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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iShares 1-5 Year Laddered Corporate Bond Index ETF, $19.82, symbol CBO on Toronto (Units outstanding: 93.1 million; Market cap: $1.8 billion; ca.ishares.com), invests in a portfolio of short-term bonds drawn from the DEX (formerly Scotia Capital) Bond Index. The ETF first sold units to the public at $20 each and began trading on Toronto on February 25, 2009. Its MER is 0.28%, and it currently yields 4.2%....
Bankers Petroleum, $5.51, symbol BNK on Toronto (Shares outstanding: 257.3 million; Market cap: $1.4 billion; www.bankerspetroleum.com), is a Canadian firm with heavy-oil assets in Albania. The company produces over 19,700 barrels a day from its Patos Marinza heavy-oil field. It also holds 100% of the nearby Kucova field. Bankers has a deal with state-owned Albpetrol to take over and reactivate 120 to 130 wells each year. The company believes it can continue to increase its production and cash flow....
Every now and then, a question comes in that raises an important point about some aspect of investing. Our first question this week (see below) provides a perfect example of theme investing. Theme investors zero in on something that’s going on in the world—in business, politics, technology or society as a whole—and try to cash in on it, directly or indirectly. You can get lucky with theme investing, but there’s a large element of risk. Interest in the theme may slump sooner than you expected. Or, your enthusiasm for the theme may lead you to drop your guard. It may spur you to put money in stocks or other investments that are drastically over-priced or fundamentally flawed. For example, the rising price of gold was a popular investing theme during much of the first decade of this century. As gold rose from under $300 to more than $1,800 per ounce, it presented a wide variety of profit-making opportunities. But the rising price of the metal was no guarantee of profit. Gold-themed investments—collectors’ coins, penny stocks, gold-based futures and options trading—gave promoters lots of ways to create low-quality investments to sell to gold-seeking investors....
Advanced Cannabis Solutions, $38.12, symbol CANN on the U.S. over-the-counter bulletin board (Shares outstanding: 13.3 million; Market cap: $508.9 million; www.advcannabis.com), is a Colorado-based company that leases growing space and related facilities to licensed marijuana business operators. In January, Advanced Cannabis Solutions signed an eight-year lease with a Pueblo grower for its recently purchased Pueblo County, Colorado, property. The lease covers a 5,000-square-foot growing facility on three acres of land, but the company says the tenant plans to expand their operation and will develop up to an additional 40,000 square feet of greenhouse space. On February 20, Advanced Cannabis Solutions said it had signed an agreement to provide consulting services to a Canadian investor group involved in the start-up of a large operation serving the Canadian medical marijuana market. The contract has a minimum duration of six months and a potential value in the “low six figures.”...
Cineplex Inc., $41.60, symbol CGX on Toronto (Shares outstanding: 62.9 million; Market cap: $2.6 billion, www.cineplex.com), is the dominant movie theatre operator in Canada and the fifth-largest in North America. The company owns or has interests in 161 theatres containing 1,632 screens. Its brands include Cineplex Odeon, Galaxy, Scotiabank Theatres, Famous Players, Coliseum and SilverCity. Cineplex takes in about 70% of Canada’s total box office revenue. In the three months ended December 31, 2013, Cineplex’s revenue rose 8.2%, to $323.2 million from $298.7 million a year earlier. Higher ticket prices and concession sales were behind the gain. Its top-selling movies in the latest quarter were The Hunger Games: Catching Fire, The Hobbit: The Desolation of Smaug, Gravity and Frozen....
iShares MSCI World Index Fund ETF, $34.01, symbol XWD on Toronto (Units outstanding: 5.8 million; Market cap: $197.3 million; ca.ishares.com), holds large- and mid-cap stocks across 23 developed countries, including Australia, Canada, France, Germany, Hong Kong, Ireland, Japan, Singapore, the U.K. and the U.S. The ETF holds 1,507 stocks covering about 85% of the market in each nation. It does this by holding units of the iShares Core S&P 500 ETF (54.3% of assets), the iShares MSCI EAFE ETF (41.6%) and the iShares MSCI Canada ETF (4.0%). iShares MSCI World Index Fund ETF has an MER of 0.47% and yields 1.6%....
Biglari Holdings, $496.61, symbol BH on New York (Shares outstanding: 1.7 million; Market cap: $837.7 million; www.biglariholdings.com), is a holding company that operates a number of different businesses. Its strategy is to keep expanding by putting cash generated from its subsidiaries into new investments. Right now, Biglari’s two main holdings are the Steak ’n Shake chain of casual dining restaurants and Western Sizzlin’ steakhouses. The company’s CEO is 36-year old Iranian-American Sardar Biglari, who has frequently taken an aggressive activist shareholder stance with companies in which he invests. He’s now embroiled in a fight with Cracker Barrel (Nasdaq symbol CBRL) to put itself up for sale and seat Biglari candidates on its board of directors....
Tekmira Pharmaceuticals, $33.23, symbol TKM on Toronto (Shares outstanding: 19.0 million; Market cap: $626.6 million; www.tekmirapharm.com), is a biopharmaceutical firm that focuses on RNAi therapeutics. RNAi therapeutics have the potential to treat a number of human diseases by “silencing” disease-causing genes. The discoverers of RNAi, a gene-silencing mechanism that all cells use, were awarded the 2006 Nobel Prize in the physiology-or-medicine category. To be effective, RNAi treatments need special delivery systems. Tekmira believes its lipid nanoparticle (LNP) technology is the best method....
Cambridge High Income Fund is a balanced mutual fund that holds 81.5% of its assets in stocks, 14.8% in bonds and 3.7% in cash. It has a 2.38% MER. We don’t currently recommend balanced funds, which hold both stocks and bonds. That’s because bonds are unlikely to perform as well in the next few years as they have in the past, mainly because interest rates will likely hold steady or rise. (Bond prices and interest rates are inversely linked. When interest rates go up, bond prices go down, and vice versa.) That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses. The fund’s stocks are of reasonably good quality, although it does focus on high-yielding REITs and former oil and gas trusts. It also takes on above-average risk with its bonds, including holdings from issuers like Inmet Mining and Perpetual Energy....
Baytex Energy, $42.34, symbol BTE on Toronto (Shares outstanding: 124.9 million; Market cap: $5.3 billion; www.baytex.ab.ca), produces oil and gas in Western Canada and the U.S. Until recently, Baytex was focused on heavy oil, which added risk. That’s because extracting the tar-like bitumen from oil sands is much more expensive than conventional oil wells. However, new technologies, such as steam-assisted gravity drainage (SAGD), have lowered the industry’s costs. SAGD systems inject steam into the ground to melt the bitumen, making it easier to pump to the surface. The company just bought Australia’s Aurora Oil & Gas, which has big shale oil holdings in Texas’s Eagle Ford area, for $2.6 billion. Aurora produces 24,678 barrels of oil equivalent a day, while Baytex averaged 57,100 barrels a day in 2013....