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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Denison Mines Corp., $1.65, symbol DML on Toronto (Shares outstanding: 484.7 million; Market cap: $809.8 million; www.denisonmines.com), moved up in late February 2014 as the outlook for uranium prices improved. That’s because Japan’s government announced details of its new Basic Energy Plan, which designates nuclear power as a key part of the country’s energy mix. The plan outlines steps to restart the 50 reactors that were closed after the 2011 Fukushima nuclear disaster and overturns the previous government’s promise to phase out nuclear plants. Japan may also build new reactors. Denison holds a 22.5% interest in France-based Areva SA’s McClean Lake uranium-processing plant in Saskatchewan. It also has stakes in exploration properties in that province’s Athabasca Basin, including its 60%-owned project at Wheeler River....
Petromanas Energy, $0.21, symbol PMI on Toronto (Shares outstanding: 693.7 million; Market cap: $145.7 million; www.petromanas.com), is an oil and gas company that’s focused on developing and exploring on its properties in Albania. Petromanas holds two production sharing contracts with the Albanian government. That gives it a 100% interest in Blocks D and E and a 25% interest in Blocks 2 and 3. In total, these areas include over 1.1 million acres. Petromanas also holds exploration properties in France and Australia. The company’s 75% partner in Blocks 2 and 3 is global giant Royal Dutch Shell plc, which gives the stock some speculative interest. Shell is contributing $100 million for exploration and seismic costs. It also paid Petromanas for costs incurred before Shell became its partner in February 2012....
Rambler Metals & Mining plc, $0.52, symbol RAB on Toronto (Shares outstanding: 143.3 million; Market cap: $73.4 million; www.ramblermines.com), is a U.K.-based mining and development company. The stock is also listed on the AIM market in the U.K. (AIM is the London Stock Exchange’s international market for smaller companies.) In 2012, Rambler brought its first mine—the 100%-owned Ming copper-gold-silver project—into commercial production. The mine is on Newfoundland’s Baie Verte peninsula. Rambler shipped its first load of concentrate from the project through its deepwater port facility at Goodyear’s Cove in November 2012. Rambler also has interests in other early-stage properties, as well as small, formerly producing mines, in the general area of the Ming mine....
From time to time, companies set up one or more of their divisions or subsidiaries as an independent firm, then hand out shares in that company to their own investors as a special dividend, or “spinoff.” You can contrast a spinoff with a new stock issue. That’s when a company (often a newly created or junior company) issues new stock to sell to the public. The two situations are like two sides of a coin—one favourable to investors, the other unfavourable. The motivations of the companies are nearly opposite. Companies sell new issues to the public when they feel it’s a good time to sell. That may be, and often isn’t, a good time for you to buy. In addition, the underwriting brokerage firms try to spark publicity about the new issue, and they pay extra commission (as much as double the regular rates) to spur their salespeople to sell the new issue to their clients. This tends to create a high-water mark in the price of the new issue. Unless the new company can follow up with business success, the price of the new issue may languish for months or years....
The Guggenheim Spin-off ETF, $44.67, symbol CSD on New York (Units outstanding: 17.0 million; Market cap: $759.4 million; www.guggenheiminvestments.com), aims to track the Beacon Spin-off Index. The ETF’s MER is 0.78%. The Beacon Spin-off Index consists of 24 stocks. Companies can be included if they have been spun off in the past 30 months. There are no limitations on market capitalization (or the total value of a company’s outstanding shares), but companies in the index are mainly small- and mid-caps with capitalizations under $10 billion. Beacon defines a spinoff as any firm resulting from either of the following events: a parent company’s distribution of shares in a subsidiary to its own shareholders or “partial initial public offerings,” in which a parent company sells a percentage of a subsidiary’s shares to the general public....
Solium Capital, $6.46, symbol SUM on Toronto (Shares outstanding: 47.1 million; Market cap: $304.3 million; www.solium.com), is a Calgary-based firm that provides software and support services to over 3,000 clients who administer stock-based compensation for their employees. The company also helps its clients comply with increasingly complex financial reporting and other regulations related to stock-based compensation. Solium’s Canadian clients represent 75 of the top 100 companies listed on the TSX and include TransAlta, Shaw Communications and Shell Canada. U.S. clients include GM, Chrysler and Owens-Illinois....
Allana Potash, $0.42, symbol AAA on Toronto (Shares outstanding: 294.0 million; Market cap: $123.5 million; www.allanapotash.com), is focused on developing its Danakhil potash project in Ethiopia. The deposit, which is located in the Danakhil Depression area, holds over 24 million tonnes of mineable potash. Allana’s property has a history of potash exploration and mining. There was small-scale production there in the 1920s, and the property was extensively explored in the 1960s, when nearly 300 holes were drilled. Operating in Ethiopia entails considerable political risk. As well, the region’s roads are poor, and power and water infrastructure is underdeveloped....
Rock Energy, $5.80, symbol RE on Toronto (Shares outstanding: 39.4 million; Market cap: $228.7 million; www.rockenergy.ca), produces oil and gas in Western Canada, with a focus on the greater Lloydminster area, along the Alberta/Saskatchewan border. Its output is 90% oil and 10% gas. In the three months ended December 31, 2013, the company produced 4,023 barrels of oil equivalent a day, up 50.2% from 2,678 barrels a year earlier. Rock’s cash flow per share jumped to $0.24 from $0.08. The company’s total debt of $8.4 million is just 3.7% of its $228.7-million market cap. That, plus its rising cash flow, gives it the funds to keep drilling and increasing its output. The stock trades at 3.8 times the company’s forecast 2014 cash flow of $1.52 a share....
Wabash National Corp., $13.32, symbol WNC on New York (Shares outstanding: 68.5 million; Market cap: $917.6 million; www.wabashnational.com), designs and makes truck trailers and related equipment. The company accounts for about 20% of U.S. trailer shipments. Wabash has three divisions: Commercial Trailer Products (61% of total sales) makes truck trailers; Diversified Products (29%) makes portable storage containers and temporary shelters; and Retail (10%) sells Wabash products through 18 company-owned stores that also offer maintenance and support services. In addition, Wabash sells its products through independent dealers. The company has broadened its product line in the past two years through acquisitions....
Fission Uranium Corp., $1.55, symbol FCU on Toronto (Shares outstanding: 330.9 million; Market cap: $513.5 million; www.fissionuranium.com), continues to move up on strong drilling results at its Patterson Lake South project in Saskatchewan. These results include Hole 187, which returned 53.5 metres of off-scale radioactivity (or greater than 9,999 counts per second) within 146 metres of mineralization that closes the gap between two previously outlined high-grade zones. “Off scale” refers to the fact that the drill core’s radioactivity is so high that even highly sensitive equipment can’t measure it properly. That’s an indication of high uranium grades. Fission is over halfway through its $12-million, 100-hole, 30,000-metre drill program at Patterson Lake. Four rigs are at work along the known mineralized trend, while a fifth is probing other exploration targets....