunications equipment.
...