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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Some investors see last Thursday’s 300-plus point drop in the Dow Industrials as an omen of a more serious market downturn. They wonder if they should sell some of their stocks now, hold on to the cash for a few months, then buy the stocks back when they have obligingly come back down to lower prices. You can find plenty of support for this idea in the media. Mostly it revolves around the view that stock prices have gone up excessively, and are now too high. These assumptions rely on a highly selective view of history. For example, the Toronto exchange index has nearly doubled since March 2009, or about five and a half years. That is an unusually fast rise. But the market was at an exceptionally low level in March 2009. When you look at how the market has performed since a record-setting plunge, it always looks as if it has gone too high in an unusually short time....
Lundin Mining, $6.23, symbol LUN on Toronto (Shares outstanding: 585.8 million; Market cap: $3.7 billion; www.lundinmining.com), is a diversified Canadian base metals miner with operations in Portugal, Sweden and Spain. It also expects to start production at its $400-million Eagle East nickel/copper mine in Michigan by the end of this year. In addition, Lundin owns 24% of two operations: the Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo and Freeport Cobalt Oy, which includes a cobalt refinery in Kokkola, Finland. In the three months ended March 31, 2014, Lundin’s revenue declined 20.4%, to $149.9 million from $188.3 million a year earlier (all figures except share price and market cap in U.S. dollars). Cash flow per share fell to $0.05 from $0.09. The decreases mostly resulted from lower metal prices....
Surge Energy, $8.26, symbol SGY on Toronto (Shares outstanding: 217.5 million; Market cap: $1.8 billion; www.surgeenergy.ca), produces oil and gas in central and northwestern Alberta and southwestern Saskatchewan. Its output is 84% oil and 16% gas. In the three months ended March 31, 2014, Surge produced 15,024 barrels of oil equivalent per day, up 55.9% from 9,636 barrels a year earlier. Acquisitions were the main reason for the gain. Cash flow jumped 109.2%, to $53.8 million from $25.7 million, on the increased output and higher realized oil and gas prices. However, per-share cash flow fell 13.9%, to $0.31 from $0.36, as the company issued more shares to pay for acquisitions, boosting the total number outstanding by 152%....
Eguana Technologies, $0.51, symbol EGT on Toronto (Shares outstanding: 35.6 million; Market cap: $19.4 million; www.eguanatech.com), formerly called Sustainable Energy Technologies Ltd., makes products that convert the high-current/low-voltage (DC) electricity from solar cells into high-voltage alternating current (AC) power, which is used by power grids and most industrial and consumer electronics. Eguana recently partnered with Germany-based Prosol Invest Deutschland GmbH, a maker of lithium-based energy-storage systems. Prosol’s products include the Sonnenbatterie, which is designed to store power from solar cells and is aimed at clients ranging from homeowners to farms and small- and medium-sized businesses. In the three months ended March 31, 2014, Eguana’s revenue jumped to $396,357 from $46,768 a year earlier. However, the company continues to lose money and report negative cash flow: its cash flow was negative $660,416 in the latest quarter, compared to negative $369,210 a year ago. Per-share cash flow was unchanged at negative $0.02 on more shares outstanding....
AutoCanada Inc., $74.80, symbol ACQ on Toronto (Shares outstanding: 21.9 million; Market cap: $1.8 billion; www.autocan.ca), has 42 franchised car dealerships in eight provinces. It sells numerous brands, including Chrysler, Dodge, Jeep, Ram, Fiat, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, BMW and Mini. However, Chrysler vehicles (including Dodge, Jeep, Ram and Fiat) supply nearly 74% of the company’s revenue. In 2013, AutoCanada’s dealerships sold roughly 36,000 vehicles and processed about 364,000 repair and maintenance orders in their 381 service bays....
DeeThree Exploration Ltd., $11.00, symbol DTX on Toronto (Shares outstanding: 88.7 million; Market cap: $959.4 million; www.deethree.ca), produces oil and natural gas in Western Canada. It also acquires and develops oil and gas properties. The company mainly focuses on the Brazeau Belly River and Alberta Bakken areas. In the three months ended March 31, 2014, DeeThree produced 9,372 barrels of oil equivalent a day, up 58.2% from 5,926 barrels a year earlier. Its cash flow per share jumped to $0.43 from $0.23. The company’s total debt of $108.2 million is just 11.3% of its $959.4-million market cap. That low debt, plus DeeThree’s rising cash flow and the proceeds of a recent $73.4-million share issue, gives the company plenty of flexibility to keep drilling and increasing its output. The stock trades at 5.2 times DeeThree’s forecast 2014 cash flow of $2.11 a share....
Arcos Dorados, $8.57, symbol ARCO on New York (Shares outstanding: 129.9 million; Market cap: $1.8 billion; www.arcosdorados.com), is the largest McDonald’s franchisee in the world by revenue and number of restaurants. It’s also the largest quick-service chain in Latin America and the Caribbean. Arcos Dorados has the exclusive right to own, operate and franchise McDonald’s restaurants in 20 countries and territories, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, St. Croix, St. Thomas, Trinidad and Tobago, Uruguay and Venezuela. The company operates, directly or through franchisees, more than 2,062 McDonald’s outlets, with over 95,000 employees. The restaurants serve about 4.3 million customers a day....
The TD Managed Balanced Growth Fund is a balanced mutual fund, holding a mixture of stocks and bonds. It holds 32% of its assets in bonds and has a 2.43% MER. We don’t generally recommend balanced funds. Bonds are unlikely to perform well over the next few years, if only because interest rates will likely hold steady or rise. That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses. TD Managed Balanced Growth Fund’s biggest holding consists of units of the TD Canadian Bond Fund (26% of assets), which mainly invests in corporate bonds (61.1% of assets)....
An interesting historical analogy is playing out right now between the World War I centennial, and Russia’s Ukrainian venture. In fact, you can’t help but wonder if Russia is stage-managing events to foster the analogy. This could balloon the unsettling effects of Russia’s current Ukrainian venture, and cut the cost of acquiring more Ukrainian territory. Comment on World War I mostly centers on the idea that a seemingly minor incident, such as the assassination of an archduke, can topple a series of dominos and set off a global war. From there, it’s not too great a stretch to wonder if another seemingly minor incident, the downing of a Malaysian passenger jet, can do something like that today. It’s in Russia’s interest to have North American and European voters think that way. If so, they are less likely to pressure their governments to get involved. Instead they’ll want a negotiated settlement, which Russia also favours. That way, Russia can acquire parts of eastern Ukraine at only a slightly higher price than it paid for Crimea....
We haven’t found any solar power stocks we want to recommend as buys. However, here’s a look at a leading solar power ETF: Guggenheim Solar ETF, $41.33, symbol TAN on New York (Units outstanding: 11.1 million; Market cap: $458.8 million; www.guggenheiminvestments.com), aims to match the performance of the Melvin and Company (MAC) Global Solar Energy Index, which comprises shares of 30 companies listed on global developed-market exchanges. The ETFs top holdings are SunEdison Inc., SolarCity Corp., First Solar, GCL-Poly Energy Holdings, Hanenergy Solar Group, SunPower Corp., GT Advanced Technologies, Canadian Solar, Meyer Burger Technology AG, Trina Solar and Shunfeng Photovoltaic....