How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
[text_ad]
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.
[text_ad]
Read More
Close
How To Invest Library Archives
If you meet a large number of investors over a large number of years, it may seem they come in two basic categories—one inclined toward value investing, the other more interested in growth. This may be due in part to their early life experiences. Value investing—trying to buy assets at bargain prices—has natural appeal for those who grew up in strained economic circumstances. Growth investing—trying to identify and buy rising stocks when they have further growth ahead—seems to appeal more to those who grew up in prosperous households. Of course, having too much money early on can handicap an investor. Some investors have confided to me that they “had it too easy” in their early years. They felt this stopped them from developing that key investor attribute we often talk about, a healthy sense of skepticism. When they began investing in their middle years, they tended to be too trusting, even gullible. This can be a major obstacle to investment success. However, too much reliance on value investing can cost you money as well....
Gilead Sciences Inc., $82.20, symbol GILD on Nasdaq (Shares outstanding: 1.5 billion; Market cap: $123.3 billion; www.gilead.com), discovers, develops and markets treatments for viruses. The company has a number of drugs on the market, including AmBisome (an antifungal agent), Emtriva (for HIV), Tamiflu (influenza), Vistide (for cytomegalovirus retinitis—or an inflammation of the retina—in AIDS patients) and Hepsera (for hepatitis B). Hepatitis refers to inflammation of the liver, as well as a group of viral infections that also affect the liver. The most common types are hepatitis A, hepatitis B and hepatitis C. Viral hepatitis is the leading cause of liver cancer and the most common reason why patients need liver transplants....
Consolidated Edison, $54.23, symbol ED on New York (Shares outstanding: 292.9 million; Market cap: $15.9 billion; www.coned.com) is a holding company for Consolidated Edison Company of New York, Inc. The firm sells electricity, gas and steam in most of New York City and Westchester County. It also owns Orange and Rockland Utilities, which operates in New York, New Jersey and Pennsylvania. Consolidated Edison has 3.6 million electric and 1.2 million gas customers. Consolidated Edison recently reached an agreement with regulators that will let it raise its rates so it can spend $649 million to make its system more storm-resistant. This became a concern after Hurricane Sandy caused extensive damage in the fall of 2012....
Syneron Medical Ltd., $10.49, symbol ELOS on Nasdaq (Shares outstanding: 36.7 million; market cap: $385.0 million; www.syneron.com) makes medical devices for non-surgical cosmetic procedures, like hair removal, wrinkle reduction and skin tightening, as well as treating acne, leg veins and cellulite. It mainly sells its products under the Syneron and Candela brands. North America is Syneron’s biggest market, at 35% of revenue, followed by Europe (34%), the Asia-Pacific region (16%), Japan (10%), Israel (2%), and other countries (3%). In the three months ended December 31, 2013, Syneron’s revenue fell 11.7%, to $64.3 million from $72.8 million a year earlier. That’s mainly because the year-earlier quarter benefited from an unusually large order....
Husky Energy Inc., $35.89, symbol HSE on Toronto (Shares outstanding: 983.5 million; Market cap: $35.3 billion; www.huskyenergy.com), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing owns 68% of Husky’s shares. Husky’s growth prospects are sound and are supported by its Sunrise oil sands project in Alberta and its $6.5-billion Liwan offshore project in the South China Sea, where natural gas has started to flow. Husky operates the deepwater infrastructure at Liwan, while its partner, Chinese state-owned firm CNOOC Ltd., operates the shallow-water facilities and onshore gas terminal. CNOOC owns 51% of Liwan’s production, and Husky holds the rest. The stock trades at 6.3 times this year’s forecast cash flow of $5.73 a share. It yields 3.3%....
Chubb Corp., $92.70, symbol CB on New York (Shares outstanding: 244.5 million; Market cap: $22.7 billion; www.chubb.com), sells insurance to individuals and businesses through 8,500 independent agents and brokers in the U.S., Canada, Europe, Australia, parts of Latin America and Asia. In 2013, the U.S. accounted for 77% of its total revenue. New Jersey-based Chubb began selling insurance in 1882 and is the 12th-largest insurance company in the U.S. The firm has three main divisions: Chubb Commercial Insurance (43% of premiums written) sells a range of insurance products to businesses; Chubb Personal Insurance (35%) sells home, automobile and health insurance to individuals; and Chubb Specialty Insurance (22%) sells liability insurance to businesses....
Timbercreek Mortgage Investment Corp., $9.37, symbol TMC on Toronto (Shares outstanding: 40.7 million; Market cap: $381.4 million; www.timbercreek.com), is a mortgage investment corporation, or MIC. MICs invest in pools of mortgages and distribute most of their profits to their shareholders. Some MICs yield 7% or 8% or more annually. They sound like conservative investments because they invest in mortgages rather than stocks. However, mortgages vary widely in their investment quality and risk. MICs can earn high profits because they take on riskier mortgages. Conservative mortgage lenders, such as banks and mortgage funds, mainly invest in top-quality first mortgages on commercial, industrial or residential properties....
Service Corporation International, $19.04, symbol SCI on New York (Shares outstanding: 213.5 million; Market cap: $4.1 billion; www.sci-corp.com), is North America’s largest funeral home and cemetery operator. The company has 1,638 funeral homes and 515 cemeteries in the U.S and Canada, as well as 12 funeral homes in Germany, which it plans to sell. It also owns flower shops, limousine services and burial vaults. In December 2013, Service Corp. paid $1.5 billion for Stewart Enterprises, which operates 220 funeral homes and 140 cemeteries in 24 states....
I’ve mentioned here, and in recent letters to our portfolio-management clients, that I’m optimistic about the stock market’s direction. In fact, I suspect that a secular bull market began in March 2009, when the market began rising after the recession. Secular bull markets take a variety of shapes. Stock prices still go up and down, of course. But the key difference with a secular bull market is that each new upward thrust takes the market to higher peaks than those of the preceding rise. The post-World War Two market rise ran from the late 1940s through the late 1960s. It was a highly rewarding period for investors who followed a conservative, fundamentally based approach like ours. Another secular bull market took place from the late 1980s through around 2007. It was also a profitable time for investors who followed an approach like ours....
Knight Therapeutics, $5.45, symbol GUD on Toronto (Shares outstanding: 77.8 million; Market cap: $423.8 million; www.gud-knight.com), was handed out to Paladin Labs shareholders after that company was recently acquired by Endo Health Solutions plc. Knight began trading on the Toronto exchange on March 3, 2014. The company’s assets from the spinoff mostly consist of Impavido, for treating Leishmaniasis, a rare disease that is spread via bites from infected sand flies. The U.S. Food and Drug Administration approved Impavido on March 19, 2014. Knight Therapeutics has just raised $180.1 million by issuing special warrants for $5.25 each. These warrants can be converted into common shares by August 11, 2014. Earlier this year, the company raised an additional $75 million....