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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Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....
BCE INC. $54.40 (Toronto symbol BCE; Shares outstanding: 839.6 million; Market cap: $44.9 billion; TSINetwork Rating: Above Average; Dividend yield: 4.5%; www.bce.ca) recently agreed to buy Glentel Inc. (Toronto symbol GLN) for $670 million. Glentel sells mobile phones and subscription plans through 494 Canadian stores, mainly under the Wireless Wave banner. Glentel also has 735 U.S. outlets and 147 in Australia and the Philippines. However, rival wireless carrier Rogers Communications (Toronto symbol RCI.B) legally challenged the takeover. Rogers claims that its existing deal with Glentel gives it the right to block any change in control....
PENGROWTH ENERGY $3.35 (Toronto symbol PGF; Shares outstanding: 530.1 million; Market cap: $1.8 billion; TSINetwork Rating: Average; Dividend yield: 14.3%; www.pengrowth.com) has started injecting steam into its Lindbergh oil sands project in Alberta to loosen the tar-like bitumen and pump it to the surface. Pengrowth believes that Lindbergh’s low operating costs will let it generate positive cash flow, even at today’s depressed oil prices. As well, now that construction on Lindbergh has ended, the company’s 2015 capital spending will fall sharply from the $740 million to $770 million it probably spent in 2014....
ISHARES CHINA LARGE-CAP ETF $42.10 (New York symbol FXI; buy or sell through brokers) is an exchange traded fund that aims to track the FTSE China 50 Index, which is made up of the 50 largest, most liquid Chinese stocks. All of the companies in the index trade on the Hong Kong exchange. Some also trade as American depositary receipts (ADRs) on New York. The fund’s top holdings are Tencent Holdings, 8.4%; China Construction Bank, 7.9%; China Mobile, 7.7%; Industrial & Commercial Bank, 7.2%; Bank of China, 6.1%; China Life, 4.8%; Ping An Insurance, 4.5%; PetroChina, 4.1%; CNOOC Ltd., 3.9%; China Petroleum and Chemical, 3.7%; Agricultural Bank of China, 2.5%; and China Pacific Insurance, 2.5%. The fund’s holdings give it the following industry breakdown: Financials, 50.3%; Oil and Gas, 13.8%; Telecommunications, 11.1%; Technology, 9.9%; Consumer Goods, 6.3%; Industrials, 4.2%; and Basic Materials, 2.4%. Its expense ratio is 0.74%....
H&R REIT $22.71 (Toronto symbol HR.UN; Units outstanding: 274.1 million; Market cap: $6.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.9%; www.hr-reit.com) is selling part ownership of 101 industrial properties in Canada and the U.S. for $731 million. In all, these buildings comprise 19.5 million square feet. The buyers include the Canadian Public Sector Pension Investment Board. H&R will keep a 50% interest in the Canadian properties and a 49.5% stake in the U.S. portfolio. It will keep managing these assets and will receive fees for doing so. H&R will retain full ownership of 14 other industrial properties. The REIT will use the proceeds to pay down debt and buy more shopping malls and office buildings....
The near-term direction of oil and gas prices remains uncertain, so we think the best way to cut risk is to look for companies with rising production that are trading at reasonable multiples to cash flow. Here are two with sound long-term prospects. PEYTO EXPLORATION & DEVELOPMENT CORP. $30.32 (Toronto symbol PEY; Shares outstanding: 153.7 million; Market cap: $4.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.4%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 77,592 barrels of oil equivalent is 90% gas and 10% oil. In the quarter ended September 30, 2014, Peyto’s cash flow rose 62.7%, to $1.09 a share from $0.67 a year ago. That’s because it raised its production by 37.7% and realized higher oil and gas prices....
CENOVUS ENERGY $22.92 (Toronto symbol CVE; Shares outstanding: 757.1 million; Market cap: $17.5 billion; TSINetwork Rating: Average; Dividend yield: 4.7%; www.cenovus.com) plans to spend $2.5 billion to $2.7 billion on exploration and development in 2015, down from the $3.1 billion it spent in 2014. The company has earmarked 75% of these funds for its existing refineries, oil sands and conventional oil properties. The rest will go to discretionary projects, like developing new oil sands projects and extraction technologies. Cutting capital spending is a prudent response to the recent oil price drop, which will likely reduce Cenovus’s cash flow by 18% in 2015, to between $3.5 billion and $4.0 billion....
TORSTAR $6.35 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $512.4 million; TSINetwork Rating: Average; Dividend yield: 8.3%; www.torstar.com) recently stopped publishing its Metro free daily commuter newspapers in seven smaller cities: Hamilton, Kitchener, London, Windsor, Regina, Saskatoon and Victoria. It now plans to shut down the Metro websites in these cities. This will let Torstar focus on Metro’s more profitable print and online editions in Halifax, Ottawa, Toronto, Winnipeg, Calgary, Edmonton and Vancouver. Torstar is a buy....
ENBRIDGE INC. $55.52 (Toronto symbol ENB; Shares outstanding: 848.8 million; Market cap: $47.5 billion; TSINetwork Rating: Above Average ; Dividend yield : 3.4 % ; www.enbridge.com) has announced a major reorganization and hiked its dividend by a third. The company plans to transfer its pipelines to 19.9%-owned affiliate Enbridge Income Fund Holdings Inc. (Toronto symbol ENF). This company owns 42% of Enbridge Income Fund (Enbridge Inc. owns the remaining 58%), which holds a variety of businesses, including oil and gas pipelines and solar and wind farms. Under the plan, Enbridge will transfer pipelines that pump oil sands crude to the U.S., along with wind farms in Alberta and Quebec, to Enbridge Income Fund. In all, these assets have a book value of $17 billion. To put that in context, Enbridge’s market cap (or the value of all of its outstanding shares) is $47.5 billion....
On a day like Monday, when the market falls more than 300 points, here’s a fact to keep firmly in mind: There’s a large random element in day-to-day stock-price movements. Many people spend lots of time studying minute-by-minute or hour-by-hour stock market fluctuations, in hopes of unlocking the “code” that will provide a source of fabulous wealth. These searchers do sometimes uncover repeating patterns. These findings may yield a string of small but seemingly risk-free gains. Unfortunately, the patterns inevitably quit repeating, sometimes with an abrupt reversal. This may happen just when the searchers have become confident enough to double their bets. It takes time to recognize the market’s random element. That’s partly because the media searches for logical explanations of any abrupt market move, and never fails to find them....