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
IBM $156.96 (New York symbol IBM; Shares outstanding: 989.7 million; Market cap: $157.0 billion; TSINetwork Rating: Above Average; Dividend yield: 2.8%; www.ibm.com) reported better-than-expected earnings in the latest quarter, but that was mainly due to cost cuts, as demand for the company’s mainframes and computer services has weakened. In the three months ended December 31, 2014, IBM’s per-share earnings fell 5.7%, to $5.81 from $6.16. That beat the consensus estimate of $5.41. Revenue fell 11.9%, to $24.1 billion from $27.4 billion, missing the consensus estimate of $24.8 billion. If you adjust for foreign exchange rates and the sale of the company’s server business, revenue declined by 2%....
Alibaba Group Holding (ADR), $91.02, symbol BABA on New York (Shares outstanding: 2.5 billion; Market cap: $224.5 billion; www.alibaba.com), the huge Chinese e-commerce company, raised a total of $25 billion last fall, in its IPO or Initial Public Offering. That figure is a world record for a new issue. Alibaba’s new issue price was $68 a share, but it opened for public trading at $92, and moved up to $93.89, 38% above its new issue price. Since then, the company’s sales and earnings growth, although strong, has fallen short of expectations. In the three months ended December 31, 2014, Alibaba’s revenue rose 39.7%, to $4.22 billion from $3.02 billion. However, that was below the consensus estimate of $4.44 billion. It’s also slower than the company’s 54% sales growth in the 2014 third quarter. The company reports that its earnings per share, excluding one-time items, rose 13.5% in the latest quarter, to $0.81. That beat the consensus estimate of $0.74. However, the company’s earnings figures include a number of difficult-to-evaluate one-time items such as pre-IPO stock awards to employees and executives, and the amortization of intangible assets on newly acquired companies....
Spectra Energy Corp., $34.77, symbol SE on New York (Shares outstanding: 671.0 million; Market cap: $22.9 billion; www.spectraenergy.com), is one of North America’s largest pipeline companies, with more than 22,000 miles of natural gas, natural gas liquid and crude oil lines in the U.S. and Canada. It also owns Union Gas, Canada’s second-largest gas utility. Through its 43,000-mile pipeline network, Union Gas delivers gas to over 1.4 million homes and businesses in more than 400 Ontario communities. In addition, Spectra owns DCP Midstream, which collects gas from wells in 18 U.S. states through 60,000 miles of gathering pipe. It then processes the gas at 60 plants before feeding it into large pipelines. The company also has storage facilities for 305 billion cubic feet of gas and 4.8 million barrels of crude....
AutoCanada Inc., $38.29, symbol ACQ on Toronto (Shares outstanding: 24.5 million; Market cap: $886.8 million; www.autocan.ca), has 46 franchised car dealerships in eight provinces. The company sells numerous brands, including Chrysler, Dodge, Jeep, Ram, Fiat, Chevrolet, GMC, Buick, Cadillac, Nissan, Hyundai, Subaru, Audi, Volkswagen and BMW. However, Chrysler vehicles (including Dodge, Jeep, Ram and Fiat) supply around 70% of its revenue. In 2013, AutoCanada’s dealerships sold roughly 36,000 vehicles and processed about 364,000 repair and maintenance orders in their 381 service bays....
CenterPoint Energy, $22.81, symbol CNP on New York (Shares outstanding: 429.8 million; Market cap: $9.8 billion; www.centerpointenergy.com), is a Houston-based company that distributes electricity and natural gas. It serves more than five million customers, mainly in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. CenterPoint also owns 55.4% of Enable Midstream Partners, a publicly traded master limited partnership that it jointly controls with OGE Energy. Enable collects gas from wells through a network of 11,000 miles of gathering pipe and processes it at 12 plants before feeding it into its 7,900 miles of interstate pipelines. In addition, the company operates 86.5 billion cubic feet of natural gas storage....
RioCan REIT, $29.23, symbol REI.UN on Toronto (Units outstanding: 313.9 million; Market cap: $9.1 billion; www.riocan.com), has Target as its seventh-largest tenant, with 26 stores, but it accounts for just 1.9% of the REIT’s annualized rental revenue. Many of the Target stores are in established malls, so RioCan should be able to rent them to new tenants, perhaps at higher rates. Meanwhile, RioCan says the leases on the 26 locations are guaranteed by the U.S. parent company, Target Corp., for more than a decade. RioCan is a recommendation of The Successful Investor. It’s a buy....
Vanguard Health Care ETF, $128.42, symbol VHT on New York (Units outstanding: 33.7 million; Market cap: $4.3 billion; www.vanguard.com), holds 48 U.S. health care stocks. Its top holdings are Johnson & Johnson, Pfizer, Merck & Co., Gilead Sciences, Amgen, AbbVie, UnitedHealth Group, Bristol-Myers Squibb, Celgene and Biogen Idec. The fund has a low 0.12% MER and a 1.0% dividend yield....
John Templeton, a 20th century investing master, once said, “The four most dangerous words for an investor are “This time it’s different”. What he meant was that the market goes through recurring cycles of optimism and pessimism, and that prices rise and fall in response. It’s dangerous to let yourself get caught up in a tide of optimism or pessimism and take it to mean the world has changed. One great example is the Internet boom of the 1990s and early 2000s. Many Internet stocks rose to extraordinary heights in those days, based on the number of visits to their websites, rather than dollars in their bank accounts. Back then, lots of analysts and investors believed that “This time it’s different” and that these stocks could go on rising indefinitely. Instead, the Internet stock boom ended suddenly, like most speculative booms. Most of the top Internet stocks collapsed and brought huge losses to investors. That’s the kind of risk Templeton had in mind when he made his famous comment about the four most dangerous words....
Yahoo! Inc., $48.38, symbol YHOO on Nasdaq (Shares outstanding: 947.4 million; Market cap: $46.8 billion; www.yahoo.com), offered one of the Internet’s first search engines when the company launched in 1994. Since then, it has become one of the Internet’s most popular destinations for content, search and navigational services. Yahoo’s sites also have a range of other features, including shopping and email. In July 2012, Yahoo appointed Marissa Mayer as president and CEO. Mayer joined Google in 1999 and helped develop many of that company’s most popular services. Before she left, she was a vice-president at Google....
Golar LNG, $30.25, symbol GLNG on Nasdaq (Shares outstanding: 93.3 million; Market cap: $2.8 billion; www.golarlng.com), is a Bermuda-based liquefied natural gas (LNG) shipping company. Golar operates and charters LNG tankers. In all, it owns nine carriers and four floating storage and regasification units. It also develops liquefaction projects, which convert gas into a liquid, and holds 41.4% of Golar LNG Partners (symbol GMLP on Nasdaq). LNG, or natural gas that has been cooled into a liquefied form, can be transported by tanker. Up to now, the LNG trade has been concentrated in the Asia-Pacific region with gas sourced from Asia and the Middle East (mainly Qatar, Malaysia and Indonesia)....