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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Avigilon Corp., $15.60, symbol AVO on Toronto (Shares outstanding: 46.6 million; Market cap: $698.3 million; www.avigilon.com), designs, makes and sells high-definition surveillance systems. Users can view the images from this equipment on computers, tablets and smartphones. In the three months ended June 30, 2014, Avigilon’s revenue rose 66.2%, to $65.2 million from $39.2 million a year earlier. Excluding one-time items, earnings per share rose 20.0%, to $0.12 from $0.10. The company continued to increase its marketing spending and add staff to support its growth. In April 2014, Avigilon raised $100 million by issuing 3.4 million shares at $29 each. The company now holds cash of $156.7 million, or $3.37 a share, and has no debt. It will use some of its cash to continue its expansion and make acquisitions, such as last year’s $17-million purchase of surveillance system firm RedCloud Security....
Your surest route to investment success is to follow our three-pronged Successful Investor approach:
- Invest mainly in well-established, high-quality companies;
- Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities.
- Downplay or avoid stocks in the broker/media limelight. Stocks in the limelight instill bloated expectations in investors. When they fail to live up to these expectations, as is bound to happen eventually, downturns can be swift and brutal.
Crescent Point Energy, $35.01, symbol CPG on Toronto, is a buy in Canadian Wealth Advisor for the Resources segment of a portfolio. Newell Rubbermaid, $32.87, symbol NWL on New York, is our #1 buy for 2014 in Wall Street Stock Forecaster. Pfizer, $28.46, symbol PFE on New York, is a Best Buy in our Wall Street Stock Forecaster....
Mutual funds are okay to hold if you own them, but we have moved away from recommending them in favour of lower-fee exchange traded funds (ETFs). We feel most fund investors should shift into ETFs wherever possible. (That why we’ve shifted our focus to ETFs in Canadian Wealth Advisor.) The Vanguard FTSE All-World ex-Canada Index ETF, $24.53, symbol VXC on Toronto (Units outstanding: 670,000; Market cap: $16.4 million; www.vanguardcanada.ca), aims to track the FTSE All-World ex-Canada Index, which is a broad global equity index that focuses on large- and mid-capitalization stocks in emerging and developed markets, excluding Canada. To do this, the ETF mainly invests in units of the U.S.-based Vanguard Large-Cap ETF, as well as the Vanguard FTSE Europe ETF, Vanguard FTSE Pacific ETF and Vanguard FTSE Emerging Markets ETF....
Domtar Corp., $37.66, symbol UFS on Toronto (Shares outstanding: 65.0 million; Market cap: $2.4 billion; www.domtar.com), is among North America’s largest producers of paper (sold in huge rolls), with an annual capacity of about 3.4 million tons. The company is also a significant producer of market pulp, and it has diversified into the personal care industry by making diapers for adults and children. In the three months ended June 30, 2014, Domtar’s revenue rose 5.6%, to $1.39 billion from $1.31 billion a year earlier. Excluding one-time items, earnings per share jumped to $0.61 from $0.24....
Genworth MI Canada, $36.48, symbol MIC on Toronto (Shares outstanding: 95.0 million; Market cap: $3.5 billion; www.genworth.ca), has been a leading Canadian residential mortgage insurer since 1995. It provides this service through its subsidiary, Genworth Financial Mortgage Insurance Company of Canada. Right now, the company has $335 billion of insurance policies written. In the three months ended June 30, 2014, Genworth’s revenue rose 17.0%, to $160.5 million from $137.1 million a year earlier. Earnings per share gained 16.9%, to $1.04 from $0.89. Genworth continues to gain market share, and it aims to manage both its credit risk and its investment portfolio conservatively....
Costco Wholesale Corp., $126.25, symbol COST on Nasdaq (Shares outstanding: 438.3 million; Market cap: $55.3 billion; www.costco.com), owns and operates warehouse-sized stores that sell a wide variety of consumer goods. The company charges its customers an annual membership fee, usually $55 a year, to shop in its stores. Costco has 663 outlets, including 468 in the U.S., 88 in Canada, 33 in Mexico, 26 in the U.K., 20 in Japan, 11 in South Korea, 10 in Taiwan, six in Australia and one in Spain. It also sells products online in the U.S., Canada, the U.K. and Mexico. The company plans to open 25 to 30 more outlets in the next year or two. About half will be in international markets....
Aveda Transportation and Energy Services Inc., $4.05, symbol AVE on Toronto (Shares outstanding: 19.9 million; Market cap: $80.6 million; www.avedaenergy.com), provides transportation services to oil and gas producers in Western Canada and the U.S., mainly in Texas, Pennsylvania, West Virginia and North Dakota. The U.S. supplies around 75% of the company’s revenue. Aveda’s trucks haul drilling rigs, storage tanks, pipeline components, temporary structures and other equipment. It also rents related gear, such as power generators and light towers. In January 2014, Aveda paid $51.4 million for North Dakota-based M&K Hotshot & Trucking, Inc. and M&K Rig Service, Inc. These businesses own 79 trailers, 15 transport trucks, 14 winch trucks and three cranes, along with 395 pieces of rental equipment....
Inner Circle members sometimes wonder how they should interpret our advice. In particular, they wonder what they should do when they ask about a stock and we say it’s “okay to hold”. To understand that recommendation, you need to consider it in light of the choices that you’ll find in the market as an investor. We continually scour the Canadian and U.S. markets for stocks to recommend as buys to our clients. We generally get excited about only a handful—that is, excited enough to recommend them as buys in our publications. Most stocks we look at have one or more serious flaws, in our view. If you ask about stocks like these, we’ll tell you to sell....
Adidas AG (ADR), $36.92, symbol ADDYY on the U.S. over-the-counter market (ADRs outstanding: 418.4 million; Market cap: $15.4 billion; www.adidas.com), together with its subsidiaries, develops, makes and markets athletic equipment and clothing worldwide. The company operates through six segments: Wholesale, Retail, TaylorMade-Adidas Golf Company, Rockport, Reebok-CCM Hockey and Other Centrally Managed Brands. Adidas was founded in 1920 and is headquartered in Herzogenaurach, Germany. It was known as Adidas-Salomon AG until 2006, when it shortened its name to Adidas AG. Its main listing is on the Frankfurt Stock Exchange....