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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Lockheed Martin Corp., $189.85, symbol LMT on New York (Shares outstanding: 315.9 million; Market cap: $60.0 billion; www.lockheedmartin.com), is the world’s largest defence contractor. In 2013, the U.S. government supplied 82% of its revenue. Lockheed has five divisions:
- Aeronautics (32% of revenue) makes and services military aircraft, including the F-16, F-22 and F-35 fighter jets, as well as C-130 transport planes;
- Space Systems (18%) makes rockets and satellites;
- Information Systems and Global Solutions (18%) offers data and audio/visual communication systems for governments and corporate clients;
- Missiles and Fire Control (17%) makes ballistic missiles and laser-guided bombs, as well as control systems for nuclear-powered vessels and nuclear plants;
- Mission Systems and Training (15%) offers control systems for military aircraft and ships. It also makes flight simulators and other training gear.
Spartan Energy, $2.49, symbol SPE on Toronto (Shares outstanding: 262.6 million; Market cap: $658.0 million; www.spartanenergy.ca), develops, produces and explores for oil and natural gas. The company was formed from the merger of Renegade Petroleum and Alexander Energy in February 2014. Following the merger, Alexander Energy was led by the former management of Spartan Oil, a company that Bonterra Energy bought for $441 million at the end of 2012. On March 3, 2014, Alexander Energy consolidated its shares on a 1-for-4 basis and changed its name to Spartan Energy. It’s now focused on producing and exploring for oil and natural gas in Saskatchewan....
CCL Industries, $124.79, symbol CCL.B on Toronto (Shares outstanding: 32.3 million; Market cap: $4.3 billion; www.cclind.com), makes packaging products for the food, health care, automotive and personal care industries. Major customers include Procter & Gamble and Johnson & Johnson. The company gets 83% of its revenue by making pressure-sensitive labels for plastic bottles and other forms of packaging. CCL also makes aluminum aerosol cans and beverage bottles (12% of revenue) and flexible plastic tubes (5%)....
Exchange Income Corp., $22.63, symbol EIF on Toronto (Shares outstanding: 22.4 million; Market cap: $506.6 million; www.exchangeincomecorp.ca), operates in two main areas: aviation and manufacturing. The aviation business (63% of revenue) includes regional airlines Perimeter Aviation, Keewatin Air, Calm Air International, Bearskin Lake Air Service, Custom Helicopters and Regional One. These airlines serve communities in Manitoba, Ontario and Nunavut. The manufacturing business (37% of revenue) includes WesTower Communications Canada (a maker and installer of wireless communication towers), Jasper Tank, Overlanders Manufacturing, Water Blast Manufacturing and Stainless Fabrication....
Home Depot, $100.43, symbol HD on New York (Shares outstanding: 1.3 billion; Market cap: $132.3 billion; www.homedepot.com), operates warehouse-style home improvement stores that average 104,000 square feet, plus an additional 24,000-square-foot garden centre. Each outlet typically carries 30,000 to 40,000 items. The company now has 2,269 locations in the U.S., Canada, Mexico, Puerto Rico and Guam. In the three months ended November 2, 2014, Home Depot’s sales rose 5.4%, to $20.5 billion from $19.5 billion a year earlier....
Growing by acquisition can add risk, but Loblaw continues to successfully integrate its huge Shoppers Drug Mart purchase. By cutting overlapping functions, it now expects to save $300 million annually by the end of the third year. The acquisition also gives Loblaw a great opportunity to sell more food, including produce and prepared meals, in Shoppers’ 1,250 stores. LOBLAW COMPANIES $60.00 (Toronto symbol L; Shares outstanding: 412.7 million; Market cap: $25.2 billion; TSINetwork Rating: Above Average; Dividend yield: 1.6%; www.loblaw.ca) is Canada’s largest food retailer, with about 1,200 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills. George Weston Ltd. owns 46% of the company. Loblaw completed its acquisition of the Shoppers Drug Mart chain in March 2014. It paid $12.3 billion: $6.6 billion in cash and $5.7 billion in Loblaw common shares....
Here’s an excerpt from Pat’s latest email to his Inner Circle members: “Overall, the drop in oil prices is a favourable development for the universe of stocks we follow and recommend. It will cut into oil stock earnings, but will act like a major tax cut for all other stocks we follow, and their customers.” “A steep plunge like this inevitably sparks predictions of an even bigger drop ahead. It pays to be skeptical of predictions like these. Nobody has ever consistently predicted the rise and fall of the oil market.”...
CRESCENT POINT ENERGY CORP. $29.65 (Toronto symbol CPG; Shares outstanding: 443.3 million; Market cap: $13.2 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.3%; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas. In the three months ended September 30, 2014, Crescent Point’s cash flow rose 11.6%, to $618.4 million from $554.1 million a year earlier. The company raised its daily output by 19.7%, to 141,183 barrels of oil equivalent from 117,963. That, plus higher oil and gas prices, was the main reason for the rising cash flow. Cash flow per share rose at a slower rate of 2.1%, to $1.45 from $1.42, because Crescent Point issued shares to pay for acquisitions....
IMPERIAL OIL $53.20 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $43.9 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) has suspended production at its Kearl oil sands project in northern Alberta due to problems with a machine that separates bitumen (heavy oil) from sand. Kearl produced 92,000 barrels a day in the third quarter of 2014, or 30% of Imperial’s total daily output of 307,000 barrels. Kearl’s second phase will add another 78,100 barrels per day to Imperial’s output in 2015. The company expects to complete the repairs at Kearl in the next few weeks. Due to the recent drop in oil prices, the outage will have only a small impact on Imperial’s fourth-quarter earnings....
We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus. The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of high quality stocks. Here’s a look at six global ETFs:...