Tuesday, December 31, 2013
Dividend Stocks Link
My blog yesterday had a bad link to my spreadsheet. This has been fixed. See my spreadsheet at dividend growth stocks.
Monday, December 30, 2013
Dividend Stocks
I have updated a third of my spreadsheet on dividend growth information. See my spreadsheet at dividend growth stocks. I am using the historical high and historical average dividend yield to get my spreadsheet to points out stock that could possibly be cheap at this point.
There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical average dividend yield are probably the best bet.
The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution.
The best buys are probably the ones selling with the dividend yield above the historical average. There is probably nothing wrong with these stocks.
However, you should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.
Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. They are generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company.
Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.
The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.
See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. You might want to look at my original entry on Dividend Growth Stocks.
This will be the first of three entries as it takes too long to update the data on dividend growth stocks in one day, so I will be doing a third of the list each day.
On my other blog I am today writing about Stella-Jones Inc. (TSX-SJ, OTC-STLJF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical average dividend yield are probably the best bet.
The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution.
The best buys are probably the ones selling with the dividend yield above the historical average. There is probably nothing wrong with these stocks.
However, you should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.
Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. They are generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company.
Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.
The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.
See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. You might want to look at my original entry on Dividend Growth Stocks.
This will be the first of three entries as it takes too long to update the data on dividend growth stocks in one day, so I will be doing a third of the list each day.
On my other blog I am today writing about Stella-Jones Inc. (TSX-SJ, OTC-STLJF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, December 27, 2013
Portfolio December 2013
I have also loaded an index spreadsheet with some key ratios here for all the stocks that I cover. Use your mouse to highlight a line in this index.
On my other blog I am today writing about Mullen Group Ltd. (TSX-MTL, OTC-MLLGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
On my other blog I am today writing about Mullen Group Ltd. (TSX-MTL, OTC-MLLGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, December 25, 2013
Next Bear Market
My internet had been down from Saturday today. This was my post for Monday, December 23, 2013.
I read a number of news emails each week. Lately they have been talking about a bear market or a market corrections coming soon. The most prominent in this call has been The Daily Buy and Sell advisor of MPL Communications . Their article was based on information from Keith Richards.
Keith Richards has a blog at Smart Bounce and two of his recent articles on a coming correction are here and here.
I also get emails from Mauldin Economics. They also have been talking about coming problems. This group is American and are very concerned about the never ending QE of the Federal Reserve.
There are, of course, others saying that calling for a stock market crash (or bear market) is wrong. However, do not forget that we are still in a cyclical bull market within a secular bear market. How long the cyclical bull will last is anyone's guess. These things always last longer than anyone expects.
On my other blog I am today writing about Methanex Corp. (TSX-MX, NASDAQ-MEOH)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I read a number of news emails each week. Lately they have been talking about a bear market or a market corrections coming soon. The most prominent in this call has been The Daily Buy and Sell advisor of MPL Communications . Their article was based on information from Keith Richards.
Keith Richards has a blog at Smart Bounce and two of his recent articles on a coming correction are here and here.
I also get emails from Mauldin Economics. They also have been talking about coming problems. This group is American and are very concerned about the never ending QE of the Federal Reserve.
There are, of course, others saying that calling for a stock market crash (or bear market) is wrong. However, do not forget that we are still in a cyclical bull market within a secular bear market. How long the cyclical bull will last is anyone's guess. These things always last longer than anyone expects.
On my other blog I am today writing about Methanex Corp. (TSX-MX, NASDAQ-MEOH)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, December 18, 2013
The Folly of P/E Multiples
I saw an article in the Financial Post called "The Folly of P/E Multiples". This article talks about not just looking at P/E Ratios to determine how reasonable a stock price is. The article talks about 5 stocks with high P/E Ratios that the author thinks investors should look further into than just P/E Ratios.
I must admit that P/E Ratios are one measurement that I use. However, I also like to look at, at least 3 other measurements to decide how reasonable a stock is priced. The stock price tests that I generally do are a P/E Ratio test, Price/Graham Price Ratio test, Price/Book Value per Share test and a dividend yield test.
With the Price/EPS Ratio test that I do, I like to compare the current P/E Ratio using this year's EPS estimates and the current price against the 5 year low, median and high median P/E Ratios. There are some rules of thumb with P/E Ratios, with below 10.00 being cheap and above 30.00 being expensive. However, you have to be aware that different sectors have different P/E Ratios that are considered low and high. Also, growth stocks tend to have quite high P/E Ratios.
My Price/Graham Price Test is a comparison of the current P/GP Ratio with the 10 year low, median and high median P/GP Ratios. Generally speaking, a P/GP Ratio of 1.00 or lower is pointing to a cheap stock. However, here again what ratio is considered cheap can vary by stocks in different sector.
For the Price/Book Value per Share Ratios stock test, I compare the current P/BV Ratio to the 10 year close median P/BV Ratio. Generally speaking, if the current P/BV Ratio is 80% of the 10 year close median P/BV Ratio, the stock is considered to be cheap. If the current P/BV Ratio is close to the 10 year close median P/BV Ratio, then the stock price is reasonable.
There is also some rule of thumb values such as if the current P/BV Ratio is 1.00 or lower, a stock is considered cheap and if the current P/BV Ratio is 1.50 then the stock price is considered reasonable. However, the P/BV Ratio can also vary by stock sector.
The last test I generally do is comparing the current dividend yield to the 5 year median dividend yield. Basically you want the current yield to higher than 5 year median dividend yield. (Here the higher the dividends yield the better the stock price.) If the current dividend yield is 20% higher than the 5 year median dividend yield, the stock price is considered to be cheap. A stock price is considered reasonable, if the dividend yield is close to the 5 year median dividend yield and a stock price is considered high if the current dividend yield is 20% lower than the 5 year median dividend yield.
I have recently been looking at historical high, low and average dividend yields as a comparison to the current dividend yield. I wrote about this in two recent posts of Dividend Growth Dividend Growth Updated .
On my other blog I am today writing about Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I must admit that P/E Ratios are one measurement that I use. However, I also like to look at, at least 3 other measurements to decide how reasonable a stock is priced. The stock price tests that I generally do are a P/E Ratio test, Price/Graham Price Ratio test, Price/Book Value per Share test and a dividend yield test.
With the Price/EPS Ratio test that I do, I like to compare the current P/E Ratio using this year's EPS estimates and the current price against the 5 year low, median and high median P/E Ratios. There are some rules of thumb with P/E Ratios, with below 10.00 being cheap and above 30.00 being expensive. However, you have to be aware that different sectors have different P/E Ratios that are considered low and high. Also, growth stocks tend to have quite high P/E Ratios.
My Price/Graham Price Test is a comparison of the current P/GP Ratio with the 10 year low, median and high median P/GP Ratios. Generally speaking, a P/GP Ratio of 1.00 or lower is pointing to a cheap stock. However, here again what ratio is considered cheap can vary by stocks in different sector.
For the Price/Book Value per Share Ratios stock test, I compare the current P/BV Ratio to the 10 year close median P/BV Ratio. Generally speaking, if the current P/BV Ratio is 80% of the 10 year close median P/BV Ratio, the stock is considered to be cheap. If the current P/BV Ratio is close to the 10 year close median P/BV Ratio, then the stock price is reasonable.
There is also some rule of thumb values such as if the current P/BV Ratio is 1.00 or lower, a stock is considered cheap and if the current P/BV Ratio is 1.50 then the stock price is considered reasonable. However, the P/BV Ratio can also vary by stock sector.
The last test I generally do is comparing the current dividend yield to the 5 year median dividend yield. Basically you want the current yield to higher than 5 year median dividend yield. (Here the higher the dividends yield the better the stock price.) If the current dividend yield is 20% higher than the 5 year median dividend yield, the stock price is considered to be cheap. A stock price is considered reasonable, if the dividend yield is close to the 5 year median dividend yield and a stock price is considered high if the current dividend yield is 20% lower than the 5 year median dividend yield.
I have recently been looking at historical high, low and average dividend yields as a comparison to the current dividend yield. I wrote about this in two recent posts of Dividend Growth Dividend Growth Updated .
On my other blog I am today writing about Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, December 16, 2013
The Trouble with RRSPs
When you are building up money in an RRSP, you do not realize the problems it will be withdrawing money after you stop working. My budget outside of tax is increasing around 2% a year. However, add in tax and it is increasing at a rate of 8% a year.
When you withdraw money from an investment fund after you stop working, you are supposed to count on withdrawing 4% of the fund a year and earn 8% a year. I am lucky that I am only withdrawing currently at 3% of my total portfolio. However, this will not last, not with taxes increasing so rapidly. They are the biggest item on my budget.
My projections shows that RRIF withdrawal amounts will hit a peak at age 71 and because at that age you have to withdraw so much that my RRIFs will stop increasing in value and start to decrease. At age 71 you have to withdraw some 7.38% of the fund. The percentage climbs from there. RRIFs are to end at age 90. With people living longer and longer, you would think that this age should be raised.
The problem for older people and the government may be that there will be very old people with little money. I know that both my parents and in-laws spent a lot of money in their last few years of life. I am talking about money in the $100,000's range.
On my other blog I am today writing about Magna International Inc. (TSX-MG, NYSE-MGA)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
When you withdraw money from an investment fund after you stop working, you are supposed to count on withdrawing 4% of the fund a year and earn 8% a year. I am lucky that I am only withdrawing currently at 3% of my total portfolio. However, this will not last, not with taxes increasing so rapidly. They are the biggest item on my budget.
My projections shows that RRIF withdrawal amounts will hit a peak at age 71 and because at that age you have to withdraw so much that my RRIFs will stop increasing in value and start to decrease. At age 71 you have to withdraw some 7.38% of the fund. The percentage climbs from there. RRIFs are to end at age 90. With people living longer and longer, you would think that this age should be raised.
The problem for older people and the government may be that there will be very old people with little money. I know that both my parents and in-laws spent a lot of money in their last few years of life. I am talking about money in the $100,000's range.
On my other blog I am today writing about Magna International Inc. (TSX-MG, NYSE-MGA)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, December 11, 2013
Reitmans
I had always liked Reitmans (TSX-RET.A) stock because they had a growing dividend and low debt. I do not mind companies that are family own. However, I had never bought this stock, until just recently. I had not bought this stock because you cannot own all the good companies on the TSX, and I owned a number of retail stocks.
I bought some recently because the company had fallen on hard times and was very cheap. I knew that this was a risk. With a family owned stock company, the family is usually quite motivated to do a good job. When I bought the stock, I realized that the dividend was at risk.
When I read that the company could no longer cover the dividends with earnings, I hoped that they would cut the dividend. I know most dividend investors do not feel that way, but I do. It is the prudent thing to do. The company did do the prudent thing and they cut the annual dividend from $0.80 to $0.20.
The thing is if companies maintain a dividend that they cannot afford, that is to go into debt to keep up the dividend, it makes recovery harder. This is not the prudent way forward for a company in financial difficulties. In the longer term, the company will be better off to have cut dividends when they cannot cover them properly with earnings.
On the other hand, my son has own stock in this company for some time. He was angry when the dividend was cut. He thinks companies should do everything in their power to maintain their dividends while they mend the company's finances. We have been arguing about whether this was a prudent move on Reitmans part or not. I realize that other investors do not feel like I do as companies that cut dividends have big falls in their stock price.
On my other blog I am today writing about FirstService Corp (TSX-FSV, NASDAQ-FSRV)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I bought some recently because the company had fallen on hard times and was very cheap. I knew that this was a risk. With a family owned stock company, the family is usually quite motivated to do a good job. When I bought the stock, I realized that the dividend was at risk.
When I read that the company could no longer cover the dividends with earnings, I hoped that they would cut the dividend. I know most dividend investors do not feel that way, but I do. It is the prudent thing to do. The company did do the prudent thing and they cut the annual dividend from $0.80 to $0.20.
The thing is if companies maintain a dividend that they cannot afford, that is to go into debt to keep up the dividend, it makes recovery harder. This is not the prudent way forward for a company in financial difficulties. In the longer term, the company will be better off to have cut dividends when they cannot cover them properly with earnings.
On the other hand, my son has own stock in this company for some time. He was angry when the dividend was cut. He thinks companies should do everything in their power to maintain their dividends while they mend the company's finances. We have been arguing about whether this was a prudent move on Reitmans part or not. I realize that other investors do not feel like I do as companies that cut dividends have big falls in their stock price.
On my other blog I am today writing about FirstService Corp (TSX-FSV, NASDAQ-FSRV)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, December 9, 2013
Market Bulls and Bears
No market goes straight up, or straight down for that matter, and all markets have times in which they pull back. In fact, the fast and sharper the rise, the sharper and steeper are the declines. However, if a market rises gradually, it usually will have a time for consolidation before the next rise rather than a decline. These are two extremes examples. Usually, the rises and falls are somewhere between these two modes.
On my other blog I am today writing about First Capital Realty (TSX-FCR, OTC- FCRGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
On my other blog I am today writing about First Capital Realty (TSX-FCR, OTC- FCRGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, December 4, 2013
6-Pak Approach
I get the daily emails from MPL Communications called Daily Buy and Sell Advisor. A recent email talked about a 6 Pak Approach to investing in Canadian stocks for 2012. The have two 6-Paks, one the Equity 6-Pak focused more on growth and the Dividend 6-Pak on growing income return.
You can sign up for this email at their site. I find that they generally give good solid advice. They sell information only to investors so they do not have to worry about doing business with the companies that they cover. So they are a good independent source of information on Canadian Stocks.
The Canadian Equity 6-Pak comprises of Bank of Nova Scotia (TSX-BNS), Brookfield Asset Management (TSX-BAM.A), Canadian Pacific Railway (TSX-CP), Enbridge Inc. (TSX-ENB)., EnCana Corp/Cenovus Energy (half allotments) (TSX-ECA and TSX-CVE) and Thomson Reuters (TSX-TRI). To the end of October, the Canadian Equity 6-Pak returned 20.2 per cent.
The Canadian Dividend 6-Pak comprises of Artis REIT (TSX-AX.UN), Bank of Montreal (TSX-BMO), BCE Inc., (TSX-BCE) Inter Pipeline L P. (TSX-IPL.UN), Power Corporation of Canada (TSX-POW) and TransAlta Corp (TSX-TA). To the end of October, the Dividend 6-Pak was a lower but nonetheless at a credible 12.7 per cent that includes a growing dividend yield of 5.2 per cent. By comparison, the year-to-date return on the benchmark S&P/TSX Composite Index was in the order of 10 per cent.
I follow all these stocks, see my site.
For CP Rail, oil-by-rail is a lucrative new bonus as President Obama keeps dithering over the Keystone XL pipeline and railroads fill the void by transporting Canadian oil sands bitumen across the border to waiting Gulf. Daily Buy and Sell Advisor likes the description of Cenovus as a "best-in-class" Canadian oil sands operator.
Brookfield Asset Management is a world leader in power, property, infrastructure and private equity. TransAlta Corp is making a massive transition from a coal to natural gas-fired electricity generation. If Mr. Buffett and Berkshire Hathaway favour TransAlta, we should like it too.
On my other blog I am today writing about Canada Bread Co. (TSX-CBY, OTC-CBDLF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
You can sign up for this email at their site. I find that they generally give good solid advice. They sell information only to investors so they do not have to worry about doing business with the companies that they cover. So they are a good independent source of information on Canadian Stocks.
The Canadian Equity 6-Pak comprises of Bank of Nova Scotia (TSX-BNS), Brookfield Asset Management (TSX-BAM.A), Canadian Pacific Railway (TSX-CP), Enbridge Inc. (TSX-ENB)., EnCana Corp/Cenovus Energy (half allotments) (TSX-ECA and TSX-CVE) and Thomson Reuters (TSX-TRI). To the end of October, the Canadian Equity 6-Pak returned 20.2 per cent.
