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
NEWMONT MINING $24.83 (New York symbol NEM; Shares outstanding: 497.9 million; Market cap: $12.6 billion; TSINetwork Rating: Average; Dividend yield: 0.4%; www.newmont.com) has broken off merger talks with Barrick Gold (Toronto symbol ABX) amid reports of personality conflicts and a failure to agree on key issues such as the location of a new head office and who would lead the combined company. Both Newmont and Barrick have large mining operations in Nevada, so a merger would have let them significantly cut their operating costs. That would have helped the combined firm cope with lower gold prices. Due to weak gold and copper prices, Newmont’s earnings fell 69.4% in the first quarter of 2014, to $108 million, or $0.22 a share. A year earlier, it earned $353 million, or $0.70 a share. Revenue declined 19.4%, to $1.8 billion from $2.2 billion....
IBM $196.47 (New York symbol IBM; Shares outstanding: 1.0 billion; Market cap: $197.9 billion; TSINetwork Rating: Above Average; Dividend yield: 2.2%; www.ibm.com) continues to benefit from rising demand for cloud computing services and analytics software, which helps businesses analyze large amounts of data. However, weaker mainframe computer sales are offsetting these gains. In the three months ended March 31, 2014, IBM earned $2.6 billion, down 21.7% from $3.4 billion a year earlier. The company spent a high $8.2 billion on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share fell at a slower pace of 15.3%, to $2.54 from $3.00. Revenue declined 3.9%, to $22.5 billion from $23.4 billion. IBM gets two-thirds of its revenue from overseas. If you adjust for foreign exchange rates, revenue fell 1%. The company expects to earn $18.00 a share for all of 2014, and the stock trades at just 10.9 times that estimate. IBM still predicts that its earnings will rise to at least $20.00 a share in 2015....
Most successful investors have a good grasp of “bells & whistles” as an investment concept, even if they think about it under a different name. The term refers to nonessential features or enhancements that aim to add commercial appeal to a newly created product. Like real bells and whistles, these features or enhancements attract attention but add little if any value. In fact, they may detract from a product’s value. When investment firms create new financial products, they follow the lead of top marketers in fast food, consumer products, smartphones and so on. All these marketers study their customers to see what appeals to them. If they see a feature has appeal—it may be “high definition” or “gluten-free” or “hedged against the Canadian dollar”—they may add it to the mix to make the product more salable. The feature need not be a good use of the customer’s money, or a healthful choice, or otherwise in the customers’ best interest....
Flaherty & Crumrine Investment Grade Fixed Income Fund, $12.36, symbol FFI.UN on Toronto (Units outstanding: 9.1 million; Market cap: $112.5 million; www.bromptongroup.com), mainly holds preferred shares of U.S. companies. Firms in the banking, insurance, utilities and financial services industries make up a combined 87.7% of the fund’s portfolio. Corporate bonds comprise 6.9%, and the remaining 5.4% is cash. The fund’s MER is 1.0%. The fund is hedged against movements of the U.S. dollar against the Canadian dollar. Its value rises and falls solely with the stocks in its portfolio, so it would not give you U.S. dollar exposure. However, hedging costs money, and we feel these outlays are wasted. They can cut the fund’s volatility from one year to the next, but they won’t add to its performance. In addition, we see U.S. dollar exposure as a plus—a valuable form of diversification....
Alliance Grain Traders Inc., $18.67, symbol AGT on Toronto (Shares outstanding: 19.9 million; Market cap: $370.5 million; www.alliancegrain.com), sources and processes specialty crops, including lentils, peas, chickpeas and canary seed, mainly for export markets. The company has 29 facilities in Canada, the U.S., Turkey, Australia, South Africa and China. Its Turkish subsidiary also produces pasta and rice, plus foods made from bulgur wheat (whole wheat that has been cleaned, parboiled, dried and sifted). In the three months ended December 31, 2013, the company’s revenue rose 51.8%, to $375.1 million from $247.2 million a year earlier. The increase came from higher processing activity and increased prices for beans, lentils and chickpeas. Before one-time items, earnings jumped 80.0%, to $6.8 million, or $0.34 a share, from $3.8 million, or $0.19....
Tricon Capital Group, $7.36, symbol TCN on Toronto (Shares outstanding: 90.5 million; Market cap: $674.3 million; www.triconcapital.com), is focused on North American residential real estate development. It has about $1.9 billion of assets under management. Tricon manages limited partnerships that provide financing to developers, usually in the form of loans, mainly for single- and multi-family construction and retail developed in conjunction with residential projects. Since its inception in 1988, Tricon has financed about 160 transactions for over $11 billion worth of developments. The company currently owns 22,500 single-family lots and 6,300 apartment units, as well as over 3,300 single-family rental homes in the U.S....
Empire Company Ltd., $66.83, symbol EMP.A on Toronto (Shares outstanding: 92.3 million; Market cap: $6.1 billion; www.empireco.ca), is a diversified Canadian firm based in Stellarton, Nova Scotia. Empire sells and distributes food through national grocery retailer Sobeys. It also invests in real estate and various publicly traded companies. In June 2007, Empire paid $58 per share (a total of $1.06 billion) for the 29.9% of Sobeys that it didn’t already own. (Sobeys was a recommendation of our Successful Investor newsletter. We first recommended the stock in April 2003 at $36, so the buyout left our subscribers with a 61% gain.)...
A: HSBC Holdings plc (ADR), $51.57, symbol HSBC on New York (ADRs outstanding: 3.8 billion; Market cap: $190.7 billion; www.hsbc.com), like many global banks, faces tighter regulations and capital requirements. In response, it continues to sell off non-core assets, streamline its business and cut its costs. The bank has already reduced its global workforce to 254,000 from 300,000 by not replacing departing employees and selling or closing 63 businesses since 2011. It is expected to make further job cuts. HSBC needs stronger growth in its key China market to significantly increase its revenue and profits. However, the ADRs are okay to hold if you want to own an international bank....
Palliser Oil & Gas, $0.25, symbol PXL on Toronto (Shares outstanding: 63.9 million; Market cap: $15.7 million; www.palliserogc.com), is a Calgary-based junior oil and gas firm that produces heavy oil in the greater Lloydminster area of Alberta and Saskatchewan. In the first quarter of 2014, the company’s average production was about 1,850 barrels of oil equivalent a day (including natural gas). Its current daily output is about 1,800 to 1,900 barrels. Palliser invested just $2 million in its operations during the first quarter, mainly on maintenance and on minimum spending to retain leases. Earlier this year, the company announced that Allan Carswell, who was president, COO, and a director, had left his positions....
Many investors spend a lot of time worrying about the wrong things. In particular, they worry about things that are unpredictable. Even if they happen, these things may have only an indirect impact on their long-term profits. As a result, they have little time to pay attention to things that have a direct impact on the value of their investments. For instance, at times they may mull over every tidbit of economic information that comes out, and how it differs from its predecessor of a week or a month earlier. They hope to detect a pattern—a sign that the economy is mending and headed for a return to steady growth, say, or perhaps deteriorating and doomed to plunge into a new recession. Others look for patterns or omens in domestic or international politics, or in demographic data, or in the price of gold. This can eat up an awful lot of time....