Once you start earning money, you should use some of it to produce another income stream. One place to get an income stream is from dividends of stock companies.
Income from investing should be channeled back into other investments whenever you can manage this. You might have to sometimes spend this income. Life does not go smoothly. However, you should not consider using the capital from which this income comes.
It takes a long time to build up capital, but if used, capital can disappear in a flash. Reports that I hear about people who win lotteries are rather disheartening. It does not matter what the country is, Canada, US, UK etc., it does not seem to matter how much people win, it seems that in about 10 years, lottery wins are broke. They are worse off than when they won.
The thing with income from investments, you should be getting more income each year from your overall investments. However, when you have capital invested in stock, the capital you have according to the TSX can gyrate a lot. Basically the market goes up and down based on how people current view the future. People's view of the future keeps changing every minute. I would not worry about this. You should focus on income and how that is changing overall.
On my other blog I am today writing about Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF)...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, September 16, 2013
Friday, September 13, 2013
Income Investing
I was just reading an interesting article on the TriDelta site by Ted Rechtshaffen on "The end of income investing - for now".
I am basically in agreement with him that REITs, Utilities and Telecommunications are overpriced. Personally I just bought some Barrick Gold Corp (TSX-ABX), which he mentions under Strike #1. I also have some tech stocks as he suggests in Strike #3. However, my tech stocks are Canadian, not American companies.
I will also be retaining my REITs, Utilities, and Telecommunication stocks. If you have a diversified portfolio, you will find that different parts of it perform better (or worse) at different times.
If you want some Tech stocks you should go to Can Tech. They had an article in June of this year on 12 dividend paying tech stocks. See the newsletter here.
On my other blog I am today writing about Granite REIT (TSX-GRT.UN, NYSE-GRP.U)...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 basically in agreement with him that REITs, Utilities and Telecommunications are overpriced. Personally I just bought some Barrick Gold Corp (TSX-ABX), which he mentions under Strike #1. I also have some tech stocks as he suggests in Strike #3. However, my tech stocks are Canadian, not American companies.
I will also be retaining my REITs, Utilities, and Telecommunication stocks. If you have a diversified portfolio, you will find that different parts of it perform better (or worse) at different times.
If you want some Tech stocks you should go to Can Tech. They had an article in June of this year on 12 dividend paying tech stocks. See the newsletter here.
On my other blog I am today writing about Granite REIT (TSX-GRT.UN, NYSE-GRP.U)...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, September 11, 2013
Payday Loans Companies
I was reading in the Knowledge Bureau's site about payday loans and discounting providers. You can see the article here.
I do not like either concept and would personally never use them. However, people with money problems are going to and it is better that they are legitimate and government regulated. I would not invest in a financial company that does Payday loans.
I look at the tax discounting a bit differently. People get their taxes done at a reasonable rate. Taxes today are extremely complex so this is a service they are receiving. Not something I would do, but this service fills a need.
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...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 do not like either concept and would personally never use them. However, people with money problems are going to and it is better that they are legitimate and government regulated. I would not invest in a financial company that does Payday loans.
I look at the tax discounting a bit differently. People get their taxes done at a reasonable rate. Taxes today are extremely complex so this is a service they are receiving. Not something I would do, but this service fills a need.
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...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.
Tuesday, September 10, 2013
Global Warming Religion
I am called a Denier (i.e. a Global Warming Denier). It is not because I do not believe that our climate is changing and the world climate is getting warmer. I do believe that the world's climate is getting warmer. It is not because I do not believe we should get off oil, because I believe we should. I also believe that we will. I do not know when, but it will come.
I do believe we must stop polluting our environment. I also have hope that we will clean up our environment and do better by our environment than we have in the past. I believe that we have made great strides in the Western world towards clean up the mess we have made with our natural environment.
The problem, you see, is that I wonder, philosophically, how much humans are really in charge of anything. I wonder how much natural forces are contributing to our warning climate. I do not swallow wholesale everything preached by the Global Warming Religion and therefore, I am accused of being a Global Warmer Denier.
I agree that we do have some influence. We can certainly do some great damage to our environment. We have torn up great forests and killed off many land animals. We are responsible for huge changes to our oceans as we have killed off and devastated whole species of fish.
There has been a tremendous growth in population. In 1800 there was 1 billion and today there are 7 billion. I am just reading a history of the US and the author reckoned there were around 3M people in the US at the time of the revolution. There are some 314M today.