The Canadian Dividend 6-Pak comprises of Artis REIT (TSX-AX.UN), Bank of Montreal (TSX-BMO), BCE Inc., (TSX-BCE) Inter Pipeline L P. (TSX-IPL.UN), Power Corporation of Canada (TSX-POW) and TransAlta Corp (TSX-TA). To the end of October, the Dividend 6-Pak was a lower but nonetheless at a credible 12.7 per cent that includes a growing dividend yield of 5.2 per cent. By comparison, the year-to-date return on the benchmark S&P/TSX Composite Index was in the order of 10 per cent.
I follow all these stocks, see my site.
For CP Rail, oil-by-rail is a lucrative new bonus as President Obama keeps dithering over the Keystone XL pipeline and railroads fill the void by transporting Canadian oil sands bitumen across the border to waiting Gulf. Daily Buy and Sell Advisor likes the description of Cenovus as a "best-in-class" Canadian oil sands operator.
Brookfield Asset Management is a world leader in power, property, infrastructure and private equity. TransAlta Corp is making a massive transition from a coal to natural gas-fired electricity generation. If Mr. Buffett and Berkshire Hathaway favour TransAlta, we should like it too.
On my other blog I am today writing about Canada Bread Co. (TSX-CBY, OTC-CBDLF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, December 2, 2013
Canadian Dozen for 2014
I get the daily emails from MPL Communications called Daily Buy and Sell Advisor. A recent email gave their choices for a Canadian dozen stocks for 2014. These stocks are shown below with a short reason why they are being picked.
You can sign up for this email at their site. I find that they generally give good solid advice. They sell information only to investors so they do not have to worry about doing business with the companies that they cover. So they are a good independent source of information on Canadian Stocks.
On my other blog I am today writing about Finning International Inc. (TSX-FTT, OTC-FINGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
You can sign up for this email at their site. I find that they generally give good solid advice. They sell information only to investors so they do not have to worry about doing business with the companies that they cover. So they are a good independent source of information on Canadian Stocks.
| Company | Symbol | Price (Oct.31) | Dividend |
| Bank of Nova Scotia | (BNS) | $63.39 | $2.48 |
| Canada's most international bank | |||
| Brookfield Asset Mgmt. | (BAM.A) | $41.28 | $0.60 + |
| Property, dominance, renewable, power, infrastructure, financial | |||
| Canadian Pacific Railway | (CP) | $149.04 | $0.40 |
| New leadership, prodigious operating catch-up leverage, oil-by-rail bonus | |||
| EnCana Corp. | (ECA) | $18.68 | $0.80 + |
| A refocusing North American natural gas giant | |||
| Cenovus Energy | (CVE) | $30.98 | $0.97 |
| Among best in oil sands, SAGD, refinery partnership with Conoco-Phillips | |||
| Husky Energy | (HSE) | $29.69 | $1.20 |
| Asian controlled, integrated producer and downstream, new mgmt., project diversity | |||
| Manulife Financial | (MFC) | $18.47 | $1.44 |
| Canada's largest insurer, impressive international (Asia) push | |||
| Suncor Energy | (SU) | $37.89 | $0.80 |
| Canada's largest Oil & Gas producer, a cash & dividend machine | |||
| Teck Resources | (TCK) | $27.90 | $0.80 |
| Diversified integrated mining, export coal, other | |||
| Toronto-Dominion Bank | (TD) | $95.69 | $1.72 |
| A premier world bank by every metric | |||
| Trans Alta Corp. | (TA) | $14.03 | $1.16 |
| Conversion to natural gas, joint venture with Mid-American Energy | |||
| Trans Canada Corp. | (TRP) | $46.99 | $1.84 |
| Transitioning leader, energy transportation and generation, including hydro, nuclear | |||
On my other blog I am today writing about Finning International Inc. (TSX-FTT, OTC-FINGF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 27, 2013
Book Reviews
I just published a number of book reviews. It is not that I had not written them up when I finished the books, it just that I did not get around to publishing.
I am trying to do something different from just more general book reviews. I will give you a link to two or so normal book reviews. I may talk about the subject of the book, or make my own comments on the subject or just talk about a particular aspect or section of a book. I may also provide links to such things as biographical information on the author.
The difference is that I want to connect the book and the author what is available on the internet. This would be such things as the author's website or interviews with the author or YouTube items on the author, the book or talks by the author. I will also provide other links, if I feel they are pertinent.
So you can read the book and then watch a video with the author being interviewed or talking about his book. Or, you can watch the videos and decide if the book will be worthwhile to read.
Restless Empire by Odd Arne Westad.
From the Ruins of Empire by Pankaj Mishra.
Flight of the Eagle by Conrad Black.
The Barbarous Years by Bernard Bailyn.
The 7 Laws of Magical Thinking by Matthew Hutson.
Cooked by Michael Pollan.
Thinking the Twentieth Century, Judt and Snyder.
The Conquest of the Ocean by Brian Lavery.
The Big Shift by Bricker, Ibbitson Bricker, Ibbitson.
On my other blog I am today writing about Chesswood Group Ltd (TSX-CHW, OTC-CHWWF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I am trying to do something different from just more general book reviews. I will give you a link to two or so normal book reviews. I may talk about the subject of the book, or make my own comments on the subject or just talk about a particular aspect or section of a book. I may also provide links to such things as biographical information on the author.
The difference is that I want to connect the book and the author what is available on the internet. This would be such things as the author's website or interviews with the author or YouTube items on the author, the book or talks by the author. I will also provide other links, if I feel they are pertinent.
So you can read the book and then watch a video with the author being interviewed or talking about his book. Or, you can watch the videos and decide if the book will be worthwhile to read.
Restless Empire by Odd Arne Westad.
From the Ruins of Empire by Pankaj Mishra.
Flight of the Eagle by Conrad Black.
The Barbarous Years by Bernard Bailyn.
The 7 Laws of Magical Thinking by Matthew Hutson.
Cooked by Michael Pollan.
Thinking the Twentieth Century, Judt and Snyder.
The Conquest of the Ocean by Brian Lavery.
The Big Shift by Bricker, Ibbitson Bricker, Ibbitson.
On my other blog I am today writing about Chesswood Group Ltd (TSX-CHW, OTC-CHWWF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 25, 2013
Dividend Growth Stocks
When I was setting up the historical high and low yields for my spreadsheet I sort of eye-balled the historical yields I had to get the historical ones. This is not very professional. I do not know how Mike Higgs' determined his values. So, I talked to a friend of mine who is a consulting actuary. Actuaries are people who deal with math a lot.
John suggested I use the "PERCENTILE.EXC" formula of excel. (The explain of this excel function is that it will look through a given set of numbers and find the exact number that breaks the data set into your chosen percentiles.)
Dividend yield and stock prices go in the opposite directions. So to find the historical high dividend yields I looked for dividend yields on the spreadsheet line with dividend yield on "low stock prices" and for historical low yields I looked for dividend yields on "high stock prices".
The functions format is "=percentile.exc(arrary,k)". For the high dividend yield formula, I used "k=0.8" and for the low dividend yield formula, I used "k=0.2") In these formulas, I am not looking for the highest or the lowest yield, but ones higher or lower than normal.
There are still problems. One is with old income trust companies which mostly have lowered dividend rates with the change to corporations. The old dividend yields will probably never occur again.
The other problem is that I have variable amounts of years of data on different stocks. For most new stocks I track it is sometimes hard to get more than 10 years of data. Also, some companies have only been around for a short period of time. For companies I have tracked for a long time, like Bombardier Inc., I have data back to 1991 in by spreadsheet on this company. (I have elsewhere data going back even further.)
I have updated my portfolio spreadsheet. The applicable sections are shown here and I have updated these fields for the stocks that I hold.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
John suggested I use the "PERCENTILE.EXC" formula of excel. (The explain of this excel function is that it will look through a given set of numbers and find the exact number that breaks the data set into your chosen percentiles.)
Dividend yield and stock prices go in the opposite directions. So to find the historical high dividend yields I looked for dividend yields on the spreadsheet line with dividend yield on "low stock prices" and for historical low yields I looked for dividend yields on "high stock prices".
The functions format is "=percentile.exc(arrary,k)". For the high dividend yield formula, I used "k=0.8" and for the low dividend yield formula, I used "k=0.2") In these formulas, I am not looking for the highest or the lowest yield, but ones higher or lower than normal.
There are still problems. One is with old income trust companies which mostly have lowered dividend rates with the change to corporations. The old dividend yields will probably never occur again.
The other problem is that I have variable amounts of years of data on different stocks. For most new stocks I track it is sometimes hard to get more than 10 years of data. Also, some companies have only been around for a short period of time. For companies I have tracked for a long time, like Bombardier Inc., I have data back to 1991 in by spreadsheet on this company. (I have elsewhere data going back even further.)
I have updated my portfolio spreadsheet. The applicable sections are shown here and I have updated these fields for the stocks that I hold.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, November 22, 2013
Secular Bear
I do agree with Danielle Park from the Toronto Money Show 2013 that we are still in a secular bear market. However, I have never gone liquid at any time. When recessions hit, I collect my dividends and wait for my portfolio to recover. Dividend increases can dramatically decline. However, the decline does not happen immediately.
For example, my dividend increase for 2009 was 14.9% and the one for 2010 was just 5.3%. My dividend increases have been climbing, but not very quickly with 2011 and 2012 at 9.23% and 9.63%, respectively. For 2013 my dividend increase is at 9.84% to date.
I expect that we will have at least one more stock crash (or maybe 2) before we get out of this Secular Market. These markets last for a long time and we probably, at least, have another 5 to 10 years to go in this one.
If you want to read further on this subject, see an article in Forbes entitled "Why It's Still Only a Cyclical Bull Market within the Long-Term Secular Bear". There is a similar article in at the Street Smart Report site. And for a really depressing recap of what is happening on this secular bear and how long it might last, see The Big Picture blog and an entry in it by Ed Easterling in 2012.
The Advisor Perspective site with the article by Doug Short in November 2013 comes at this subject from a slightly different angle, but no less depressing than the one that Ed Easterling wrote in 2012. It is only fair to include an article that says we are out of the current secular bear and into another secular bull. This is also on the Advisor Perspective site but by Chris Puplava. However, I do not believe this.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
For example, my dividend increase for 2009 was 14.9% and the one for 2010 was just 5.3%. My dividend increases have been climbing, but not very quickly with 2011 and 2012 at 9.23% and 9.63%, respectively. For 2013 my dividend increase is at 9.84% to date.
I expect that we will have at least one more stock crash (or maybe 2) before we get out of this Secular Market. These markets last for a long time and we probably, at least, have another 5 to 10 years to go in this one.
If you want to read further on this subject, see an article in Forbes entitled "Why It's Still Only a Cyclical Bull Market within the Long-Term Secular Bear". There is a similar article in at the Street Smart Report site. And for a really depressing recap of what is happening on this secular bear and how long it might last, see The Big Picture blog and an entry in it by Ed Easterling in 2012.
The Advisor Perspective site with the article by Doug Short in November 2013 comes at this subject from a slightly different angle, but no less depressing than the one that Ed Easterling wrote in 2012. It is only fair to include an article that says we are out of the current secular bear and into another secular bull. This is also on the Advisor Perspective site but by Chris Puplava. However, I do not believe this.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 20, 2013
Globe and Mail Investors
The Globe and Mail investor's site is not the site it used to be. I find I use it less and less. It has not updated what it provides for quite some time. It used to be the go to site for Canadian investors. This is not true anymore. Here are some other sites you might want to try.
The first one to talk about is called 4-Traders. It has some interesting information under the financials a consensus tabs for stock. For a Canadian stock, just enter the symbol and it will probably suggest the right Canadian stock, and if not click more results after the list of possible companies. I have not yet come across a Canadian stock that they do not have at least some information on.
The next site to comment on is Reuters. To get a Canadian stock on this site, enter the symbol, followed by a dot and to. For example, for Gluskin Sheff (TSX-GS), enter "gs.to" and press search button and you will get suggestions of "Gluskin Sheff" and press the symbol opposite the stocks name and your will get information on that stock. This site gives interesting information about key people, financials and analysts.
Another interesting site is Morningstar. Just enter the TSX symbol of your stock and it should come up on their list of possible stocks you are looking for. There are some premium sections to the site but a lot is free. What is especially interesting on this site is under "filing" tap where you can see all financial statements.
The last site I will talk about today is Market Watch from the Wall Street Journal. To get information on a Canadian stock you must preface it with "CA:". So to get info on Gluskin Sheff (TSX-GS), in enter symbol of keywords box, put "CA:GS". On this site you can also get historical quotes.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The first one to talk about is called 4-Traders. It has some interesting information under the financials a consensus tabs for stock. For a Canadian stock, just enter the symbol and it will probably suggest the right Canadian stock, and if not click more results after the list of possible companies. I have not yet come across a Canadian stock that they do not have at least some information on.
The next site to comment on is Reuters. To get a Canadian stock on this site, enter the symbol, followed by a dot and to. For example, for Gluskin Sheff (TSX-GS), enter "gs.to" and press search button and you will get suggestions of "Gluskin Sheff" and press the symbol opposite the stocks name and your will get information on that stock. This site gives interesting information about key people, financials and analysts.
Another interesting site is Morningstar. Just enter the TSX symbol of your stock and it should come up on their list of possible stocks you are looking for. There are some premium sections to the site but a lot is free. What is especially interesting on this site is under "filing" tap where you can see all financial statements.
The last site I will talk about today is Market Watch from the Wall Street Journal. To get information on a Canadian stock you must preface it with "CA:". So to get info on Gluskin Sheff (TSX-GS), in enter symbol of keywords box, put "CA:GS". On this site you can also get historical quotes.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 18, 2013
Bicycles in Toronto
I rode my bicycle to work in the 1960's and 1970's up until 1975. For me it was great. It was basically downhill all the way to work. This was good because I would not walk into work all sweaty. It was uphill home but that was fine. I stopped riding to work because I changed jobs and had one closer to home and it was easy to walk to work.
We have bike lanes now. They can be dangerous because of people parking in bike lanes. Taxis and trucks are the main offenders, but others do it too. When the lanes are narrow on a street, the taxis and trucks tend to part half on the bicycle path and half on the sidewalk. I have never seen or even heard of these people getting tickets for this action.
I think that it was safer to ride a bicycle when I did ride it to work than it is now. I had a bicycle about 5 years ago but got rid of it. I thought riding downtown was quite dangerous. It is too bad because bike riding is good exercise and could be a great way to get to a place that is a bit too far to walk.
On my other blog I am today writing about Brookfield Office Properties (TSX-BPO, NYSE-BPO) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
We have bike lanes now. They can be dangerous because of people parking in bike lanes. Taxis and trucks are the main offenders, but others do it too. When the lanes are narrow on a street, the taxis and trucks tend to part half on the bicycle path and half on the sidewalk. I have never seen or even heard of these people getting tickets for this action.
I think that it was safer to ride a bicycle when I did ride it to work than it is now. I had a bicycle about 5 years ago but got rid of it. I thought riding downtown was quite dangerous. It is too bad because bike riding is good exercise and could be a great way to get to a place that is a bit too far to walk.
On my other blog I am today writing about Brookfield Office Properties (TSX-BPO, NYSE-BPO) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, November 15, 2013
Toronto Money Show 2013
I thought I would mention some companies that were talked about. Energy infrastructure companies were mentioned by more than one talker. Companies mentioned were ones like AltaGas Ltd (TSX-ALA) and Pembina Pipeline (TSX-PPL). Several speakers mentioned Enbridge (TSX-ENB). Another stock that was mentioned by several speakers was Constellation Software (TSX-CSU).
