Gordon Pape spoke in a Saturday afternoon session for on "Choosing Market Winners". Gordon Pape is the Editor and Publisher of The Income Investor and the Internet Wealth Builder. Their site is www.buildingweath.ca.
Basic concern is why am I buying this stock? The Main purpose is what do you want to gain? You should define your objective. It is capital gain, dividend income, a combination or for some other reason.
For capital gains eliminate certain classes that are not the cash flow type, like Utilities, Telecoms and REITs. You should look at up and coming companies that are providing goods and services that people want to buy. It is risky to buy IPOs. He looks for established companies with strong growth rates.
An example is NVIDIA Corporation (NASDAQ-NVDA). It has had a strong growth of 64% in last 3 months (May to September of 2017). Momentum and growth is a better indicator than P/E. Dividend is at 0.3%. It is into gaming and number one in the world entertainment. They have 200M games. They are a leader in AI. They invested GPU. They are investing in trucks with 5 in a row with one driver. There is an 85% reduction in misdiagnosis with AI. They are worth $170 now, but this is just the beginning.
Another example is Ottawa's Shopify (TSX-SHOP, NYSE-SHOP). They have grown at 380% in 1.5 years. They are at $132.30 (September 2017). You were lucky if you go in early. US investors have not yet got into it. It has a preorder platform for small and medium size companies to manage sales. They have 500,000 merchants using its platform with $40B in sales. They also have some big name clients like G.E.
They have had a 75% increase in revenue in the second quarter of 2017 (US$). There was a 64% jump in recurring revenue. They are reinvesting into the company. They have yet to make a profit but are getting closer. They have grown revenue by 65% between 2016 and 2017. The stock will go higher, but there will be pull backs.
If you have cash flow or income as your objective, you should look at dividend growth companies. A company would be Brookfield Infrastructure Partners LP (TSX-BIP.UN). This stock also trades in New York. It is a Bermuda based company that does infrastructure around the world. (This is like what the CPP is doing.) It has stable revenue. 90% is contractual or government. Revenue in September 2010 was 12.6M and in September 2017 53.78M. They had 325% capital gain which is an extra benefit. There was a 3 to 2 split.
It trades at a discount sometime during the year. It pays out 60 to70% of its earnings in Dividends. The annual increase is 13 to 14%. The main risk is a global recession. Most of the revenue is controlled by government or a contract.
Another example is TransCanada (TSX-TRP). The price went from $25.25 in 2003 to $62.94 in September 2017. That is a 150% gain, and it is not a lot over the period of time. It is well diversified into alternative energy. They have increased the dividend each year since 2000. The target is 8T to10% growth in dividend each year. Trump has approved Keystone and they have purchases a Columbia pipeline.
So to reiterate, if you want capital gains you should look for a company with consumer demand (that is producing a product or service that people want to buy), a good growth rate, that has future prospects (and they are reinvesting in the firm), a company with sound management and profitable acquisitions. You should read about the management and personnel information. If your capital gains stock doubles, then sell half so that you are not playing with your own money. Do this especially if you are not sure about a company.
If you are an income investor you should look for bottom line profits, dividend history, good management, sound balance sheet and a future dividend policy. See if the company has announced a dividend policy. Some companies do this. Brookfield pays out over 100% of EPS as payout is based on cash flow. See what a company's payout rates are based on. Brookfield is still a buy.
On my other blog I wrote yesterday about Keyera Corp. (TSX-KEY, OTC-KEYUF)... learn more. Next, I will write about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE)... learn more on Friday, November 17, 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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