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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How To Invest Library Archives
This week, we have a special report for you—see below—about a number of stocks that offer a particularly attractive combination of three investment positives: low per-share price-to-earnings ratios, steady or rising dividends, and promising growth prospects. Pat
We still think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects. These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects....
On occasion, we come across an investment that provides a clear example of one or more investment principles. Global X Social Media ETF, which we analyze in this week’s first question, touches on several. ETFs. Exchange traded funds are a relatively recent and benign investment innovation. Unlike many investment innovations, ETFs can cut investor risk and cost. They are a little like conventional open-ended mutual funds, but fees and trading costs are much lower, since they only aim to duplicate the performance of a market index. However, not every index is a good model for investing. You might say that ETFs make it easier and cheaper to pursue a variety of investment ideas, regardless of whether the ideas are good or bad. Theme investing. This particular ETF gives you an easy and low-cost way of investing in stocks associated with the “Social media” investing theme. These stocks are now in the broker/media limelight (see next investment principle). That’s not a particularly good time to buy. By the time the media has identified an investment theme like social media, and the investment industry has begun offering ETFs and other short cuts to investing in it, the best opportunities may have already come and gone....
Global X Social Media ETF, $17.72 symbol SOCL on Nasdaq (Units outstanding: 7.8 million; Market cap: $138.2 million; www.globalxfunds.com), invests in companies that provide social networking, file sharing and other web-based media applications. This exchange traded fund holds 27 social media stocks. U.S. social media stocks make up 55.0% of assets. China is next with 25.6%; Japan, 11.0%; the Netherlands, 3.8%; Russia, 2.4%; Taiwan, 1.2%; and Germany, 1.0%. The fund’s MER is 0.65%. It began trading as a new issue on November 14, 2011. Since then, it has been far more volatile than the Standard & Poor’s 500 market index, and has consistently underperformed the index. Since it began trading, the fund has gained around 23%. In the same time, the Standard & Poor’s 500 Index has gained around 57%....
People Corporation, $2.60, symbol PEO on Toronto (Shares outstanding: 39.5 million; Market cap: $102.7 million; www.peoplecorporation.com), provides group benefits, group retirement and human resource services from offices across Canada. People’s shares moved up at the end of March, after the company reported stronger results in the quarter ended February 28, 2014. Revenue rose 37.7%, to $11.2 million from $8.1 million a year earlier. Acquisitions—mostly Hamilton + Partners, which People bought in July 2013—accounted for about two-thirds of the gain. Earnings jumped to $1.4 million, or $0.043 a share, from $178,014, or $0.005. The company just raised $10.4 million by issuing new shares for $2.15 each. It will use some of these funds for more acquisitions....
Men’s Wearhouse, $49.99, symbol MW on New York (Shares outstanding: 47.6 million; Market cap: $2.4 billion; www.menswearhouse.com), is one of the largest retailers of men’s tailored business attire (both brand name and private labels). Men’s Wearhouse operates 1,124 stores, including 661 Men’s Wearhouse locations, 248 Men’s Wearhouse and Tux stores, 121 Moores Clothing for Men outlets (Canada only) and 94 K&G locations (which carry lower-priced men’s and women’s clothing). The company has won its hard-fought $1.8-billion hostile takeover battle for men’s clothing retailer Jos. A. Bank (Nasdaq symbol JOSB). The combined firm will have over 1,700 stores, making it the fourth-largest menswear seller in the U.S. (behind Macy’s, Kohl’s and J.C. Penney), with annual sales of $3.5 billion. As part of the deal, Bank has dropped its plan to buy Eddie Bauer....
Sun Bancorp, $3.83, symbol SNBC on Nasdaq (Shares outstanding: 86.8 million; Market cap: $332.4 million; www.sunnationalbank.com), owns Sun National Bank, which provides various commercial and consumer banking services in New Jersey. Sun Bancorp operates 50 locations in New Jersey and has around $3.1 billion of assets. It fired former CEO Thomas X. Geisel in December 2013. The company’s stock jumped in early April 2014, after it hired Thomas M. O’Brien as its new chief executive officer. O’Brien is the former CEO of State Bank of Long Island. The new hire has the approval of billionaire investor Wilbur Ross, who holds around 25% of Sun Bancorp. Ross specializes in investing in, and turning around, distressed financial firms....
U.S. Oil Sands, $0.13, symbol USO on Toronto (Shares outstanding: 853.1 million; Market cap: $110.9 million; www.usoilsandsinc.com), owns oil sands leases that cover 32,005 acres in Utah. The company aims to use a process it developed to recover bitumen without the need for tailings ponds. U.S. Oil Sands’ system uses a solvent that it believes is both renewable and biodegradable. In October 2013, U.S. Oil Sands raised $81 million by issuing new shares at $0.15 each. It will use the funds to bring its proposed 2,000-barrel-a-day PR Spring project to production. The stock has since dropped down below the new issue price, and this is generally not a promising sign....
WesternOne, $7.90, symbol WEQ on Toronto (Shares outstanding: 31.7 million; Market cap: $250.4 million; www.weq.ca), aims to keep expanding by acquiring privately owned small- and medium-sized businesses, mainly in Western Canada. The company converted from an income trust to a corporation on January 1, 2013. WesternOne operates in two main areas: construction heat services and aerial equipment; and modular building construction and leasing. The company’s businesses include Britco Building Innovation, a designer and maker of commercial custom-built mobile and modular buildings in North America. In January 2013, Britco expanded into Australia through the acquisition of APB, one of that country’s largest modular building manufacturers....
Harvard Bioscience Inc., $4.21, symbol HBIO on Nasdaq (Shares outstanding: 32.0 million; Market cap: $134.7 million; www.harvardbioscience.com), develops, makes and sells a wide range of products for bioscience research laboratories. Dr. William T. Porter founded Harvard Bioscience in 1901 to make equipment for teaching his physiology classes. The company initially made these products in the basement of the Harvard Medical School. It changed its name to Harvard Bioscience Inc. in 2000, when it sold shares to the public and listed on the Nasdaq exchange. In 2001, Harvard University took Harvard Bioscience to court to stop the company from using the Harvard name. However, the dispute was settled in 2003. Now, both Harvard Bioscience and Harvard Apparatus Regenerative Technology (see below) use the Harvard name and logos under license from Harvard University....