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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Element Financial Group, $14.51, symbol EFN on Toronto (Shares outstanding: 263.9 million; Market cap: $3.8 billion; www.elementfinancial.ca), is a leading independent North American equipment-finance company. Element operates across the continent through four segments: Commercial and Vendor Finance; Aviation Finance; Fleet Management; and Rail Finance. Commercial and Vendor Finance focuses on equipment for a range of markets, from transportation and construction to industrial, health care, golf and office products....
Long-time readers may recall that in the mid-1990s, I started writing about three special factors that I felt were likely to make stock prices go higher, and continue rising longer, than most investors expected. These special factors or “economic energizers” were:
- Economic liberalization and the spread of free enterprise around the world, following the end of the Cold War and the break-up of the Soviet Union.
- The maturing of the baby boomers, who were entering the economic prime of their lives.
- The productivity gains available from modern computer and communications technology.
Greenbrier Cos., $68.02, symbol GBX on New York (Shares outstanding: 27.5 million; Market cap: $1.9 billion; www.gbrx.com), supplies transportation equipment and services to the railroad industry. It also makes ocean-going marine barges. The company’s plants are in the U.S., Mexico and Poland. Greenbrier has three divisions: Manufacturing (69% of revenue); Wheels, Repairs and Parts (27%); and Leasing & Services (4%). Two customers, TTX Company and Union Pacific Railroad, account for 27% of its total revenue. In its fiscal 2014 third quarter, which ended May 31, 2014, Greenbrier’s revenue rose 18.1%, to $593.3 million from $502.2 million a year earlier. That’s mainly because the company delivered 4,300 railcars in the latest quarter, up 72.0% from 2,500. The repair and parts business also raised its prices, increasing its revenue by 7.2%. Leasing revenue jumped 50.8%, thanks to higher sales of railcars made by a third party....
Global Partners LP, $40.69, symbol GLP on New York (Units outstanding: 27.4 million; Market cap: $1.1 billion; www.globalp.com), owns and operates one of the largest fuel terminal networks in the U.S. Northeast. It distributes gasoline and other petroleum products throughout the area and contracts with railroad companies to transport oil by rail from the mid-continent region of the U.S. and Canada to its facilities on both coasts. Global also has about 900 gas stations and convenience stores in the Northeast U.S. In addition, the company distributes natural gas and propane. Kansas City Southern and Global have announced plans to jointly develop an oil-by-rail train terminal in Port Arthur, Texas. The terminal, which will be constructed on 200 acres Global will lease from Kansas City Southern, will initially serve as a destination for heavy crude from Western Canada....
Pacific Ethanol, $21.30, symbol PEIX on Nasdaq (Shares outstanding: 20.3 million; Market cap: $509.2 million; www.pacificethanol.net), produces and markets ethanol in the western U.S., primarily California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington. Ethanol is a liquid alcohol obtained by fermenting sugar or starch converted to sugar. In Canada and the U.S., fuel ethanol is made from grains, such as corn, wheat and barley. Small quantities have been made on an experimental basis from low-cost agricultural cellulosic biomass, like trees and grasses. In its pure form, ethanol can be used as a fuel for cars, but it is usually used as a gasoline additive to increase octane and reduce vehicle emissions....
InvenSense, $24.77, symbol INVN on Nasdaq (Shares outstanding: 88.6 million; Market cap: $2.2 billion; www.invensense.com), makes computer chips that can track an object’s motion. A range of consumer electronics use the company’s technology, including smartphones, tablets, wearable computers, gaming devices, cameras and remote controls for smart TVs. Fast-selling products that contain its chips include Amazon’s Kindle Fire tablet, the Samsung Galaxy Note 3 tablet and the Google Nexus 5 smartphone. InvenSense’s products are also used in industrial applications....
Some investors wonder if buying a new condominium apartment in downtown Toronto is a good idea right now. They feel Toronto is sure to prosper as an alternative to other world financial capitals like London and New York. After all, Canada has a relatively liberal immigration policy, plus a stable government, attractive corporate tax policy and so on. They assume this will attract wealthy business people who will buy Toronto condos and drive up prices. This is an example of a “top-down” investing strategy. That’s when you zero in on a market that seems likely to rise, then try to profit from it. As you probably know, we prefer the “bottom-up” approach. That’s when you focus on high-quality investments that are likely to prosper under most circumstances. Then you zero in on those that are reasonably priced. If they provide attractive income, so much the better. But it’s the quality and appeal of the investment, rather than your prediction about their market, that makes you want to buy....
Counsel Corp., $1.88, symbol CXS on Toronto (Shares outstanding: 99.1 million; Market cap: $185.3 million; www.counselcorp.com), operates a residential mortgage-lending business through its wholly owned subsidiary, Street Capital. The company sources its mortgages through a network of independent brokers across Canada. It then sells the mortgages it underwrites to leading financial institutions. Even though the company sells the mortgages, it continues to handle all communication with borrowers throughout each mortgage’s term. That lets it renew mortgages without the cost of acquiring new ones, which typically involves significant expenses for things like brokers, marketing and underwriting....
Neptune Technologies & Bioressources Inc., $2.06, symbol NTB on Toronto (Shares outstanding: 75.0 million; Market cap: $159.7 million; www.neptunebiotech.com), makes omega-3 dietary supplements using a patented process for extracting oil from krill. (Krill are shrimp-like deepwater invertebrates that range in length from half an inch to two-and-a-half inches.) Omega-3 fatty acids reportedly help lower cholesterol and blood pressure when used as a dietary supplement. The company sells its supplements as bulk oil to a network of distributors who package and sell them under their own labels to customers who are mainly in the U.S., Europe and Australia....
Timbercreek Senior Mortgage Investment Corp., $9.34, symbol MTG on Toronto (Shares outstanding: 31.6 million; Market cap: $295.1 million; www.timbercreek.com), is a mortgage investment corporation. Mortgage investment corporations, or MICs, invest in pools of mortgages and distribute most of their profits to their shareholders. Some MICs yield 6% or 7% or more annually. They sound like conservative investments because they invest in mortgages rather than equity. However, mortgages vary widely in their investment quality and risk. MICs can earn high profits because they take on riskier mortgages. Timbercreek Senior Mortgage Investment Corp. yields 6.4%....