There was a lot of speakers who were upbeat about the future and a few that were quite concern about the future. In the short term the market is going up. We do seem to be in a cyclical bull market. However, in the longer term we have problems. We have high debt levels. High debt levels tend to slow economies down. We have an aging population. Also, we are still in the secular bear market that started in 2000.
The US has just as high debt levels coming out of WWII. Inflation did help them a bit to deleverage. But what really got the job done was the US building the interstate highways. The US army saw the roads in Germany and wanted the same. This is why the interstate highway system was built. What happened because of the interstate highways was that commerce took off. Tax revenue flowed and the government deleveraged. (Deleveraging, by the way is paying down debt.)
Most people think that the banks in the US caused the 2008 recession. (This is not really quite true, but that is another subject.) If you look at what Japan did, it did not fix the banks. (People called some banks in Japan zombie banks.) They may just be recovering from the 1989/1990 stock market crash and a big part of the reason their economy was so slow for so long was that they did not fix the banks.
It is true we have some serious problems with debt and aging populations. I do think this going to cause some problems, but I also think that we will find out way through it.
On my other blog I am today writing about Northland Power Inc. (TSX-NPI, OTC-NPIFF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
There was a lot of speakers who were upbeat about the future and a few that were quite concern about the future. In the short term the market is going up. We do seem to be in a cyclical bull market. However, in the longer term we have problems. We have high debt levels. High debt levels tend to slow economies down. We have an aging population. Also, we are still in the secular bear market that started in 2000.
The US has just as high debt levels coming out of WWII. Inflation did help them a bit to deleverage. But what really got the job done was the US building the interstate highways. The US army saw the roads in Germany and wanted the same. This is why the interstate highway system was built. What happened because of the interstate highways was that commerce took off. Tax revenue flowed and the government deleveraged. (Deleveraging, by the way is paying down debt.)
Most people think that the banks in the US caused the 2008 recession. (This is not really quite true, but that is another subject.) If you look at what Japan did, it did not fix the banks. (People called some banks in Japan zombie banks.) They may just be recovering from the 1989/1990 stock market crash and a big part of the reason their economy was so slow for so long was that they did not fix the banks.
It is true we have some serious problems with debt and aging populations. I do think this going to cause some problems, but I also think that we will find out way through it.
On my other blog I am today writing about Northland Power Inc. (TSX-NPI, OTC-NPIFF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Thursday, November 14, 2013
Money Show 2013 - David Stanley
This is my last entry for the Toronto Money Show of 2013. We were going to go to another talk, but it was cancelled. So, instead we went to the Cafe Moroc (which is in front of the Sultan's Tent) for Martinis. They give you good and real martinis. You know the real kind, with gin, a bit of vermouth and an olive. Not everyone knows how to make these anymore. Bars have 20 different types of martinis and none of them real.
David Stanley is a private investor and a contributor to Canadian MoneySaver magazine. It was also part of the Canadian MoneySaver event at the World Money Show. His talk was entitled "Beating the TSX - It Works". He said that he does not trade a lot.
He had six points to cover in this presentation.
There would not be enough people working to fund retirement. Younger people out of university are deeply in debt. You might consider investing to send the kids to school, to make big purchases or leave something to your heirs. Money gives you freedom.
The next point is in what should I invest? Common stocks and fixed income products have the best and safest returns. Pick a ratio that suits you best. With government bonds and GICs you hazard a negative real return at the present time.
You should invest in the US because it is safer. Put 5% in the US, 10% internationally and the rest in Canada. The US is not as safe currently because of the recent problems. Why would you invest in CICs? The reason is capital preservation. If you have a pension, count this as fixed income product.
He thinks we should put most of money in Big Cap stock. Your total return will be both capital gains and dividends. Over the long term, dividends will be 50% of your total return. For investment income, dividends are the best way to go. The crash of 2008 saw dividends holding up better than other investments. Dividends are the dictate of management. Capital gains are the dictate of the market.
The blue chips stocks are the big companies. The TSX does not have good blue chip stocks in all sectors. High dividend stocks tend to outperform in the market. You can compound your return in dividend stocks by reinvesting your dividends. For the best return on the market, it depends on initial investment amount and time and frequency of compounding.
High yield sectors are Telecoms, Utilities, Real Estate and Financials (TURF). There are no REITs in the TSX60. There was a recent dip in stocks because interest rates rose and people were saying get out of dividend stocks. They did go down initially, but are now back up again.
The TSX total return over the past 10 years compared to the TSX Index. Index is up 82.96% and the Total Return is up 149.90%, a 67% difference. Source is the G&M. Chart is for TSXT-I compared to the TSX-I chart. (Total return index assumes you reinvest dividends paid.) It is striking how much of the total return index was reinvested dividends.
The following chart shows the compound annual growth rate (CAGR) for several investments investing in Canadian dividend stocks.
Michael O'Higgins wrote the History of Beating the Dow. BTSX is beating the TSX. The TSF35 was the precursor to the TSX60. The TSF35 was the index between 1982 and 1995. The BTSX was beating the TSX. You would buy the top 10 of the TSX60 by yield. You would therefore buy the cheapest stocks. (This index did not include any income trust stocks.)
To do the BTSX, you buy equal amounts of each of the 10 stocks and you allocate at least $1,000 to each stock. If a $10,000 investment is too high, buy the 5 highest TSX60 stock by dividend yield. Each year replace the stocks with the current top 10 stocks by dividend yield. This would result in a 5 to 10% change a year. Stocks may no longer be part of the highest yielders because their price has gone up.
Stocks prices are volatile as stocks do not trade on fundaments, but on emotion. High beta stocks are the most volatile. These tend to underperform the low beta stocks across time and countries.
Why does BTSX work? First, stock price and yield are inversely related if dividend is constant. Dividend yield is annual dividend divided by the stock price. Stocks are only a good investment if you do not pay too much.
Low beta Blue Chips stocks would be TD Bank (TSX-TD), Fortis Inc. (TSX-TFS) and BCE Inc. (TSX-BCE). Stock will exhibit significant cyclicality over time. Stock prices are unpredictable over time. We are simply and efficiently exploiting small but favorable valuation shifts over time. The average return for the BTSX since 1987 is 12.56% and for the Total Return TSX is 9.52% per year. In the past year the BTSX return was 15.36% and for Total Return TSX was 8.039%. The BTSX is getting close to doubling the TR TSX from last year to this year.
There is a downside risk to the BTSX. The down side risk is lower returns, higher inflation, higher taxes, more volatility and irrational markets for investors. These are structural changes.
What is the probability that my portfolio will survive a black swan event unscathed? David Stanley thinks that on a reward-risk scale, the BTSX has a high reward and moderate risk. You can get more information on this at Money Saver Files. You might get more information on BTSX at Money Saver Files.
Note that only 10% of actively managed mutual funds outperform the TSX over a 5 year period. The MERs of 2.36% will kill you. The BTSX is passive investing and the risks are:
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
David Stanley is a private investor and a contributor to Canadian MoneySaver magazine. It was also part of the Canadian MoneySaver event at the World Money Show. His talk was entitled "Beating the TSX - It Works". He said that he does not trade a lot.
He had six points to cover in this presentation.
- Why should I invest at all?
- In what should I invest?
- Why invest in big cap Canadian stock?
- How does beating the TSX work?
- How has beating the TSX performed?
- The downside and what it is.
There would not be enough people working to fund retirement. Younger people out of university are deeply in debt. You might consider investing to send the kids to school, to make big purchases or leave something to your heirs. Money gives you freedom.
The next point is in what should I invest? Common stocks and fixed income products have the best and safest returns. Pick a ratio that suits you best. With government bonds and GICs you hazard a negative real return at the present time.
| Item | 10 year return | 3 year return |
|---|---|---|
| TSX | 8.3% per year | 1.3% per year |
| S&P500 | 2.2% per year | 5.9% per year |
| 5 yr. GIC | 2.5% per year | 1.9% per year |
| CPI | 1.8% per year | 1.2% per year |
| MSCI World Index | 4.8% per year | 4.9% per year |
| TSX60 | 8.4% per year | 0.4% per year |
You should invest in the US because it is safer. Put 5% in the US, 10% internationally and the rest in Canada. The US is not as safe currently because of the recent problems. Why would you invest in CICs? The reason is capital preservation. If you have a pension, count this as fixed income product.
He thinks we should put most of money in Big Cap stock. Your total return will be both capital gains and dividends. Over the long term, dividends will be 50% of your total return. For investment income, dividends are the best way to go. The crash of 2008 saw dividends holding up better than other investments. Dividends are the dictate of management. Capital gains are the dictate of the market.
The blue chips stocks are the big companies. The TSX does not have good blue chip stocks in all sectors. High dividend stocks tend to outperform in the market. You can compound your return in dividend stocks by reinvesting your dividends. For the best return on the market, it depends on initial investment amount and time and frequency of compounding.
High yield sectors are Telecoms, Utilities, Real Estate and Financials (TURF). There are no REITs in the TSX60. There was a recent dip in stocks because interest rates rose and people were saying get out of dividend stocks. They did go down initially, but are now back up again.
The TSX total return over the past 10 years compared to the TSX Index. Index is up 82.96% and the Total Return is up 149.90%, a 67% difference. Source is the G&M. Chart is for TSXT-I compared to the TSX-I chart. (Total return index assumes you reinvest dividends paid.) It is striking how much of the total return index was reinvested dividends.
The following chart shows the compound annual growth rate (CAGR) for several investments investing in Canadian dividend stocks.
| Investments | MER | CAGR |
|---|---|---|
| Mutual Funds | 2.2 - 2.4% | 6.6% |
| ETFs | 0.30 - 0.60% | 10.4% |
| Total Return Index | (non-investable) | 10.7% |
| BTSX | < or = 1% | 12.9% |
Michael O'Higgins wrote the History of Beating the Dow. BTSX is beating the TSX. The TSF35 was the precursor to the TSX60. The TSF35 was the index between 1982 and 1995. The BTSX was beating the TSX. You would buy the top 10 of the TSX60 by yield. You would therefore buy the cheapest stocks. (This index did not include any income trust stocks.)
To do the BTSX, you buy equal amounts of each of the 10 stocks and you allocate at least $1,000 to each stock. If a $10,000 investment is too high, buy the 5 highest TSX60 stock by dividend yield. Each year replace the stocks with the current top 10 stocks by dividend yield. This would result in a 5 to 10% change a year. Stocks may no longer be part of the highest yielders because their price has gone up.
Stocks prices are volatile as stocks do not trade on fundaments, but on emotion. High beta stocks are the most volatile. These tend to underperform the low beta stocks across time and countries.
Why does BTSX work? First, stock price and yield are inversely related if dividend is constant. Dividend yield is annual dividend divided by the stock price. Stocks are only a good investment if you do not pay too much.
Low beta Blue Chips stocks would be TD Bank (TSX-TD), Fortis Inc. (TSX-TFS) and BCE Inc. (TSX-BCE). Stock will exhibit significant cyclicality over time. Stock prices are unpredictable over time. We are simply and efficiently exploiting small but favorable valuation shifts over time. The average return for the BTSX since 1987 is 12.56% and for the Total Return TSX is 9.52% per year. In the past year the BTSX return was 15.36% and for Total Return TSX was 8.039%. The BTSX is getting close to doubling the TR TSX from last year to this year.
There is a downside risk to the BTSX. The down side risk is lower returns, higher inflation, higher taxes, more volatility and irrational markets for investors. These are structural changes.
What is the probability that my portfolio will survive a black swan event unscathed? David Stanley thinks that on a reward-risk scale, the BTSX has a high reward and moderate risk. You can get more information on this at Money Saver Files. You might get more information on BTSX at Money Saver Files.
Note that only 10% of actively managed mutual funds outperform the TSX over a 5 year period. The MERs of 2.36% will kill you. The BTSX is passive investing and the risks are:
- Prices may dip if bond yields increase.
- BTSX portfolio is typically overweight in Financials, Utilities and Telecoms, which are interest sensitive.
- You have no one to blame but yourself.
- Taxes on dividends may increase.
- The index itself can have problems (like 2000 when NT was 33% of index).
- Dividends may not increase or be cut.
- You can get a user error by not staying the course.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 13, 2013
Money Show 2013 - Benj Gallander
Benj Gallander is president of Control the Heard. His talk was entitled "Playing with Probability". His web site is called Contra the Heard. Probability is about the chance that something will happen.
He wants stocks that have been around at least 10 years. He wants historical data. Most IPOs are down a year later. People price a stock so that they can get the best price. He likes using technical analysis, fundamental analysis and talking to management.
Benj Gallander said that life can only be understood backwards, but can only be lived forward. Also an example of 1 is not enough to go on. Mark Twain said that there are two times not to speculate. When one can afford to and when one cannot afford to. If you have no discipline, you have no method. You should never make a trade in haste, as you will not do well.
We are all animals and we have the tendency to act in the same way over time. We were the same in 1970 and will be in 100 years. We do not change over time. People tend to invest when things are going well. A contrarian would invest when things are not going well. Do not invest when markets are hot. To do well you have to invest when things are bad.
It is normal today to have a cell phone and the internet. We have a lot more information. Are we better off? The answer is yes.
Benj Gallander says that he always sets a sell target when he is buying and it is usually twice the current price. He is not married to the target, but is pretty much unless fundamentals change. He does technical analysis, but also looks at the defensive side of a stock. That is he looks at debt levels. If investing in mutual funds, the lower the fee the better the results, usually.
With Contra the Heard newsletter, they send out an email when they buy and sell in their portfolio. You can invest on your own, this is not surgery and it is easy. However, you should read a lot of books and magazines, like MoneySaver. The more you practice investing, the better you will get.
He gave a quote of "ignorance gives people a lot of possibilities".
Dollar cost averaging lowers your returns and does not work. The key is to look for bargains in November and December. You do so because of tax loss selling occurring then. Next you have the Santa Claus rally and then the January effect. Some stocks have different times to buy and sell over the year. Use these as probabilities.
In 2008 was the last time the Contra the Heard lost money and their fund was down 36%. You will lose sometime in the market. It is important to look at the debt level of a company. You should look at debt relative to revenue. He likes companies with stable or lowering debt.
Another quote is "fate laughs at probabilities". However probabilities are crucial to this game. You should never buy on margin. This can be a big problem if the market goes against you. You should pay down your debt.
Commodities are currently out of favour. It is hard to find good companies with low debt. The US has financial crisis every 10 years. Capitalization ratios of banks are important. Should we look for another black swan event? Yes, because they always happen.
Some countries are doing better and some are not. Companies are doing way better than countries. GIC are a part of a balanced portfolio. Have money on the sideline. Reduce your risk. Beside debt, use no margin.
You should buy successful companies. There are companies that have been successful in the past and have been around for a long time. This is no guarantee, but it is a good sign.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
He wants stocks that have been around at least 10 years. He wants historical data. Most IPOs are down a year later. People price a stock so that they can get the best price. He likes using technical analysis, fundamental analysis and talking to management.
Benj Gallander said that life can only be understood backwards, but can only be lived forward. Also an example of 1 is not enough to go on. Mark Twain said that there are two times not to speculate. When one can afford to and when one cannot afford to. If you have no discipline, you have no method. You should never make a trade in haste, as you will not do well.
We are all animals and we have the tendency to act in the same way over time. We were the same in 1970 and will be in 100 years. We do not change over time. People tend to invest when things are going well. A contrarian would invest when things are not going well. Do not invest when markets are hot. To do well you have to invest when things are bad.
It is normal today to have a cell phone and the internet. We have a lot more information. Are we better off? The answer is yes.
Benj Gallander says that he always sets a sell target when he is buying and it is usually twice the current price. He is not married to the target, but is pretty much unless fundamentals change. He does technical analysis, but also looks at the defensive side of a stock. That is he looks at debt levels. If investing in mutual funds, the lower the fee the better the results, usually.
