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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Gear Energy, $3.67, symbol GXE on Toronto (Shares outstanding: 54.0 million; Market cap: $196.4 million; www.gearenergy.com), produces and explores for oil. It has heavy oil production in east-central Alberta and west-central Saskatchewan. In December 2013, the company’s output averaged close to 5,000 barrels of oil equivalent a day. Gear began trading on Toronto in November 2013. In the three months ended September 30, 2013, the company’s cash flow rose 46.7%, to $0.22 a share from $0.15, on higher production and oil and gas prices. Its long-term debt of $52.7 million is a reasonable 27% of its $196.4-million market cap....
ICICI Bank (ADR), $34.22, symbol IBN on New York (ADRs outstanding: 577.4 million; Market cap: $19.3 billion; www.icicibank.com), is India’s largest non-state-owned bank by assets. It is highly diversified, with insurance, lending and banking businesses. ICICI is growing rapidly: its profits rose 13%, to $408 million, in the three months ended December 31, 2013. Demand for mortgages and vehicle loans remains strong, although the bank is seeing more bad loans from corporations, which remains a concern. The bank continues to expand in India and overseas. At the same time, it is offering more services, which will broaden its client base. However, its expenses are rising along with the amount of money it is setting aside to cover bad loans. Moreover, the Indian market, where the bank has 68.8% of its loans, is intensively competitive....
Here are some of our recommendations in the health care area: PFIZER, $31.87, symbol PFE on New York (Shares outstanding: 6.5 billion; Market cap: $206.6 billion; www.pfizer.com), is the world’s largest pharmaceutical drug maker. Its top-selling brands include Lipitor (for high cholesterol), Lyrica (epilepsy), Celebrex (arthritis), Viagra (erectile dysfunction), Xalatan (glaucoma), Norvasc (hypertension) and Zyvox (bacterial infections). Pfizer also makes over-the-counter drugs. Its major brands include Advil (pain relief), Centrum (vitamins) and Robitussin (cough syrup). Buy....
In late 2012 and early 2013, Alberta’s heavy oil, or bitumen, was trading at a discount of around $40 U.S. a barrel to U.S. benchmark West Texas Intermediate (WTI) light crude. Bitumen from the oil sands is a thick, tar-like form of oil that requires more processing than regular crude. The lower price for Canadian bitumen was mostly due to a lack of pipeline and refinery capacity. As well, increased U.S. light oil production drove down the price of Alberta’s harder-to-process heavy oil. Since then, though, the discount has narrowed: earlier this month, Alberta oil sold for $19.50 U.S. a barrel less than U.S. benchmark WTI light crude....
North American Tungsten, $0.10, symbol NTC on Toronto (Shares outstanding: 238.1 million; Market cap: $21.4 million; www.natungsten.com), acquires, explores, develops and operates mineral properties, mainly tungsten, in the Northwest Territories and Yukon Territory. The company owns the producing Cantung mine, as well as the Mactung project. Cantung has the potential to generate about 4% of the world’s tungsten output. The company believes the Mactung deposit, which could be in production in a few years, has about 10% of the world’s known tungsten resources. Low tungsten prices forced North American Tungsten to suspend operations at Cantung in October 2009, but it resumed production in October 2010. Tungsten has many uses, including as tungsten carbide in cemented carbides, which are wear-resistant materials used in the metalworking, mining, oil and construction industries....
When we look for stocks to buy for our portfolio-management clients, we pay special attention to hidden assets. These are assets that companies own, but that do not carry much weight on company balance sheets. You might think of them as a bonus asset that you get for free. For instance, when a company buys real estate, the purchase price goes on its balance sheet as the value of the asset. Over a period of years or decades, the market value of that real estate may climb substantially. But the purchase price remains unchanged on the balance sheet. You have to look closely to spot this hidden value. At times, the hidden value in a company’s real estate can come to exceed the market value of its stock. This hidden value may only become apparent to investors when the company upgrades the use of the real estate. For example, a merchandiser might repurpose a parking lot to build a shopping mall with a residential condo tower on higher floors, and a parking garage down below....
Rio Tinto plc (ADR), $57.26, symbol RIO on New York (ADRs outstanding: 1.4 billion; Market cap: $78.4 billion; www.riotinto.com), is a major international mining group. The U.K.-based company locates, develops, mines and processes a range of minerals, including aluminum, copper and diamonds. It also produces commodities for power generation, like coal and uranium, and industrial minerals, such as borax, titanium dioxide and salt. Rio Tinto operates across the globe, with a significant concentration in Australia and North America. It has 71,220 employees....
Trinity Industries Inc., $59.29, symbol TRN on New York (Shares outstanding: 78.1 million; Market cap: $4.6 billion; www.trin.net), makes a variety of metal products for many industries. Its five main operating segments are: Rail (railcars and components), Construction Products (highway-safety products, concrete and aggregates like sand, gravel and crushed stone), Inland Barge (barges), Energy Equipment (wind turbines) and Railcar Leasing and Management. In the three months ended September 30, 2013, Trinity’s revenue rose 22.4%, to a record $1.1 billion from $907.3 million a year earlier. Earnings per share also set a record, jumping 57.5%, to $1.26 from $0.80. The higher sales and cost cutting were behind the gain....
Source Exploration, $0.11, symbol SOP on Toronto (Shares outstanding: 60.7 million; Market cap: $6.7 million; www.sourceexploration.com), holds an option on the Las Minas gold, silver and copper exploration project in Mexico’s Las Minas mining district. The stock jumped in early November 2013 after Source appointed David Baker and Earl Terris to its board of directors. From 2003 through March 2012, Baker was the president and CEO of Goldbrook Ventures, which Source says he built from an exploration start-up in Quebec’s Raglan district to its 2012 sale to its Chinese joint venture partners for $100 million....
Alexander Energy, $0.71, symbol ALX on Toronto (Shares outstanding: 253.7 million; Market cap: $180.1 million; www.alexanderenergy.ca), is a junior oil and gas producer. The company brought in new management in late 2013. The new managers then bought shares from the company that made them the majority shareholders. It now plans to change its name to Spartan Energy. Until recently, the company’s main oil and gas property was at Alexander, Alberta. However, it recently paid $32.5 million for a property in southeastern Saskatchewan that produces 370 barrels of oil a day. Alexander raised $51.5 million in a share issue to pay for the acquisition....