Tuesday, October 17, 2017

Money Show 2017 - Peter Hodson

Peter Hodson spoke in a Friday afternoon session on "Five Things (times five) Investors need to know: Investors seem to Forget the Basics Always". Peter Hodson is the Editor of Canadian Money Saver Magazine. Their site is www.canadianmoneysaver.ca. I went to this talk because at other Money Shows the Canadian Money Saver has put on great talks. Peter Hodson runs 5iResearch that only provides research. He said he bought his first stock at age 11.

You should never sell a stock just because the stock is down or just because the stock is up.

Dividend growth is more important than dividend yield. High yields can be a problem. When yields get high the stock will probably fall. Some companies do not change their dividends. You can pick a high yield stock if the whole market is down. It is better to buy a stock with a 2% yield that is growing than a 9% yield that is not.

Do not sell too early. Selling too early will never make you rich. You cannot get a 10 bagger if you sell after a stock has just doubled.

High Fees will make you poor. Mutual Fund managers are making too much money. The lower cost of ETFs buying maybe the way you should go. If a Mutual fund has 2.5% fees and the Top 10 stocks are typical, why are you in that Mutual Fund? He had Mutual Funds and his own investments. His own investments were doing better.

Ride your winner stocks. Earning momentum does not change in one quarter. Good news and rising prices attract more investment. Analyst upgrades can be very positive for stocks. Pay attention to what analyst are dong. That is what they are upgrading and what they are downgrading.

Market Capitalization is import we have $100M, 500M and $1B market caps in Canada. When a stock bumps up to a new lever it will attract new investors. Often investors are not interested in a $5 stock, but are when the stock reaches $10. Stocks can shift into a different level or group of investors.

Gambling is not investing.

He does not like share dilutions. He likes companies that never dilute shareholders. Constellation Software Inc. (TSX-CSU) has never issued new shares. For example, you do not want to buy a company that increased their shares 10 times over the past 10 years.

Corporate earnings are the key. Stock prices reflect earrings and earnings trends. Most other news is noise. If earnings are not going up, see why. Canadian companies will struggle because of the rising Canadian dollar.

For interest rates, direction and surprise is the key. Expectation of inflation can change. When rates reverse direction things are changing. Rates are currently going up because of a strong economy.

You should do proper section allocation. Ignore the TSX sector allocation as it has 60% financial and resources. No not invest this way. You do not spend an index. Sectors are based on market cap. There are 11 TSX sectors and you should invest in them all.

Insider buying is more important than insiders selling. There are lots of reasons for insiders to sell. They generally buy because they feel confidence in the company.

Do not focus on quarterly results. The best companies are set up for long term growth that may be at the expense of a quarter or two. However, investors still pay for consistency. 10 days are not import, but 10 years is. You should keep an eye on the longer term.

High debt can destroy a company faster than anything else. Avoid companies with high debt whenever possible. For example, Concordia International Corp (TSX CXR) has debt to cash flow of 2times to 3 times. Avoid companies with debt to cash flow of 4 times to 5 times. It is hard to bankrupt a company with no debt.

When a stock pays its first dividend that is a bullish sign from a small or mid cap. You start small and grow.

He likes insider ownership. Insiders need to own shares not options. You should compare insider's salary to ownership. For example, the insiders at Constellation Software Inc. (TSX-CSU) are committed.

Find companies with a competitive edge. Alpha, Google and Facebook all have a competitive edge. Companies might have patents, a cost advantage or market share. Cineplex Inc. (TSX-CGX) has 70% of the market, so this is good.

Ignore target prices. Credit Suisse once said to sell Netflix at $1.50 and it is now $175. Target prices can cause you to trade. They are highly inaccurate at the best of times. There are too many factors to consider other than a company when setting target prices.

New issues are sold not bought. They often have 5% commissions. You should stick with what you know.

Do not be afraid of high valuations and say that a company at 30 P/E Ratio is too high. Do not be afraid as there may be a reason for it. Big winners are expensive. A great, great company does not go down very much. If you want a stock, just buy it.

Do not get cute. If you want a stock, just buy it. If you want to sell a stock, just sell it. You should make a decision and move on.

Sell your losers first. Generally a stock is down for a reason. Losers move down and winners move up. If you bought a stock at $30 and it is now $5 and you want it to go back to $30. That would take a lot to do. Do not average down. If you are wrong about a stock at $25, you will not be right about it at $10.

Hope is not a winning strategy.

Do not have too many stocks. 30 stocks are enough.

Time is your biggest ally. If markets are at record highs everyone is winning. Today's peak is the next decade's trough. Facebook at $17 in 2012 and now is $171.

After you do fundamental valuation, you should look at technical analysis.

On my other blog I wrote yesterday about Teck Resources Ltd. (TSX-TCK.B, NYSE-TCK)... learn more. Next, I will write about Logistec Corp (TSX- LGT.B, OTC-LTKBF)... learn more on Wednesday, October 18, 2017 around 5 pm.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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