With Contra the Heard newsletter, they send out an email when they buy and sell in their portfolio. You can invest on your own, this is not surgery and it is easy. However, you should read a lot of books and magazines, like MoneySaver. The more you practice investing, the better you will get.
He gave a quote of "ignorance gives people a lot of possibilities".
Dollar cost averaging lowers your returns and does not work. The key is to look for bargains in November and December. You do so because of tax loss selling occurring then. Next you have the Santa Claus rally and then the January effect. Some stocks have different times to buy and sell over the year. Use these as probabilities.
In 2008 was the last time the Contra the Heard lost money and their fund was down 36%. You will lose sometime in the market. It is important to look at the debt level of a company. You should look at debt relative to revenue. He likes companies with stable or lowering debt.
Another quote is "fate laughs at probabilities". However probabilities are crucial to this game. You should never buy on margin. This can be a big problem if the market goes against you. You should pay down your debt.
Commodities are currently out of favour. It is hard to find good companies with low debt. The US has financial crisis every 10 years. Capitalization ratios of banks are important. Should we look for another black swan event? Yes, because they always happen.
Some countries are doing better and some are not. Companies are doing way better than countries. GIC are a part of a balanced portfolio. Have money on the sideline. Reduce your risk. Beside debt, use no margin.
You should buy successful companies. There are companies that have been successful in the past and have been around for a long time. This is no guarantee, but it is a good sign.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Money Show 2013 - Norm Rothery
Norm Rothery is the founder of StingyInvestor.com and publisher of The Rothery Report. His talk was entitled "Balance, Dividends and Value".
What is going on with US banks? Citi still has problems and is still owned by the government. J.P. Morgan is being fined. Worldwide banks are having problems (US, EU and elsewhere). What is happening to their customer base? They have all-time record cash with the Fed because having more cash is more effective than lending. They are sitting on cash and are not loaning it out. Banks are currently in strife now as are their customers in strife.
We had this problem before in the 1970's and 1980's. Inflation was in the double digits and banks were not lending. The US government past legislation so non-banks could loan out money. From the 1980's to now these companies formed an interesting part of the market place and are taking advantage of the current situation.
There is better banking by companies like Hercules Technology Growth Capital Inc. (NYSE-HTGC). It is a specialty finance company investing in technology, biotechnology, life science, and clean-technology industries at all stages of development. They not only lend money, but buy into companies. When a firm comes to market, they get their loans repaid and cash in their stock. Companies they invested in where Google and Facebook. They provide counseling to companies and they also advance their clients causes with the government.
Forget about fracking. We have seen benefits of fracking to get oil and gas. There is also environmental damage, whether or not it has been proven. These companies are taking on additional liabilities. What can go wrong? Paying high dividends and threaten by future liabilities these companies can have problems going forward.
There are alternatives to fracking. Fracking goes back to the 1940's, but it has only been popular lately. You should look at Kinder Morgan Energy Partners LP (NYSE-KMP). This stock has a yield of 6.5% and their oil extraction method could get much more oil than from fracking.
It is called EOR (Enhanced Oil Recovery). It is injecting carbon-dioxide or CO² into shale. The CO² lubricates the oil to come out. Problem is that they get lots of water with the oil. At first they could not separate the oil and water. Now they have a process to separate the oil and water and this processing is starting to get deployed.
How do you get CO²? Kinder Morgan is effectively in the pipeline business. They have rights to fields that produce CO² and are shipping it to Texas. Now they are partnering with companies that produce CO², such as refining companies, power generation companies that are creating lots of CO². These companies now must capture CO² and they can sell it to Kinder Morgan. This will be better than fracking.
The train wreck in Lac-Megantic was hell on earth with the crude oil fire. There are not enough pipelines in North America. There are pipelines to take oil from ports inland. Trains are much more expensive than pipelines, but if you can get a higher price for oil it can become viable to use railways. If a train that is carrying oil leaves the track, it will explode.
Enbridge Inc. (TSX-ENB, NYSE-ENB) owns 50% of Seaway pipeline. It got approval to turn pipeline's direction. It also has a right of way to build a pipeline beside the old one.
You can see Williston, North Dakota from satellites because it is so bright. It is illuminated because it is burning off natural gas. It is cheaper to burn it away than transport it away. If Cheniere Energy Partners LP (AM-CQO.A) could export it to the EU or Mexico, they could make money. However, it is illegal in the US to sell gas abroad. The government has now given a company a permit to export natural gas. This company is Teekay Shipping, part of Teekay Corporation (NYSE-TK) and this company can now ship gas.
Mutual Funds are a drain. Mutual Funds charge fees of 0 to 3%. All things being equal go with the lowest fees. Capital gains are taxed. For a $50 gain, the tax would be around 23% or just above $20. This is comparable to 2 to 2.5% mutual fees. Investors should take advantage of RRSPs and TFSAs.
Mutual Fund investors have terrible timing. The 10 year average returns for investing in different mutual funds are show below. The first column shows what the return on the fund was. The second column shows what the investors in these funds actually made. It has been documented many times that investors in mutual funds make less than the funds they invest in.
Why did balanced funds do better? Investors tended to buy high and sell low in the more volatile funds. The timing effect was lower in the balanced fund. What investors should do is keep fees low, keep taxes low and manage timing. This will minimize regret. We are better off with one Balanced Fund. Humans hate loss twice more than they like gains.
If you are opting for a Balanced Fund, here are some
You might be better off for the bond part of your investments to be in a GIC account or for you to buy bonds. For the stock portion of your investing, buy a stock index fund. You might be tempted to do dividend investing to growth your income via dividends. The advantage would be a steady income, a likely return boost, there are potential tax advantages and you can apply withdrawal discipline. You could earn 4% in dividends.
The things to watch for are very high dividends (often a sign of distress), foreign dividend taxes, high fee funds, dividend cuts (as dividends are not guaranteed) and the Canadian dividend advantage. If you look at the TSX from 1977 to 2013, the stocks that outperformed the market are high yield stocks. They outperformed the TSX. Low yield stocks tended to perform lower than the TSX index and no yield stocks were the lowest performers. (Franklin Templeton has a bulletin on the case for dividend paying equities in today's market that illustrate this point.)
In the US market, the high yield dividend stocks performed the best, with the highest yield stocks the 2nd worse performer. The stocks with no yield were the worst performers. Stocks with medium and low yields did fine. The stocks with the lowest yields did 3rd worst.
You can buy dividend Exchange Traded Funds. Examples are iShare TSX Canadian Aristocrats (TSX-CDZ) with fees of .66% and Vanguard FTSE CDN High Dividend Yield (TSX-VDY) with fees of .35%. For US stocks you can get Vanguard High Dividend E.T.F. (NYSEZ-VYM) with a .10% fee and Vanguard Dividend Appr. E.T.F. (NYSE-VIG) with a .10% fee. You can get Canadian version of the American ETFs called Vanguard US Div. Appr. ETF Cad (TSX-VGH) and Vanguard US Div. Apprecia. ETF (TSX-VGG). Both the Canadian versions have fees of .35%. In the past, Vanguard has lowered its fees in the US.
A simple method of dividend stock selection is to use the Dogs of the TSX. Start with the 60 largest TSX stocks in the TSX60 Index. Buy the 10 with the highest yield. By this method you would get individual dividend stocks that have positive average yields, dividend growth, financial growth and earnings growth that will growth dividends.
The negative factors for the Dogs of the TSX are that stocks with extra ordinarily high yields can be derivative products. Stocks with negative momentum, that is stocks that have recently gone down a lot tend to continue to move down. You need to look for value by buying stocks with a margin of safety.
The Advantages of the Dogs of the TSX are that you get potentially high returns, they often are less volatile and it is a simple valuation method. Things to watch for are the fact that Canadian stocks can be hard to follow and you might be forced to sell them.
Stocks with low P/E Ratios tend to outperform the market while stocks with high P/E Ratios tend to underperform the market. Stocks with low P/B Ratios tend to outperform the market and stocks with high P/B Ratios tend to underperform the market. The best stocks, of course, have low P/E Ratios and low P/B Ratios. The best stocks would have low positive P/E Ratio, P/B Ratio, P/S Ratio and P/CF Ratio.
You want to look for companies with financial strength, that have dividends with dividend growth and that have low liquidity or are small neglected stocks. (Liquidity here refers to how liquid the market is for a stock, that is how often it trades and volume of its trades.) Warning signs for companies are negative momentum, value traps and Vampire Squid management (that is too many managers).
For the US market, the P/E rating is rather high so very low return is expected from stocks at the moment. For the US Bond Market, we are at the lowest point in history since 1880. However, interest rates were also quite low in the 1940's and 1950's.
A copy of Norm Rothery's slides are available here. ? You can subscribe to the Rothery Report.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
What is going on with US banks? Citi still has problems and is still owned by the government. J.P. Morgan is being fined. Worldwide banks are having problems (US, EU and elsewhere). What is happening to their customer base? They have all-time record cash with the Fed because having more cash is more effective than lending. They are sitting on cash and are not loaning it out. Banks are currently in strife now as are their customers in strife.
We had this problem before in the 1970's and 1980's. Inflation was in the double digits and banks were not lending. The US government past legislation so non-banks could loan out money. From the 1980's to now these companies formed an interesting part of the market place and are taking advantage of the current situation.
There is better banking by companies like Hercules Technology Growth Capital Inc. (NYSE-HTGC). It is a specialty finance company investing in technology, biotechnology, life science, and clean-technology industries at all stages of development. They not only lend money, but buy into companies. When a firm comes to market, they get their loans repaid and cash in their stock. Companies they invested in where Google and Facebook. They provide counseling to companies and they also advance their clients causes with the government.
Forget about fracking. We have seen benefits of fracking to get oil and gas. There is also environmental damage, whether or not it has been proven. These companies are taking on additional liabilities. What can go wrong? Paying high dividends and threaten by future liabilities these companies can have problems going forward.
There are alternatives to fracking. Fracking goes back to the 1940's, but it has only been popular lately. You should look at Kinder Morgan Energy Partners LP (NYSE-KMP). This stock has a yield of 6.5% and their oil extraction method could get much more oil than from fracking.
It is called EOR (Enhanced Oil Recovery). It is injecting carbon-dioxide or CO² into shale. The CO² lubricates the oil to come out. Problem is that they get lots of water with the oil. At first they could not separate the oil and water. Now they have a process to separate the oil and water and this processing is starting to get deployed.
How do you get CO²? Kinder Morgan is effectively in the pipeline business. They have rights to fields that produce CO² and are shipping it to Texas. Now they are partnering with companies that produce CO², such as refining companies, power generation companies that are creating lots of CO². These companies now must capture CO² and they can sell it to Kinder Morgan. This will be better than fracking.
The train wreck in Lac-Megantic was hell on earth with the crude oil fire. There are not enough pipelines in North America. There are pipelines to take oil from ports inland. Trains are much more expensive than pipelines, but if you can get a higher price for oil it can become viable to use railways. If a train that is carrying oil leaves the track, it will explode.
Enbridge Inc. (TSX-ENB, NYSE-ENB) owns 50% of Seaway pipeline. It got approval to turn pipeline's direction. It also has a right of way to build a pipeline beside the old one.
You can see Williston, North Dakota from satellites because it is so bright. It is illuminated because it is burning off natural gas. It is cheaper to burn it away than transport it away. If Cheniere Energy Partners LP (AM-CQO.A) could export it to the EU or Mexico, they could make money. However, it is illegal in the US to sell gas abroad. The government has now given a company a permit to export natural gas. This company is Teekay Shipping, part of Teekay Corporation (NYSE-TK) and this company can now ship gas.
Mutual Funds are a drain. Mutual Funds charge fees of 0 to 3%. All things being equal go with the lowest fees. Capital gains are taxed. For a $50 gain, the tax would be around 23% or just above $20. This is comparable to 2 to 2.5% mutual fees. Investors should take advantage of RRSPs and TFSAs.
Mutual Fund investors have terrible timing. The 10 year average returns for investing in different mutual funds are show below. The first column shows what the return on the fund was. The second column shows what the investors in these funds actually made. It has been documented many times that investors in mutual funds make less than the funds they invest in.
| Fund | Fund's Return | Investor's Return | Difference |
|---|---|---|---|
| US Equity | 1.59% | 0.22% | -1.37% |
| International Equity | 3.15% | 2.64% | -0.51% |
| All Funds | 3.18% | 1.68% | -1.50% |
| Balanced | 2.74% | 3.36% | 0.62% |
Why did balanced funds do better? Investors tended to buy high and sell low in the more volatile funds. The timing effect was lower in the balanced fund. What investors should do is keep fees low, keep taxes low and manage timing. This will minimize regret. We are better off with one Balanced Fund. Humans hate loss twice more than they like gains.
If you are opting for a Balanced Fund, here are some
| Fund | Fee | Bond/Stock | Management |
|---|---|---|---|
| Mawer CDN Balance | .98% | 40/60 | Active |
| Mawer CDN T.E. Bal. | .99% | 40/60 | Active |
| PH&N Balanced | .90% | 40/60 | Active |
| Steadyhand Founder | .69 - 1.64% | 40/60 | Active |
| TD Balance Index | .89 | 50/50 | Index |
You might be better off for the bond part of your investments to be in a GIC account or for you to buy bonds. For the stock portion of your investing, buy a stock index fund. You might be tempted to do dividend investing to growth your income via dividends. The advantage would be a steady income, a likely return boost, there are potential tax advantages and you can apply withdrawal discipline. You could earn 4% in dividends.
The things to watch for are very high dividends (often a sign of distress), foreign dividend taxes, high fee funds, dividend cuts (as dividends are not guaranteed) and the Canadian dividend advantage. If you look at the TSX from 1977 to 2013, the stocks that outperformed the market are high yield stocks. They outperformed the TSX. Low yield stocks tended to perform lower than the TSX index and no yield stocks were the lowest performers. (Franklin Templeton has a bulletin on the case for dividend paying equities in today's market that illustrate this point.)
In the US market, the high yield dividend stocks performed the best, with the highest yield stocks the 2nd worse performer. The stocks with no yield were the worst performers. Stocks with medium and low yields did fine. The stocks with the lowest yields did 3rd worst.
You can buy dividend Exchange Traded Funds. Examples are iShare TSX Canadian Aristocrats (TSX-CDZ) with fees of .66% and Vanguard FTSE CDN High Dividend Yield (TSX-VDY) with fees of .35%. For US stocks you can get Vanguard High Dividend E.T.F. (NYSEZ-VYM) with a .10% fee and Vanguard Dividend Appr. E.T.F. (NYSE-VIG) with a .10% fee. You can get Canadian version of the American ETFs called Vanguard US Div. Appr. ETF Cad (TSX-VGH) and Vanguard US Div. Apprecia. ETF (TSX-VGG). Both the Canadian versions have fees of .35%. In the past, Vanguard has lowered its fees in the US.
A simple method of dividend stock selection is to use the Dogs of the TSX. Start with the 60 largest TSX stocks in the TSX60 Index. Buy the 10 with the highest yield. By this method you would get individual dividend stocks that have positive average yields, dividend growth, financial growth and earnings growth that will growth dividends.
The negative factors for the Dogs of the TSX are that stocks with extra ordinarily high yields can be derivative products. Stocks with negative momentum, that is stocks that have recently gone down a lot tend to continue to move down. You need to look for value by buying stocks with a margin of safety.
The Advantages of the Dogs of the TSX are that you get potentially high returns, they often are less volatile and it is a simple valuation method. Things to watch for are the fact that Canadian stocks can be hard to follow and you might be forced to sell them.
Stocks with low P/E Ratios tend to outperform the market while stocks with high P/E Ratios tend to underperform the market. Stocks with low P/B Ratios tend to outperform the market and stocks with high P/B Ratios tend to underperform the market. The best stocks, of course, have low P/E Ratios and low P/B Ratios. The best stocks would have low positive P/E Ratio, P/B Ratio, P/S Ratio and P/CF Ratio.
