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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El Pollo Loco, $33.22, symbol LOCO on Nasdaq (Shares outstanding: 35.9 million; Market cap: $1.3 billion; www.elpolloloco.com), specializes in Mexican-style grilled chicken. El Pollo Loco means “the crazy chicken” in Spanish. The company fire-grills citrus-marinated chicken in front of its customers. El Pollo Loco first sold shares to the public and began trading on the Nasdaq exchange on Friday, July 25, 2014. The quick-serve restaurant chain raised $100 million in an initial public offering (IPO) of 7.1 million shares priced at $15 each. The stock has more than doubled since its initial listing, and it continues to hit new highs....
Technology Select Sector SPDR Fund ETF, $38.74, symbol XLK on New York (Units outstanding: 340.3 million; Market cap: $13.2 billion; www.spdrs.com), aims to track the S&P Technology Select Sector Index, which consists of tech stocks in the S&P 500 Index. The fund’s MER is just 0.16%. The $13.6-billion fund’s top 10 holdings are Apple, Google, Microsoft, Verizon, IBM, Cisco Systems, Intel, AT&T, Oracle and Qualcomm. The ETF is broken down by segment as follows: technology, hardware, storage and peripherals, 20.6%; software, 16.6%, information technology services, 15.8%; Internet software and services, 15.1%; diversified telecommunication services, 11.4%; semiconductors and semiconductor equipment, 10.4%; communications equipment, 8.0%; and electronic equipment, instruments and components, 2.1%....
First Quantum Minerals, $24.72, symbol FM on Toronto (Shares outstanding: 590.8 million; Market cap: $14.6 billion; www.first-quantum.com), became Canada’s biggest copper producer after its April 2013 acquisition of Inmet Mining. The company now operates seven mines and five development projects worldwide. It produces copper, nickel, gold, zinc and platinum group metals. The Inmet acquisition included the Cobre Panama copper project in Panama. Inmet had estimated a cost of $6.4 billion to build an open-pit mine at the site. However, First Quantum believes it can do so faster and cheaper than Inmet’s estimates. Planning is now underway, and first production could come as soon as 2017....
Tourmaline Oil, $51.51, symbol TOU on Toronto (Shares outstanding: 201.2 million; Market cap: $10.4 billion; www.tourmalineoil.com), has identified over 7,200 oil and natural gas drilling locations in Western Canada and has the funds for exploration. That should let it keep raising its production. In the three months ended June 30, 2014, Tourmaline’s daily output averaged 109,953 barrels of oil equivalent, up 56.7% from 70,178 a year earlier. Cash flow per share jumped 66.2%, to $1.13 from $0.68, mostly due to the higher production and increased gas prices. About 85% of Tourmaline’s output is natural gas. The company continues to benefit from higher gas prices, while its steadily rising production pushes up its share price....
TransCanada Corp. gets a lot of media coverage over its proposed Keystone XL pipeline, which would pump crude from Alberta’s oil sands to refineries on the U.S. Gulf Coast. However, Keystone is just one of many projects the company is planning. These developments will keep its profits high and let it continue to raise its dividend. TRANSCANADA CORP. $54.00 (Toronto symbol TRP; Shares outstanding: 708.0 million; Market cap: $38.2 billion; TSINetwork Rating: Above Average; Dividend yield: 3.6%; www.transcanada.com) operates 68,500 kilometres of natural gas pipelines and over 11,800 megawatts of power generation in Canada and the U.S. In the three months ended June 30, 2014, TransCanada’s revenue rose 11.2%, to $2.2 billion from $2.0 billion a year earlier. Excluding one-time items, earnings per share fell 7.8%, to $0.47 from $0.51. That was mostly due to maintenance outages at its Bruce Power plant in Ontario and weaker power prices in Alberta....
BCE INC. $48.88 (Toronto symbol BCE; Shares outstanding: 777.3 million; Market cap: $38.0 billion; TSINetwork Rating: Above Average; Dividend yield: 5.1%; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT $30.88 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $7.0 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.bellaliant.ca) that it doesn’t already own. The deal should close by November 30, 2014. Merging the two firms will make it easier for BCE to expand its high-speed wireless and Fibe TV networks in Atlantic Canada. Bell Aliant shareholders will have three options when they tender their shares: $31.00 in cash; 0.6371 of a BCE share (worth $31.14 at today’s price for BCE); or $7.75 in cash plus 0.4778 of a BCE share ($31.10)....
Canada’s inflation rate has risen to 1.8%, but it’s still below the Bank of Canada’s 2% target. This should let the bank keep interest rates low, which holds down our dollar, making our exports cheaper in world markets. That’s good for Canada’s economic growth. Even so, the long-term outlook is for higher interest rates. That’s because heavy deficit spending and the expansion of the money supply in the past few years make higher inflation more likely. We continue to advise against investing in bonds right now. That’s because today’s low interest rates make bonds unattractive, and rising rates would push down their future value....
IMPERIAL OIL $54.20 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $45.9 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) recently opened the first phase of its massive Kearl oil sands project in Alberta, and the second phase should start up next year. This project will help the company double its production, to 600,000 barrels a day, by 2020. Oil sands projects are harder to operate than conventional properties, and they need high oil prices to earn a profit. However, Imperial’s refineries help shield it from a drop in oil prices because they pay less for the crude they need. The stock trades at a moderate 12.2 times Imperial’s likely 2014 earnings of $4.45 a share....
Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new firms: the new Encana, which focuses on gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 20% since the split. Oil prices have risen, however, and Cenovus’s stock is up about 28%. ENCANA CORP. $22.86 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $16.9 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) is one of North America’s largest natural gas producers. Encana continues to benefit from its new plan to focus on six main properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), the Tuscaloosa Marine Shale (Louisiana) and Texas’s Eagle Ford oil shale....
PENN WEST $8.14 (Toronto symbol PWT; Shares outstanding: 492.6 million; Market cap: $4.0 billion; TSINetwork Rating: Average; Divd. yield: 6.9%; www.pennwest.com) appointed former Suncor CEO Rick George as chairman in May 2013 to bring in much-needed measures to shore up its finances and boost its value. The company’s shares traded at $10 when George took over, down from a peak of $47 in 2006. The shares moved up to as high as $13.50 last year, but had moved back down to $10 in mid-July 2014. That’s when they dropped a further 19%, to today’s price, after the company announced it was re-examining its accounting practices going back several years....