You want to look for companies with financial strength, that have dividends with dividend growth and that have low liquidity or are small neglected stocks. (Liquidity here refers to how liquid the market is for a stock, that is how often it trades and volume of its trades.) Warning signs for companies are negative momentum, value traps and Vampire Squid management (that is too many managers).
For the US market, the P/E rating is rather high so very low return is expected from stocks at the moment. For the US Bond Market, we are at the lowest point in history since 1880. However, interest rates were also quite low in the 1940's and 1950's.
A copy of Norm Rothery's slides are available here. ? You can subscribe to the Rothery Report.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, November 12, 2013
Money Show 2013 - Neil George
Neil George is editor of By George. His talk was entitled "More Income, Less Risk in the Shadow of the Fed's Taper". His web site is called NeilGeorge.com. You can get a sample copy of his Lifetime Income Report if you email Neil George.
How does he work? He works the reporters. He reads newspapers and watches Fox News, CNBC, MSNBC, BBC and CNN and Fox Business. He watches Bloomberg television. He takes notes. Neil George says he always carries a reporter's notebook and as he reads or watches news, he makes notes. He has two columns of notes, one for company specific news and one for non-company specific news. He draws a line between a company and other news to get to good companies. You should know why you own a stock. Look at them from the top down and from the bottom up. Ask what will go wrong.
There are three types of companies, cash cows, long haulers and nibblers. Know your investment before you buy a stock. Do not look at earnings, but at operation profit. You want the more they sell, the more they make type companies. Ask what can go wrong to slow sales? When does this occur? What did the company do? What might happen if the situation reoccurs? Do regulatory changes cost the company? How did it handle it in the past? You want companies that are making more stuff, selling more stuff and earning more money.
Next you should look at a company from the bankers' perspective. Would you lend this company money? Look at their debt. Who are their major creditors? If financed by banks, remember that companies with bank creditors had problems in the last crisis. What could challenge the company on the business and balance sheet sides?
We think about cash, bonds and real estate as groups. Think about what a company can do for you. If it is a good company, you can buy either its stock or its bonds. A company may not pay a high dividend, but it is good if it grows over time.
You should group your investments into 3 groups. The foundation and larges part should be the cash cows. These would be investments that would be able to pay large dividends year after year. They are not growers.
The second type would be the long haulers. These would be few in number and generate growth, they should be proven growers. They would build revenue and earnings and these would complement the cash cows. The will price in their growth. An example is Samsung (OTC: SSNGY) which has low dividends but generates large sales growth year over year. The market recognizes this and values the company higher and higher. It should have low to double digit growth. It is an inflation beating stock.
The third type of stocks would be Nibbles. Nibblers are stocks that you have researched for which you like their story. You are convinced that they are either a cash cow or a long hauler. Do a small initial investment and see how it works out.
While we are young... Warren Buffett is considered to be an astute investor. He started out with Berkshire Hathaway and turned it around and used the cash to buy make more investments. He can no longer buy a small company and turn it around and make any difference to his company now. Others can do this. He has a collection of dull and boring companies. They make money and pay out this in dividends. He has small companies that throw off a lot of cash.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
How does he work? He works the reporters. He reads newspapers and watches Fox News, CNBC, MSNBC, BBC and CNN and Fox Business. He watches Bloomberg television. He takes notes. Neil George says he always carries a reporter's notebook and as he reads or watches news, he makes notes. He has two columns of notes, one for company specific news and one for non-company specific news. He draws a line between a company and other news to get to good companies. You should know why you own a stock. Look at them from the top down and from the bottom up. Ask what will go wrong.
There are three types of companies, cash cows, long haulers and nibblers. Know your investment before you buy a stock. Do not look at earnings, but at operation profit. You want the more they sell, the more they make type companies. Ask what can go wrong to slow sales? When does this occur? What did the company do? What might happen if the situation reoccurs? Do regulatory changes cost the company? How did it handle it in the past? You want companies that are making more stuff, selling more stuff and earning more money.
Next you should look at a company from the bankers' perspective. Would you lend this company money? Look at their debt. Who are their major creditors? If financed by banks, remember that companies with bank creditors had problems in the last crisis. What could challenge the company on the business and balance sheet sides?
We think about cash, bonds and real estate as groups. Think about what a company can do for you. If it is a good company, you can buy either its stock or its bonds. A company may not pay a high dividend, but it is good if it grows over time.
You should group your investments into 3 groups. The foundation and larges part should be the cash cows. These would be investments that would be able to pay large dividends year after year. They are not growers.
The second type would be the long haulers. These would be few in number and generate growth, they should be proven growers. They would build revenue and earnings and these would complement the cash cows. The will price in their growth. An example is Samsung (OTC: SSNGY) which has low dividends but generates large sales growth year over year. The market recognizes this and values the company higher and higher. It should have low to double digit growth. It is an inflation beating stock.
The third type of stocks would be Nibbles. Nibblers are stocks that you have researched for which you like their story. You are convinced that they are either a cash cow or a long hauler. Do a small initial investment and see how it works out.
While we are young... Warren Buffett is considered to be an astute investor. He started out with Berkshire Hathaway and turned it around and used the cash to buy make more investments. He can no longer buy a small company and turn it around and make any difference to his company now. Others can do this. He has a collection of dull and boring companies. They make money and pay out this in dividends. He has small companies that throw off a lot of cash.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 11, 2013
Money Show 2013 - Donald Dony
Donald Dony is the Principal of D. W. Dony and Associates Inc. His web site is Technical Speculator. His talk was entitled "The Business Cycle: Understanding the Bigger Picture and Current Investing Environment". He was part of the Canadian Money Saver Special Event.
His list of topics is
The definition and the phases of the business cycle: Recession is a decline in real GDP growth for at least two quarters. The Low Point is the time when the real GDP stops decline and starts expanding. The Recovery is the period in which the real GDP grows. The Peak is the point at which the real GDP stops increasing and declines. The average business cycle last for four and one half years. The business cycle tends to last for 4 to 6 years.
The 4 Key indicators of the business cycle are:
There is a free site called Trading Economics from which you can get all sorts of economic charts from.
Canadian Unemployment is still rising. The same is happening with disposal income. We had a peak in 2010. US GDP annual growth has the same rhythm and peaked in 2010. It is hard to predict how deep the next low will be. It will probably be in 2014. There tends to be lows every 5 years in Canada. The US has been struggling from 2009.
The unemployment rate and the TSX move in the opposite directors. The more employment we have the higher the TSX. The TSX broke the resistance level of 12,900 and is now around 13,000. There is also a co-relation of US unemployment and the S&P500. The unemployment rate is still going down. There is a co-relation in the lows in unemployment and the peak in the market.
The world economies GDP growth rate and North American GDP growth rate peaked in 2010 and is slowly declining. There is a similarity to the world GDP and World Stock Markets. Switzerland and the US are the only the markets at new highs. Most global markets are going sideways or moving slightly down.
Oil prices pushed the Russian, Canadian and Brazilian markets up in 2008. When the oil price fell, so did the market in these countries. With commodities and the TSX, when the commodities go up the TSX generally goes up, but this is not a perfect match. All commodities are priced in US dollars. When the US dollar goes down, Canadian prices go up. There has been a short term bull back, but there is a gradual rise in the US dollar.
What are the current conditions of the market? The trailing P/E is not so reliable an indicator as prices move faster than earnings. The more reliable P/E uses the 10 year average of earnings. Looking at the S&P500 this way, it is getting expensive. Currently it is 63% higher than where it should be by this measure.
The NYSE debt margins are a current conditions leading indicator. As the market goes up, more people buy on margin. We might be near a peak on this measure. As far as valuations go on the S&P500, we are on the expensive side. We can get our current conditions from the Conference Board and their leading indicator shows that we are slowing drifting lower.
In section rotation, 6 months ago in Q1 and Q2, the best were financials, health care and consumer discretionary. Q3 is a swing towards materials and industrials. The swing is more towards risk and growth and there is an upward swing in the S&P500.
Retail sales are the biggest single factor for US and Canada. The current condition is that retail sales are dropping. They peaked in 2010 and are slowly moving lower. The US and Canadian consumer spending represents the largest component of the economy. Consumer discretionary spending is still moving up and consumer discretionary spending is still outperforming consumer staples. Investors are focusing on consumer discretionary versus consumer staples and this is good for the market. Before 2008, money was moving into consumer staples.
The current condition on bond yield is that they are still on a downward swing. Concerning the QE and the market, when QE2 stopped, the market dropped. Tapering may be in the early part of 2014. The current condition of the US market is that more than 50% of the market is trading above their 200 day average and the stock market is moving up. Eight out of ten stocks in the S&P500 is still moving up and this is a good sign for the market. The stock market is strong and he does not see weakness at least in 2014.
For the TSX, half the stocks are up and half are down. Slightly more are up (55.23%). The TSX is gradually moving higher.
The big picture is an investing end. The Canadian GDP and Industrial Production peaked in 2010. The 20 year pattern of lows in GDP suggests that there may be another low in 2014. The trailing P/E and 10 year P/E on the S&P500 is above average. The current market is 56 months old and the average length of a market is 54 months. Most of the world's stack markets have falling over the last 3 years.
Capital over the last quarter has been a movement into consumer discretionary, industrials and materials and this occurs in the last part of the business cycle. The US dollar is stabilizing and rising long term and this is negative for commodity prices.
In the past QEs were just stopped, they were never unwound. He thinks that they will just stop the QEs. QE cannot go on forever.
Donald Dony's website is called Technical Speculator.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
His list of topics is
- Understanding the Business Cycle
- Four Key Indicators
- Where we are in the cycle
- Stock Market and the Economy
- Importance of the US
- Currency conditions.
The definition and the phases of the business cycle: Recession is a decline in real GDP growth for at least two quarters. The Low Point is the time when the real GDP stops decline and starts expanding. The Recovery is the period in which the real GDP grows. The Peak is the point at which the real GDP stops increasing and declines. The average business cycle last for four and one half years. The business cycle tends to last for 4 to 6 years.
The 4 Key indicators of the business cycle are:
- GDP
- Industrial production (measures about industrial output)
- Non-Farm employment, and
- Disposable personal income.
There is a free site called Trading Economics from which you can get all sorts of economic charts from.
Canadian Unemployment is still rising. The same is happening with disposal income. We had a peak in 2010. US GDP annual growth has the same rhythm and peaked in 2010. It is hard to predict how deep the next low will be. It will probably be in 2014. There tends to be lows every 5 years in Canada. The US has been struggling from 2009.
The unemployment rate and the TSX move in the opposite directors. The more employment we have the higher the TSX. The TSX broke the resistance level of 12,900 and is now around 13,000. There is also a co-relation of US unemployment and the S&P500. The unemployment rate is still going down. There is a co-relation in the lows in unemployment and the peak in the market.
The world economies GDP growth rate and North American GDP growth rate peaked in 2010 and is slowly declining. There is a similarity to the world GDP and World Stock Markets. Switzerland and the US are the only the markets at new highs. Most global markets are going sideways or moving slightly down.
Oil prices pushed the Russian, Canadian and Brazilian markets up in 2008. When the oil price fell, so did the market in these countries. With commodities and the TSX, when the commodities go up the TSX generally goes up, but this is not a perfect match. All commodities are priced in US dollars. When the US dollar goes down, Canadian prices go up. There has been a short term bull back, but there is a gradual rise in the US dollar.
What are the current conditions of the market? The trailing P/E is not so reliable an indicator as prices move faster than earnings. The more reliable P/E uses the 10 year average of earnings. Looking at the S&P500 this way, it is getting expensive. Currently it is 63% higher than where it should be by this measure.
The NYSE debt margins are a current conditions leading indicator. As the market goes up, more people buy on margin. We might be near a peak on this measure. As far as valuations go on the S&P500, we are on the expensive side. We can get our current conditions from the Conference Board and their leading indicator shows that we are slowing drifting lower.
In section rotation, 6 months ago in Q1 and Q2, the best were financials, health care and consumer discretionary. Q3 is a swing towards materials and industrials. The swing is more towards risk and growth and there is an upward swing in the S&P500.
Retail sales are the biggest single factor for US and Canada. The current condition is that retail sales are dropping. They peaked in 2010 and are slowly moving lower. The US and Canadian consumer spending represents the largest component of the economy. Consumer discretionary spending is still moving up and consumer discretionary spending is still outperforming consumer staples. Investors are focusing on consumer discretionary versus consumer staples and this is good for the market. Before 2008, money was moving into consumer staples.
The current condition on bond yield is that they are still on a downward swing. Concerning the QE and the market, when QE2 stopped, the market dropped. Tapering may be in the early part of 2014. The current condition of the US market is that more than 50% of the market is trading above their 200 day average and the stock market is moving up. Eight out of ten stocks in the S&P500 is still moving up and this is a good sign for the market. The stock market is strong and he does not see weakness at least in 2014.
For the TSX, half the stocks are up and half are down. Slightly more are up (55.23%). The TSX is gradually moving higher.
The big picture is an investing end. The Canadian GDP and Industrial Production peaked in 2010. The 20 year pattern of lows in GDP suggests that there may be another low in 2014. The trailing P/E and 10 year P/E on the S&P500 is above average. The current market is 56 months old and the average length of a market is 54 months. Most of the world's stack markets have falling over the last 3 years.
Capital over the last quarter has been a movement into consumer discretionary, industrials and materials and this occurs in the last part of the business cycle. The US dollar is stabilizing and rising long term and this is negative for commodity prices.
In the past QEs were just stopped, they were never unwound. He thinks that they will just stop the QEs. QE cannot go on forever.
Donald Dony's website is called Technical Speculator.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, November 8, 2013
Money Show 2013 - Jim Jubak
Jim Jubak is editor and founder of JubakPicks.com. His talk was entitled "Growing Demand? Limited Supply? Big Payoffs for anything that Improves Production? Not Subject to Deflation?" Or, "Are food stocks the perfect sector". To get his newsletter, email Jim.
There is a conundrum about this market. He does not believe in gloom and doom. No one has any knowledge of where the market is going. He thinks that in the short term, the market is going up. Cash is moving in and out of the market.
For the global market, we have growing population and growing wealth. Because of the growing wealth people are doing things like switching from rice to prepackaged noodles. The problem with commodities is that they have big down turns. In China, if you have the right connection you can get money without having to prove you can make money. You just need a job.
China goes from over capacity to under capacity to over capacity. This is why we have problems with commodities. An example is potash. The market is clasping and price is down 30% and still falling. This is why food commodities have the same arc as other commodities. Copper is down 30% from 2011 peak. It looks like we have a surplus of 8000,000 metric tons. Demand is still falling. Copper goes from $7,200 a metric to$ 6,200 in 12 months.
Life style changes due to rising income increases food demand. Meat and dairy consumption grows with income. China is expected to become the world leader in consumption of pork, passing the EU by 2022. China's import of oil seeds is expected to climb 40% in 10 years.
Why are food commodities different from other commodities? It is more difficult to add new capacity. Consumption of food is less elastic. China is not a major source of new capacity. Climate is a wild card.
We should rethink the list of "food socks". First fertilizer is not a food but a commodity. While increasing food capacity is difficult, the payoffs are high enough to finance continued efforts in water purifications, desalination and seed breeding. Infrastructure in developing economies is a food issue. In India, 40% of its production spoils before it hits the market. Think about who collects higher prices, who can pass along higher prices and who has limited pricing power.
McDonald's is not a food company as it has a hard time in passing along increases in food costs. His number one Food stocks are ones like Groupe Danone (OTC: DANOY) and Nestle SA (OTC: NSRGY) He likes Nestle for its bottled water. His second group of food stocks is Industrias Bachoco SAB de CV (NYSE-IBA) and BRF SA (NYSE-BRFS). This last stock is the 10 largest in the world and is from Brazil. Others are Gruma SAB de CV (NYSE-GMK), Deere & Co (NYSE-DE), Yara International ASA (OTC-YRAIF) and Fonterra Shareholders' Fund (AX-FSF). The last company is in Sydney Australia.
China cannot produce dairy products as it does not have the land.
Next are water stocks as food stocks. Stocks are Manila Water Co Inc. (OTC: MWTCY), Guangdong Investment Ltd. (OTC-GGDVY), Companhia de Saneamento Basico do Estado de Sao Paulo - SABESP (NYSE-SBS), Xylem Inc. (NYSE-XYL), General Electric Co. (NYSE-GE) and Keppel Corporation Ltd (OTC-KPZELY). Guangdong Investment Ltd supplies water to Hong Kong. GE is included because it has water infrastructure.
Next are seed stocks as food stocks. These are good stocks for the short term, but he does not know about the long term. Stocks are Monsanto Co. (NYSE-MON), DuPont (NYSE-DD) and Syngenta AG (NYSE-SYT). There is a long term question of how viable this whole GMO/herbicide approach is. This approach kills everything, including bacteria and then you get hardening of the soil.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
There is a conundrum about this market. He does not believe in gloom and doom. No one has any knowledge of where the market is going. He thinks that in the short term, the market is going up. Cash is moving in and out of the market.
For the global market, we have growing population and growing wealth. Because of the growing wealth people are doing things like switching from rice to prepackaged noodles. The problem with commodities is that they have big down turns. In China, if you have the right connection you can get money without having to prove you can make money. You just need a job.
China goes from over capacity to under capacity to over capacity. This is why we have problems with commodities. An example is potash. The market is clasping and price is down 30% and still falling. This is why food commodities have the same arc as other commodities. Copper is down 30% from 2011 peak. It looks like we have a surplus of 8000,000 metric tons. Demand is still falling. Copper goes from $7,200 a metric to$ 6,200 in 12 months.
Life style changes due to rising income increases food demand. Meat and dairy consumption grows with income. China is expected to become the world leader in consumption of pork, passing the EU by 2022. China's import of oil seeds is expected to climb 40% in 10 years.
Why are food commodities different from other commodities? It is more difficult to add new capacity. Consumption of food is less elastic. China is not a major source of new capacity. Climate is a wild card.
We should rethink the list of "food socks". First fertilizer is not a food but a commodity. While increasing food capacity is difficult, the payoffs are high enough to finance continued efforts in water purifications, desalination and seed breeding. Infrastructure in developing economies is a food issue. In India, 40% of its production spoils before it hits the market. Think about who collects higher prices, who can pass along higher prices and who has limited pricing power.
McDonald's is not a food company as it has a hard time in passing along increases in food costs. His number one Food stocks are ones like Groupe Danone (OTC: DANOY) and Nestle SA (OTC: NSRGY) He likes Nestle for its bottled water. His second group of food stocks is Industrias Bachoco SAB de CV (NYSE-IBA) and BRF SA (NYSE-BRFS). This last stock is the 10 largest in the world and is from Brazil. Others are Gruma SAB de CV (NYSE-GMK), Deere & Co (NYSE-DE), Yara International ASA (OTC-YRAIF) and Fonterra Shareholders' Fund (AX-FSF). The last company is in Sydney Australia.
China cannot produce dairy products as it does not have the land.
Next are water stocks as food stocks. Stocks are Manila Water Co Inc. (OTC: MWTCY), Guangdong Investment Ltd. (OTC-GGDVY), Companhia de Saneamento Basico do Estado de Sao Paulo - SABESP (NYSE-SBS), Xylem Inc. (NYSE-XYL), General Electric Co. (NYSE-GE) and Keppel Corporation Ltd (OTC-KPZELY). Guangdong Investment Ltd supplies water to Hong Kong. GE is included because it has water infrastructure.
Next are seed stocks as food stocks. These are good stocks for the short term, but he does not know about the long term. Stocks are Monsanto Co. (NYSE-MON), DuPont (NYSE-DD) and Syngenta AG (NYSE-SYT). There is a long term question of how viable this whole GMO/herbicide approach is. This approach kills everything, including bacteria and then you get hardening of the soil.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Thursday, November 7, 2013
Money Show 2013 - Genevieve Roch-Decker
Genevieve Roch-Decker is Portfolio Manager of LDIC Inc. Her talked is entitled "Making Money in Energy Infrastructure: Low Volatility but High Octane".
Energy producers are stocks like Suncor Energy (TSX-SU0 and Pengrowth Energy (TSX-PGF). Energy infrastructure includes pipelines, mid-stream and service companies like AltaGas Ltd. (TSX-ALA). The question is in risks and returns. She has owned Inter Pipeline (TSX-IPL) for 10 years and looks at this stock versus a stock like Pengrowth Energy (TSX-PGF). She feels that slow and steady wins the race. The turtle is IPL and the hare is Pengrowth.
She says that it is very difficult for energy producers to create shareholder value. They are fighting for production and they are a slave to a treadmill, to commodity prices and to debenture financing. Total return in Pengrowth over the last 10 years is a capital loss of 4% and for IPL is a gain of 565%.
The gain this year for energy producers is 4% with a yield of 3.2%. The return for Energy Infrastructure is 13.3% with a yield of 3.5%. The TSX composite return is 6.2% with a yield of 3%.
She feels that her company will do twice as better when they put their clients' money into energy infrastructure. Why is this? First is the take or pay contracts. Next is the visibility on earnings and dividend growth. Third is the low cost of capital and four is the high barrier to entry. Producers must guarantee money to a pipeline builder (in the form of contracts). Infrastructure producers create shareholder value.
There is a problem with price differentials with North American gas and oil. The North American price for gas is $2 - $3 MMCT and for oil is $95 BBL. The World price for gas is $15 MMCT and $110 BBL for oil. The problem is lack of infrastructure which is causing this. There also has been a huge surge in production and we are at a 15 year high. There is congestion in pipelines. Infrastructure is happing and will be over the next 5 years.
Her company is excited about energy infrastructure and they have 30% to 80% in infrastructure. One producer they like is Crescent Point Energy (TSX-CPG). Most other producers are a slave to infrastructure companies. Other companies that they like are AltaGas Ltd. (TSX-ALA), Pembina Pipeline Corp. (TSX-PPL), Inter Pipeline (TSX-IPL) and Keyera Corp. (TSX-KEY). She also likes producers of Suncor (TSX-SU), Pengrowth Energy (TSX-PGF), Canadian Natural Resources (TSX-CNQ) and EnCana Corp. (TSX-ECA).
AltaGas has LNG and uses railways. It also has pipelines through B. C. IPL has projects just in one province. They do not own Enbridge or TransCanada as they feel that they are too expensive. Enbridge is having problems with growth (Keystone).
They own Keyera Corp. (TSX-KEY), AltaGas Ltd. (TSX-ALA), Inter Pipeline (TSX-IPL) and Keyera Corp. (TSX-KEY). All had good third quarters this year and propane prices are strengthening.
Crescent Point Energy (TSX-CPG) dividend is sustainable. Some people say that they are borrowing and issuing stock to pay the dividend. She feels that they have the cash flow to pay the dividends. Whitecap Resources (TSX-WCP) has cut their dividend. This company does not have a good dividend model.
Infrastructure companies have had a great run-up. New expenditures over the next five years will generate great growth. They are invested Canexus Corporation (TSX-CUS). However, problem with this company is that the company did not properly explain what they were doing. They expect better cash flow next year. The chemical business in currently in a trough but will come out of it by mid-year in 2015.
They are invested in EnCana, but have reduced their exposure to this sector. They also have Paramount Resources (TSX-TOU). They are also invested in some cross border income trusts such as Eagle Rock Energy Partners LP (NASDAQ-EROC) and Parallel Energy Trust (TSX-PTL.UN). Argent Energy Trust (TSX- AET.UN) they held for the last year and got 11 to 12% dividend. They thought it was a non-positive investment and sold it.
There is the Douglas Channel LNG project. Small bands have signed with AltaGas. She thinks that B. C. will have a working plan for this project by the first of the year and make laws in the first to third quarter of next year. It will take a couple to 4 years to build the pipeline. These things always take longer than you think. Small producers in B. C. will be bought out so do not buy small producers.
The have Enterprise Group (TSX-E) and it is on the service side in a small cap fund. They have only a small position currently. They also have ShawCor Ltd. (TSX-SCL). It is also on the service side. They had a good year in 2013 and not so good for 2014. There has been a year over year decline in earnings. Stock price may go down.
Oil prices went from $70 to $30 to $110 and now are at $95 over the past 10 years. Do not buy commodities as no one knows where they will go. They are not only buying LNG companies but those involved with construction and engineering. Buying construction and engineering companies means you will make money. In the past LNG terminals were built to bring in gas because we were short of gas but these terminals were not used. (I think the point is that the construction and engineering companies got paid even though the terminals they built were not used.)
Husky Energy (TSX-HSE) is a producer and they are not into it. They like engineering companies like Stantec Inc. (TSX-STN) which are into construction and engineering. They also like Chicago Bridge & Iron Co. (NYSE-CBI) which is into constructions and engineering in US and Canada. There are equipment and labor problems in building the pipelines and for producers.
Lower interest rates will help build infrastructure. Companies are refinancing long term debt today at lower rates than they had before. There is some concern about the debt, but it is long term debt.
There is a current transition from coal into gas. In the US trucks are moving to use gas as fuel. This has started in Calgary also.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Energy producers are stocks like Suncor Energy (TSX-SU0 and Pengrowth Energy (TSX-PGF). Energy infrastructure includes pipelines, mid-stream and service companies like AltaGas Ltd. (TSX-ALA). The question is in risks and returns. She has owned Inter Pipeline (TSX-IPL) for 10 years and looks at this stock versus a stock like Pengrowth Energy (TSX-PGF). She feels that slow and steady wins the race. The turtle is IPL and the hare is Pengrowth.
She says that it is very difficult for energy producers to create shareholder value. They are fighting for production and they are a slave to a treadmill, to commodity prices and to debenture financing. Total return in Pengrowth over the last 10 years is a capital loss of 4% and for IPL is a gain of 565%.
The gain this year for energy producers is 4% with a yield of 3.2%. The return for Energy Infrastructure is 13.3% with a yield of 3.5%. The TSX composite return is 6.2% with a yield of 3%.
She feels that her company will do twice as better when they put their clients' money into energy infrastructure. Why is this? First is the take or pay contracts. Next is the visibility on earnings and dividend growth. Third is the low cost of capital and four is the high barrier to entry. Producers must guarantee money to a pipeline builder (in the form of contracts). Infrastructure producers create shareholder value.
There is a problem with price differentials with North American gas and oil. The North American price for gas is $2 - $3 MMCT and for oil is $95 BBL. The World price for gas is $15 MMCT and $110 BBL for oil. The problem is lack of infrastructure which is causing this. There also has been a huge surge in production and we are at a 15 year high. There is congestion in pipelines. Infrastructure is happing and will be over the next 5 years.
Her company is excited about energy infrastructure and they have 30% to 80% in infrastructure. One producer they like is Crescent Point Energy (TSX-CPG). Most other producers are a slave to infrastructure companies. Other companies that they like are AltaGas Ltd. (TSX-ALA), Pembina Pipeline Corp. (TSX-PPL), Inter Pipeline (TSX-IPL) and Keyera Corp. (TSX-KEY). She also likes producers of Suncor (TSX-SU), Pengrowth Energy (TSX-PGF), Canadian Natural Resources (TSX-CNQ) and EnCana Corp. (TSX-ECA).
AltaGas has LNG and uses railways. It also has pipelines through B. C. IPL has projects just in one province. They do not own Enbridge or TransCanada as they feel that they are too expensive. Enbridge is having problems with growth (Keystone).
They own Keyera Corp. (TSX-KEY), AltaGas Ltd. (TSX-ALA), Inter Pipeline (TSX-IPL) and Keyera Corp. (TSX-KEY). All had good third quarters this year and propane prices are strengthening.
Crescent Point Energy (TSX-CPG) dividend is sustainable. Some people say that they are borrowing and issuing stock to pay the dividend. She feels that they have the cash flow to pay the dividends. Whitecap Resources (TSX-WCP) has cut their dividend. This company does not have a good dividend model.
Infrastructure companies have had a great run-up. New expenditures over the next five years will generate great growth. They are invested Canexus Corporation (TSX-CUS). However, problem with this company is that the company did not properly explain what they were doing. They expect better cash flow next year. The chemical business in currently in a trough but will come out of it by mid-year in 2015.
They are invested in EnCana, but have reduced their exposure to this sector. They also have Paramount Resources (TSX-TOU). They are also invested in some cross border income trusts such as Eagle Rock Energy Partners LP (NASDAQ-EROC) and Parallel Energy Trust (TSX-PTL.UN). Argent Energy Trust (TSX- AET.UN) they held for the last year and got 11 to 12% dividend. They thought it was a non-positive investment and sold it.
There is the Douglas Channel LNG project. Small bands have signed with AltaGas. She thinks that B. C. will have a working plan for this project by the first of the year and make laws in the first to third quarter of next year. It will take a couple to 4 years to build the pipeline. These things always take longer than you think. Small producers in B. C. will be bought out so do not buy small producers.
The have Enterprise Group (TSX-E) and it is on the service side in a small cap fund. They have only a small position currently. They also have ShawCor Ltd. (TSX-SCL). It is also on the service side. They had a good year in 2013 and not so good for 2014. There has been a year over year decline in earnings. Stock price may go down.
Oil prices went from $70 to $30 to $110 and now are at $95 over the past 10 years. Do not buy commodities as no one knows where they will go. They are not only buying LNG companies but those involved with construction and engineering. Buying construction and engineering companies means you will make money. In the past LNG terminals were built to bring in gas because we were short of gas but these terminals were not used. (I think the point is that the construction and engineering companies got paid even though the terminals they built were not used.)
Husky Energy (TSX-HSE) is a producer and they are not into it. They like engineering companies like Stantec Inc. (TSX-STN) which are into construction and engineering. They also like Chicago Bridge & Iron Co. (NYSE-CBI) which is into constructions and engineering in US and Canada. There are equipment and labor problems in building the pipelines and for producers.
Lower interest rates will help build infrastructure. Companies are refinancing long term debt today at lower rates than they had before. There is some concern about the debt, but it is long term debt.
There is a current transition from coal into gas. In the US trucks are moving to use gas as fuel. This has started in Calgary also.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 6, 2013
Money Show 2013 - Roger Conrad 2
Roger Conrad is Founder and Chief Editor of Capitalist Times. His web site is here. His talk was entitled "Former Income Trusts: Still Your Best Buys for Reliable Growth and High Yield".
Yellow Media (TSX-Y) is taking longer to turn around that he thought it would.
Dividend socks are not bonds and we should not get out of them when interest rates rise. Utilities are an essential service, that is energy (electric) and water. We are four and half years into a bull market. The central bank will taper and interest rates will spike. The conventional wisdom is that this will cause dividends stocks to crash. For corrections, the following table shows the co-relation of indexes and 10 year treasury bonds.
Rate sensitive stocks follow the stock market not interest rates. The Income Trusts that converted to corporations in 2011 just hit a new all-time high beating the TSX and beating the S&P500. Monthly payouts are effective cash management.
The Halloween massacre of 2008 weeded out the weak companies. These companies are debt and risk adverse. They have strong businesses and returned to dividend growth following conversions. Of course, not all old income trust companies were winners. There was no rising tide to raise all boats post 2008 crash.
There is sector weakness in unregulated electricity, energy, drilling, restaurant products and logistics. Debt is increasingly toxic. Many ex-income trusts reassessed their big dividend payouts. For example, Atlantic Power (TSX-ATP) just cut their dividends. Some companies have been in a race to the bottom.
The dividend markers have characteristics of dividend growth, consistent dividend payout ratio (DPR), have moderate debt with light refinancing needs, have a business model build for dividends, healthy growth with solid management and are diversified and balanced. Companies have cut dividends due to debt. Companies that had not paid dividends before being coming income trusts because of fluctuating earnings, do not have a business model for dividends
Bird Construction (TSX-BDT) is a major engineering company. Most construction has been volatile, but they are in big projects and have solid earnings. This have 5.8% yield that grows at 5.5% per year. The debt is low. The DPR is 92.6%. They have seasonal and steady returns. It is a nice company with a nice dividend.
Davis and Henderson (TSX-DH) is a financial tech and related services firm for banks in US and Canada. The yield is 4.8% growing at 3.2% per year. The risk for this company is potential weakness in banks. The valuations are rising. The DPR is 55.4%. Earnings and debt are not an issue and they are making acquisitions.
Dundee REIT (TSX-D.UN) is an office REIT. Its yield is 7.7% and the 12 month growth rate is 2%. The DPR is 77.7% of FFO. Occupancy rates are 94.9%. The company rents at 11% below the market. The risks are the over building in Canadian cities which is a re-leasing risk and growth by acquisitions might be scarce. There is not a lot of risk and it is priced in. This company does not have much co-relation with interest rates.
EnerCare Inc. (TSX-ECI) rents waterheaters to homeowners and operates sub-metering contracts. The yield is 7.1% and 12 month growth in dividends is 3.6%. The DPR is 73%. The risks are changeable regulations and flooding damaged. It is targeted by another firm and there is an ongoing proxy battle that is pushing up the stock price.
Newalta Corp (TSX-NAL) is cleaning up for resources. The yield is 2.8% and the 12 month dividend increase is 11%. The DPR is 22%. The company provides a range of recycling/clean up services for heavy industry and energy. Its credit rating is BA3-Moody (stable) and DD-DBRS (stable). It got hit in 2008 and converted to a corporation and cut its dividend. It has continued to grow the underlying business and it has recovered. It is on a sustainable path, unlike 5 to 6 years ago. It is more diversified.
Northern Property REIT (TSX-NPR.UN) owns and operates apartment properties in remote resource producing regions of Canada. Its yield is 5.5% and the 12 month stock growth is 3.3%. The DPR is 69.3% of FFO. They are into places such as Yellowknife. Their occupancy rate is 93.5%. The weakest province is B. C. with a 15.3% vacancy rate. This stock has been expensive in the past but not now. It had to sell senior housing as an income trust. The risk is Canadian Tax changes for REITs and vacancies in key markets.
Shaw Communications (TSX-SJR.B) operates broadband, cable, internet and satellites. The yield is 4% paid monthly. The 12 month growth in dividends is 5.2%. The credit rating is BBB-DBRS (stable) and BAA3-Moodys (Stable) and BBB-S&P (stable). The risks are erosion of market share to competition, change in favorable regulations and valuation concerns. It could be a takeover target.
Student Transportation (TSX-STB) owns and operates school bus systems, some are under contract. The yield is 8.3% and the 12 month dividend growth is 0%. The DPR is 79%. Potential revenue growth is 11%. The risks are fuel costs and poor performance leading to loss of contracts. This stock has attracted short sellers, but they have no done well. It is growing with acquisitions.
There are several things to avoid with these sorts of stocks. The first thing to avoid is stocks with 10% plus yield unless you are willing to bet they'll overcome their challenges. Beware of downward shift in guidance and pay attention to conference calls. Weak producers will be vulnerable to widening oil and gas price differentials. (Our oil and gas prices are low.) Watch debt and DPRs for danger signs.
Roger Conrad has a several newsletters. The first is Utility Investor. Another is Capitalist Times. The last one is Energy and Income Advisor. Go to the web sites or call Sherry at 1-888-860-2759 to subscribe.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Yellow Media (TSX-Y) is taking longer to turn around that he thought it would.
Dividend socks are not bonds and we should not get out of them when interest rates rise. Utilities are an essential service, that is energy (electric) and water. We are four and half years into a bull market. The central bank will taper and interest rates will spike. The conventional wisdom is that this will cause dividends stocks to crash. For corrections, the following table shows the co-relation of indexes and 10 year treasury bonds.
| Index | S&P 500 | 10 year Treasury |
|---|---|---|
| Dow | 0.365 | 0.001 |
| S&P500 | 1.000 | 0.261 |
| TSX Energy | 0.661 | 0.219 |
| TSX Oils | 0.831 | 0.222 |
| Telecom | 0.398 | 0.035 |
Rate sensitive stocks follow the stock market not interest rates. The Income Trusts that converted to corporations in 2011 just hit a new all-time high beating the TSX and beating the S&P500. Monthly payouts are effective cash management.
The Halloween massacre of 2008 weeded out the weak companies. These companies are debt and risk adverse. They have strong businesses and returned to dividend growth following conversions. Of course, not all old income trust companies were winners. There was no rising tide to raise all boats post 2008 crash.
There is sector weakness in unregulated electricity, energy, drilling, restaurant products and logistics. Debt is increasingly toxic. Many ex-income trusts reassessed their big dividend payouts. For example, Atlantic Power (TSX-ATP) just cut their dividends. Some companies have been in a race to the bottom.
The dividend markers have characteristics of dividend growth, consistent dividend payout ratio (DPR), have moderate debt with light refinancing needs, have a business model build for dividends, healthy growth with solid management and are diversified and balanced. Companies have cut dividends due to debt. Companies that had not paid dividends before being coming income trusts because of fluctuating earnings, do not have a business model for dividends
Bird Construction (TSX-BDT) is a major engineering company. Most construction has been volatile, but they are in big projects and have solid earnings. This have 5.8% yield that grows at 5.5% per year. The debt is low. The DPR is 92.6%. They have seasonal and steady returns. It is a nice company with a nice dividend.
Davis and Henderson (TSX-DH) is a financial tech and related services firm for banks in US and Canada. The yield is 4.8% growing at 3.2% per year. The risk for this company is potential weakness in banks. The valuations are rising. The DPR is 55.4%. Earnings and debt are not an issue and they are making acquisitions.
Dundee REIT (TSX-D.UN) is an office REIT. Its yield is 7.7% and the 12 month growth rate is 2%. The DPR is 77.7% of FFO. Occupancy rates are 94.9%. The company rents at 11% below the market. The risks are the over building in Canadian cities which is a re-leasing risk and growth by acquisitions might be scarce. There is not a lot of risk and it is priced in. This company does not have much co-relation with interest rates.
EnerCare Inc. (TSX-ECI) rents waterheaters to homeowners and operates sub-metering contracts. The yield is 7.1% and 12 month growth in dividends is 3.6%. The DPR is 73%. The risks are changeable regulations and flooding damaged. It is targeted by another firm and there is an ongoing proxy battle that is pushing up the stock price.
Newalta Corp (TSX-NAL) is cleaning up for resources. The yield is 2.8% and the 12 month dividend increase is 11%. The DPR is 22%. The company provides a range of recycling/clean up services for heavy industry and energy. Its credit rating is BA3-Moody (stable) and DD-DBRS (stable). It got hit in 2008 and converted to a corporation and cut its dividend. It has continued to grow the underlying business and it has recovered. It is on a sustainable path, unlike 5 to 6 years ago. It is more diversified.
Northern Property REIT (TSX-NPR.UN) owns and operates apartment properties in remote resource producing regions of Canada. Its yield is 5.5% and the 12 month stock growth is 3.3%. The DPR is 69.3% of FFO. They are into places such as Yellowknife. Their occupancy rate is 93.5%. The weakest province is B. C. with a 15.3% vacancy rate. This stock has been expensive in the past but not now. It had to sell senior housing as an income trust. The risk is Canadian Tax changes for REITs and vacancies in key markets.
Shaw Communications (TSX-SJR.B) operates broadband, cable, internet and satellites. The yield is 4% paid monthly. The 12 month growth in dividends is 5.2%. The credit rating is BBB-DBRS (stable) and BAA3-Moodys (Stable) and BBB-S&P (stable). The risks are erosion of market share to competition, change in favorable regulations and valuation concerns. It could be a takeover target.
Student Transportation (TSX-STB) owns and operates school bus systems, some are under contract. The yield is 8.3% and the 12 month dividend growth is 0%. The DPR is 79%. Potential revenue growth is 11%. The risks are fuel costs and poor performance leading to loss of contracts. This stock has attracted short sellers, but they have no done well. It is growing with acquisitions.
There are several things to avoid with these sorts of stocks. The first thing to avoid is stocks with 10% plus yield unless you are willing to bet they'll overcome their challenges. Beware of downward shift in guidance and pay attention to conference calls. Weak producers will be vulnerable to widening oil and gas price differentials. (Our oil and gas prices are low.) Watch debt and DPRs for danger signs.
Roger Conrad has a several newsletters. The first is Utility Investor. Another is Capitalist Times. The last one is Energy and Income Advisor. Go to the web sites or call Sherry at 1-888-860-2759 to subscribe.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Money Show 2013 - Danielle Park
Danielle Park is President and Portfolio Manager at Venable Park Investment Counsel Inc. Her talk was entitled "Cyclical Opportunities within an Era of De-Leveraging: How to Protect and Grow you Capital Over the Full Market Cycles". Her web sites are Venerable Park and Juggling Dynamite. She also has a blog on the Juggling Dynamite site.
I found that Danielle Park had a very different and very negative view of what was occurring in the US compared to other speakers. I do agree with her that we are still in a secular bear market. However, I have never gone liquid at any time.
The risk in the capital market is higher than at any other time in History. QE has made the dumb and the reckless look smart again. Every blow up in the market has ended badly. The tech run up was to go on forever. People believed that QE would cause the market to go up and it does go up on these rules. Suspending market to market accounting and superstition in QE were big factors in the driving the market.
The logic behind QE will make people feel good and invest and therefore create jobs. The money multiplier has not been lower. Growth is worse than hope for. There is little room for stimulus and no political consequences make for no easy out of QE. We have the lowest growth since 1930's in the US. We have more debt than in the 1930s and much less budget buffer for the economy.
We need infrastructure, but there is no money because of debt. People are more indebted and have low savings and have little to spend so there is weak demand. People are cutting expenses to grow profit. This has caused profit to be higher than ever. Eventually we will need corporate sales to generate profits.
Corporate borrowing is cheap and companies are buying back their own shares to elevate EPS on weak sales. There is no lasting benefit to this. We now have lots of debt. People are taking cash now and leaving nothing for the future. In the next downturn, companies will lack a buffer to survive. There will be less demand. Companies buying back shares give non-productive growth. Price per sales is low.
Stock buyers have been paying more and more for shares, relatively. Earnings growth is negative in quarters 2 and 3. There is disappointing earnings and revenue. The forecasts called for high sales and earnings, but it was no so. Normally, GSP is connected with revenue growth, year over year. In quarter 2, growth was 2.9%. The lowest ever recorded outside of a recession.
Because of low business investment nominal GDP growth is going lower. Real final sales growth is now at recessionary levels of 1.6%. Sales growth that is lower than 2% is at recessionary growth levels. US retail sales have been falling since 2010. People do not have the income level or jobs to fund sales. The people are still heavily in debt.
It is not just the US that is facing slower growth. World GDP growth has been falling since 2010. And it is now below 2%. In the prior growth period it was 5%. US stocks are in a world of their own since QE forever was promised in 2011. The most expensive markets are in the US and India.
North American bonds sold off after each QE and then caused a deflationary rally to lower yields every time. Tapering talk cause the bond market to sell off. Commercial rates tightened. (That is interest rates went up.) There was a spike in rates re tapering talk.
Sales are low and revenue is declining worldwide. US household income is the lowest in 60 years. Aggressive Fed liquidity fuels the third stock bubble in 13 years. It is Ben Bernanke bubble now. S&P500 market debt today, in 2000 and in 2007 was high. We are still in a secular bear market. Commodities prices bought the inflation promise in QE1 and QE2, but not for QE3. Commodities prices are deflationary because of demand since 2008. The only cure is the cycle to have a bottom.
Because commodities are price in US dollars, this is a major headwind for commodities prices. Canada has disappointed high hopes. The economic data continues to disappoint. Canada is ill prepared for a slowdown. The Federal Government has downloaded debt to the provinces.
The financials and REITs are the last legs holding up the TSX. They are derivative sectors of the energy and material sectors in Canada. Energy and materials sectors reflect global demand. The TSX is drive by venture and is down.
Once people realize that QE is a fraud, the market will go down. Even in more normal conditions the next global recession will come. Maintaining liquidity is the key.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I found that Danielle Park had a very different and very negative view of what was occurring in the US compared to other speakers. I do agree with her that we are still in a secular bear market. However, I have never gone liquid at any time.
The risk in the capital market is higher than at any other time in History. QE has made the dumb and the reckless look smart again. Every blow up in the market has ended badly. The tech run up was to go on forever. People believed that QE would cause the market to go up and it does go up on these rules. Suspending market to market accounting and superstition in QE were big factors in the driving the market.
The logic behind QE will make people feel good and invest and therefore create jobs. The money multiplier has not been lower. Growth is worse than hope for. There is little room for stimulus and no political consequences make for no easy out of QE. We have the lowest growth since 1930's in the US. We have more debt than in the 1930s and much less budget buffer for the economy.
We need infrastructure, but there is no money because of debt. People are more indebted and have low savings and have little to spend so there is weak demand. People are cutting expenses to grow profit. This has caused profit to be higher than ever. Eventually we will need corporate sales to generate profits.
Corporate borrowing is cheap and companies are buying back their own shares to elevate EPS on weak sales. There is no lasting benefit to this. We now have lots of debt. People are taking cash now and leaving nothing for the future. In the next downturn, companies will lack a buffer to survive. There will be less demand. Companies buying back shares give non-productive growth. Price per sales is low.
Stock buyers have been paying more and more for shares, relatively. Earnings growth is negative in quarters 2 and 3. There is disappointing earnings and revenue. The forecasts called for high sales and earnings, but it was no so. Normally, GSP is connected with revenue growth, year over year. In quarter 2, growth was 2.9%. The lowest ever recorded outside of a recession.
Because of low business investment nominal GDP growth is going lower. Real final sales growth is now at recessionary levels of 1.6%. Sales growth that is lower than 2% is at recessionary growth levels. US retail sales have been falling since 2010. People do not have the income level or jobs to fund sales. The people are still heavily in debt.
It is not just the US that is facing slower growth. World GDP growth has been falling since 2010. And it is now below 2%. In the prior growth period it was 5%. US stocks are in a world of their own since QE forever was promised in 2011. The most expensive markets are in the US and India.
North American bonds sold off after each QE and then caused a deflationary rally to lower yields every time. Tapering talk cause the bond market to sell off. Commercial rates tightened. (That is interest rates went up.) There was a spike in rates re tapering talk.
Sales are low and revenue is declining worldwide. US household income is the lowest in 60 years. Aggressive Fed liquidity fuels the third stock bubble in 13 years. It is Ben Bernanke bubble now. S&P500 market debt today, in 2000 and in 2007 was high. We are still in a secular bear market. Commodities prices bought the inflation promise in QE1 and QE2, but not for QE3. Commodities prices are deflationary because of demand since 2008. The only cure is the cycle to have a bottom.
Because commodities are price in US dollars, this is a major headwind for commodities prices. Canada has disappointed high hopes. The economic data continues to disappoint. Canada is ill prepared for a slowdown. The Federal Government has downloaded debt to the provinces.
The financials and REITs are the last legs holding up the TSX. They are derivative sectors of the energy and material sectors in Canada. Energy and materials sectors reflect global demand. The TSX is drive by venture and is down.
Once people realize that QE is a fraud, the market will go down. Even in more normal conditions the next global recession will come. Maintaining liquidity is the key.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Money Show 2013 - Michael Smedley
Michael Smedley is director and chief portfolio officer for Canadian General Investments Limited. His talk was entitled "Special Opportunities in North American Small-Mid Cap Markets".
It is in Health and Bio-tech that is the place to be in the US. He looks for special opportunities whether liquid or illiquid. He also looks at the earnings trend, dividends, competition, sector, management and debt.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
It is in Health and Bio-tech that is the place to be in the US. He looks for special opportunities whether liquid or illiquid. He also looks at the earnings trend, dividends, competition, sector, management and debt.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, November 5, 2013
Money Show 2013 - John Stephenson
John Stephenson is Senior Vice President and Portfolio Manager for First Asset Investments Management Inc. and editor of Strategic Investor. His talk was entitled "Breakaway".
Breakaway is talking about US's strong performance versus Canada. The EU is the biggest risk followed by Japan and then US. The US had a lot of problems earlier this month. However, we are encouraged to buy stocks and take risks. The markets have lately been on fire. The DOW is up 18% compared to the TSX up by 7.3% year to date.
We are half way through S&P500 earnings season and there were 5% surprises to the upside. Earnings growth was 4.5%. There were material sector surprises. Why is this? The 4-6 month valuation is reasonable at 14 times earnings.
He took a trip to Asia and ended up in Japan. The cab from the airport of Tokyo center was $400 US. The bus was $60 US. Japan's government has built a fire under its market. There are strong stimulus and Central Banks have unlimited power. Japan is using 3 times the stimulus that the US used. However, there was a 180 degree turn around in the US.
After the bust of 2008, there were abandon buildings and no one in the shopping malls. A lot of US citizens looked to Canada for jobs. But the US has picked up. Spending is up. The job market is still weak. Not everyone will get a job. The hardest hit real estate market is up big. This is very positive news, the real estate market being up.
Car sales are flooring analysts. There are strong sales because the average age of cars in the US is 11 years. People are therefore buying. This is good for Linamar Corp (TSX-LNR), Magna International (TSX-MG), Chrysler, General Motors (NYSE-GM) and Ford Motor (NYSE-F).
The US shale oil and gas will not change the US from an importer to an exporter. They may have sufficiency in gas, but not in oil. Energy is a net job creator. We in Canada have struggled with house prices and they have just gone up higher and a hard landing has not happened. Debt to disposal income is up in Canada. Canada is relatively less attractive than the US. We are going to have tougher times. The US has had tough times for 5 years and is just heading out of tough times. The biggest predictor of global economy is US Manufacturers Index. When is its 50 the economy is growing and when below 50, not so much.
Look at the industrials. They are moving higher. Europe and China may be going up. The current cycle in the stock market may be longer lived. The early cycle movers are the place to be. US stocks are good, but the multiples are getting higher and therefore stocks are getting expensive. What will carry us forward will be capital expansion. Companies are sitting on cash. They will start to spend and this will push up growth.
The replacement of hardware is starting. The Fed is still driving the economy. The Fed will be on hold in the first part of 2014. The talk of tapering caused interest rates to rise up by 3%. Ben Bernanke wanted them lower (i.e. at 2%). Utilities and pipelines are in cyclical times. The hissy fit of the Republicans and Democrats causes a pause in economic stimulus. The Fed is waiting for better employment numbers.
The best growth is in emerging markets. All talk of tapering has stopped. $550B was raised my global mutual funds. Most of this money went into bond funds and not much into equity. There is no current shifting from bonds to equities. However, we need to put a greater amount into equities. Brazil is struggling. Russian and India were down until tapering talk stopped.
We should be going into cyclical stocks such as info tech, financials and industrials. Commodities are big in Canada, but we should be cautious about commodities. China is doing a bit better at 8% rather than 7.5%. However, it used to grow at 10 to 11%.
We should avoid things with little growth now. We should be out of the defensive stuff. Interest rates will go back up in the middle of next year. The dividend yields are not looking as good and balance sheets have debt. Utilities and telecoms (i.e. Rogers - as government wants to lower roaming rates) have negative headwinds.
Some pipelines are ok, like Enbridge (TSX-ENB). The dividend is ok and will have growth. Pipelines are different than utilities as pipelines are infrastructure. Railroads are fine. Do not have any gold as there is not much performance going forward. The Costs for gold are going up as cost for oil is going up. The view that gold is a safe haven is false.
Where we should be putting our money is in financials such as banks and insurance companies. In the long term insurance companies will be fine but they are just not strong at the moment. They are tied to the stock market but they have rounded the corner.
In the US and China, stocks will be good. Bonds will be challenging. The US banks have spent 5 years in the dog house and are doing better now. We are in a cyclical up cycle. It is time to buy such things as Blackstone Group LP (NYSE-BX), Lazard Ltd. (NYSE-LAZ) and Morgan Stanley (NYSE-MS).
Tech stocks are trading at a discount now, but fundamentals are good. These are such stocks are SalesForce.com (NYSE-CRM), Qualcomm (NASDAQ-QCAOM), Oracle Corp. (NYSE-ORCL), Linamar Corp (TSX-LNR), Magna (TSX-MG), Air Canada (TSX-AC.B) and Boeing Co. (NYSE-BA).
SalesForce.com (NYSE-CRM) and Qualcomm (NASDAQ-QCAOM) are good investments, but there is a problem with tax withholding on US dividends. The US does not recognize the TFSA as a registered account so there will be tax withholding on dividends for this account.
Qualcomm makes chips for cell phones and we are heading into a wireless world. For Oracle, we are going into a cloud world. Linamar is better at present than Magna. For Magna, it has had a great run and you might want to wait before buying. For Boeing, its problems are being solved.
Later in the year will be times for the later cyclicals, such as the materials sector. He is negative on precious metals, but not a bear. Good stocks are Teck Resources (TSX-TCK.B) and Freeport McMoran (NYSE-FCX).
Energy peaked in the latest cycle. The worldwide economies are picking up. US is on a tear re gas. The world is getting better. Canada is having a hard time getting oil to market. Keystone will not be built. However we have the Northern Gateway pipeline project, the Kinder Morgan pipeline and we are reversing the flow of eastern pipelines to flow east.
Our oil is trading at a discount, but there is international interest. Companies to consider is Suncor Energy (TSX-SU), EnCana Corp (TSX-ECA) and finally Canadian Natural Resources (TSX-CNQ) which he owns. Also other companies are Whitecap Resources (TSX-WCP), Crescent Point Energy (TSX-CPG) and ARC Resources Ltd. (TSX-ARX). He thinks that Canadian Natural Resources will have better growth than Suncor, ARC or Crescent Point.
Stephenson says he is excited about the future. The US has turned the corner. Canada is looking better. Our real estate is ok. The valuations are cheap and he is looking forward to being fully investing.
He thinks that the Canadian currency will go down to $.90 to the dollar. The GDP will be 3.5% in US (and it will do no new taxes) and 2% in Canada. The Canadian dollar is an oil proxy.
The REIT rise is over, but maybe good yields later this year. Nowhere looks like Toronto, not even New York with the number of condos being build and the exuberation. Canadian Banks are not financing them. Finance is from non-Canadian banks. There is a bubble and there are no good stats on owners and speculators. He went on a tour with US investors. There will not be a crash, but there will be a draw down on condo's in Canada. We are out whack with US real estate market.
It is in 2014 when most condos in Toronto will be completed. They were sold 3 yes ago and in the future there will be too much supply and lower demand. There are too many speculators involved. There is more risk in condos than in houses. Yes, Toronto is desirable, but there is weakness in condos, but not in houses.
When do interest rates become a speed bump? This will be at 6 to 7%. Stock markets do well when rates start to rise. Rising interest rates only become bad later. The central banks want some inflation, but not too much inflation. The US economy is not that good, so the Fed will keep rates low. Main Street is improving, but there is government gridlock. Real estate is recovering in the US. The US market is up, so the US investor has recovered.
Chevron Corp. (NYSE-CVX) is a good investment. There are lots of big US companies getting gassy but he is not as positive on gas as he is on oil. Currently the price of gas is $3.50 to $100 for oil, which is a 25 to 1 ratio. (It used to be a 4 - 1 ratio.)
The last 7 years have been very volatile and he does not believe in buy and hold. The Utilities and REITs have gotten hammered with all the talk of tapering. The fundamentals are getting better. People on fixed income investments will be going to equities.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Breakaway is talking about US's strong performance versus Canada. The EU is the biggest risk followed by Japan and then US. The US had a lot of problems earlier this month. However, we are encouraged to buy stocks and take risks. The markets have lately been on fire. The DOW is up 18% compared to the TSX up by 7.3% year to date.
We are half way through S&P500 earnings season and there were 5% surprises to the upside. Earnings growth was 4.5%. There were material sector surprises. Why is this? The 4-6 month valuation is reasonable at 14 times earnings.
He took a trip to Asia and ended up in Japan. The cab from the airport of Tokyo center was $400 US. The bus was $60 US. Japan's government has built a fire under its market. There are strong stimulus and Central Banks have unlimited power. Japan is using 3 times the stimulus that the US used. However, there was a 180 degree turn around in the US.
After the bust of 2008, there were abandon buildings and no one in the shopping malls. A lot of US citizens looked to Canada for jobs. But the US has picked up. Spending is up. The job market is still weak. Not everyone will get a job. The hardest hit real estate market is up big. This is very positive news, the real estate market being up.
Car sales are flooring analysts. There are strong sales because the average age of cars in the US is 11 years. People are therefore buying. This is good for Linamar Corp (TSX-LNR), Magna International (TSX-MG), Chrysler, General Motors (NYSE-GM) and Ford Motor (NYSE-F).
The US shale oil and gas will not change the US from an importer to an exporter. They may have sufficiency in gas, but not in oil. Energy is a net job creator. We in Canada have struggled with house prices and they have just gone up higher and a hard landing has not happened. Debt to disposal income is up in Canada. Canada is relatively less attractive than the US. We are going to have tougher times. The US has had tough times for 5 years and is just heading out of tough times. The biggest predictor of global economy is US Manufacturers Index. When is its 50 the economy is growing and when below 50, not so much.
Look at the industrials. They are moving higher. Europe and China may be going up. The current cycle in the stock market may be longer lived. The early cycle movers are the place to be. US stocks are good, but the multiples are getting higher and therefore stocks are getting expensive. What will carry us forward will be capital expansion. Companies are sitting on cash. They will start to spend and this will push up growth.
The replacement of hardware is starting. The Fed is still driving the economy. The Fed will be on hold in the first part of 2014. The talk of tapering caused interest rates to rise up by 3%. Ben Bernanke wanted them lower (i.e. at 2%). Utilities and pipelines are in cyclical times. The hissy fit of the Republicans and Democrats causes a pause in economic stimulus. The Fed is waiting for better employment numbers.
The best growth is in emerging markets. All talk of tapering has stopped. $550B was raised my global mutual funds. Most of this money went into bond funds and not much into equity. There is no current shifting from bonds to equities. However, we need to put a greater amount into equities. Brazil is struggling. Russian and India were down until tapering talk stopped.
We should be going into cyclical stocks such as info tech, financials and industrials. Commodities are big in Canada, but we should be cautious about commodities. China is doing a bit better at 8% rather than 7.5%. However, it used to grow at 10 to 11%.
We should avoid things with little growth now. We should be out of the defensive stuff. Interest rates will go back up in the middle of next year. The dividend yields are not looking as good and balance sheets have debt. Utilities and telecoms (i.e. Rogers - as government wants to lower roaming rates) have negative headwinds.
Some pipelines are ok, like Enbridge (TSX-ENB). The dividend is ok and will have growth. Pipelines are different than utilities as pipelines are infrastructure. Railroads are fine. Do not have any gold as there is not much performance going forward. The Costs for gold are going up as cost for oil is going up. The view that gold is a safe haven is false.
Where we should be putting our money is in financials such as banks and insurance companies. In the long term insurance companies will be fine but they are just not strong at the moment. They are tied to the stock market but they have rounded the corner.
In the US and China, stocks will be good. Bonds will be challenging. The US banks have spent 5 years in the dog house and are doing better now. We are in a cyclical up cycle. It is time to buy such things as Blackstone Group LP (NYSE-BX), Lazard Ltd. (NYSE-LAZ) and Morgan Stanley (NYSE-MS).
Tech stocks are trading at a discount now, but fundamentals are good. These are such stocks are SalesForce.com (NYSE-CRM), Qualcomm (NASDAQ-QCAOM), Oracle Corp. (NYSE-ORCL), Linamar Corp (TSX-LNR), Magna (TSX-MG), Air Canada (TSX-AC.B) and Boeing Co. (NYSE-BA).
SalesForce.com (NYSE-CRM) and Qualcomm (NASDAQ-QCAOM) are good investments, but there is a problem with tax withholding on US dividends. The US does not recognize the TFSA as a registered account so there will be tax withholding on dividends for this account.
Qualcomm makes chips for cell phones and we are heading into a wireless world. For Oracle, we are going into a cloud world. Linamar is better at present than Magna. For Magna, it has had a great run and you might want to wait before buying. For Boeing, its problems are being solved.
Later in the year will be times for the later cyclicals, such as the materials sector. He is negative on precious metals, but not a bear. Good stocks are Teck Resources (TSX-TCK.B) and Freeport McMoran (NYSE-FCX).
Energy peaked in the latest cycle. The worldwide economies are picking up. US is on a tear re gas. The world is getting better. Canada is having a hard time getting oil to market. Keystone will not be built. However we have the Northern Gateway pipeline project, the Kinder Morgan pipeline and we are reversing the flow of eastern pipelines to flow east.
Our oil is trading at a discount, but there is international interest. Companies to consider is Suncor Energy (TSX-SU), EnCana Corp (TSX-ECA) and finally Canadian Natural Resources (TSX-CNQ) which he owns. Also other companies are Whitecap Resources (TSX-WCP), Crescent Point Energy (TSX-CPG) and ARC Resources Ltd. (TSX-ARX). He thinks that Canadian Natural Resources will have better growth than Suncor, ARC or Crescent Point.
Stephenson says he is excited about the future. The US has turned the corner. Canada is looking better. Our real estate is ok. The valuations are cheap and he is looking forward to being fully investing.
He thinks that the Canadian currency will go down to $.90 to the dollar. The GDP will be 3.5% in US (and it will do no new taxes) and 2% in Canada. The Canadian dollar is an oil proxy.
The REIT rise is over, but maybe good yields later this year. Nowhere looks like Toronto, not even New York with the number of condos being build and the exuberation. Canadian Banks are not financing them. Finance is from non-Canadian banks. There is a bubble and there are no good stats on owners and speculators. He went on a tour with US investors. There will not be a crash, but there will be a draw down on condo's in Canada. We are out whack with US real estate market.
It is in 2014 when most condos in Toronto will be completed. They were sold 3 yes ago and in the future there will be too much supply and lower demand. There are too many speculators involved. There is more risk in condos than in houses. Yes, Toronto is desirable, but there is weakness in condos, but not in houses.
When do interest rates become a speed bump? This will be at 6 to 7%. Stock markets do well when rates start to rise. Rising interest rates only become bad later. The central banks want some inflation, but not too much inflation. The US economy is not that good, so the Fed will keep rates low. Main Street is improving, but there is government gridlock. Real estate is recovering in the US. The US market is up, so the US investor has recovered.
Chevron Corp. (NYSE-CVX) is a good investment. There are lots of big US companies getting gassy but he is not as positive on gas as he is on oil. Currently the price of gas is $3.50 to $100 for oil, which is a 25 to 1 ratio. (It used to be a 4 - 1 ratio.)
The last 7 years have been very volatile and he does not believe in buy and hold. The Utilities and REITs have gotten hammered with all the talk of tapering. The fundamentals are getting better. People on fixed income investments will be going to equities.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
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