It is not like our climate has not been warm (Roman Warm Period, Medieval Warm Period) or cool (Dark Ages, Little Ice Age) in the past. So, we have gone from Roman Warm Period to Dark Ages (cool) to Medieval Warm Period to Little Ice Age, but all weather changes that are now occurring is our fault. There is no possibility of any natural causes?
Does all this not sound like the over tones of religion?
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...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 do believe we must stop polluting our environment. I also have hope that we will clean up our environment and do better by our environment than we have in the past. I believe that we have made great strides in the Western world towards clean up the mess we have made with our natural environment.
The problem, you see, is that I wonder, philosophically, how much humans are really in charge of anything. I wonder how much natural forces are contributing to our warning climate. I do not swallow wholesale everything preached by the Global Warming Religion and therefore, I am accused of being a Global Warmer Denier.
I agree that we do have some influence. We can certainly do some great damage to our environment. We have torn up great forests and killed off many land animals. We are responsible for huge changes to our oceans as we have killed off and devastated whole species of fish.
There has been a tremendous growth in population. In 1800 there was 1 billion and today there are 7 billion. I am just reading a history of the US and the author reckoned there were around 3M people in the US at the time of the revolution. There are some 314M today.
It is not like our climate has not been warm (Roman Warm Period, Medieval Warm Period) or cool (Dark Ages, Little Ice Age) in the past. So, we have gone from Roman Warm Period to Dark Ages (cool) to Medieval Warm Period to Little Ice Age, but all weather changes that are now occurring is our fault. There is no possibility of any natural causes?
Does all this not sound like the over tones of religion?
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...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, September 9, 2013
Graham Number or Price
On my other blog I am today writing about Enbridge Income Fund Holdings (TSX-ENF, OTC-EBGUF)...continue...
I thought today I would talk about the Graham Price or Graham Number as there has been questions about this item. This is based on the principles of Benjamin Graham and it is meant to be used to calculate the maximum price you should pay for a stock. See Wikipedia for this calculation. Investopedia also explains about this calculation on their site
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. See the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW).
There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
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 thought today I would talk about the Graham Price or Graham Number as there has been questions about this item. This is based on the principles of Benjamin Graham and it is meant to be used to calculate the maximum price you should pay for a stock. See Wikipedia for this calculation. Investopedia also explains about this calculation on their site
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. See the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW).
There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
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, September 5, 2013
PEG Ratio
Someone who follows my blogs asked a question the other day. She was wondering if my Price/Graham Price Ratio was the same as the PEG ratio. It is very different.
The PEG Ratio is the Price/Earnings to Growth Ratio or P/E ratio/Annual EPS Growth. The lower the PEG Ratio is the better the stock price. A fairly priced stock should have a PEG at 1.
For example with Badger, I can calculate both a Trailing or Historical and a forward or future PEG Ratio. For Badger Daylighting Ltd (TSX-BAD, OTC-BADFF), I can calculate the PEG.
The Trailing or Historical PEG would be 2.03 (18.78/9.23) which is the current P/E of 18.78 divided by the 5 year growth in EPS at 9.23%. I can also use the 5 year running average growth over 5 years which is 10.33 and gets us the PEG Ratio of 1.82.
The Forward or Future PEG Ratio would be using the anticipated EPS growth for 2013 of 22.82% and this would give us a PEG of 0.82 (18.78/22.82). You could also use the average of next 3 years of growth and dividend 18.78 by averaging the growth rates of 22.82%, 17.23% and 4.32% for a PEG Ratio of 1.27.
The P/E Ratio I was using of 18.78 is based on a stock price of $55.60 and 2013 earnings estimate of $2.96. This is the forward P/E Ratio. You could also use the Trailing P/E of 23.07 which is based on a stock price of $55.60 and 2012 earnings of $2.41. For a Trailing P/E you could also use the one based on EPS over last 12 months to most recent report of June 2013, which is $2.61. The EPS here is 21.30 based on Stock Price of $55.60 and EPS of $2.61.
Check out information on this ratio at Investopedia. This is generally a good site to get information on all the ratios that are used for stocks. There is also an article on Wikipedia on this subject. I used Google to search these sites. The search engine, especially the Wikipedia one is not nearly as good as Google.
I will talk about the Graham Price or Number in another post.
On my other blog I am today writing about Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)...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 PEG Ratio is the Price/Earnings to Growth Ratio or P/E ratio/Annual EPS Growth. The lower the PEG Ratio is the better the stock price. A fairly priced stock should have a PEG at 1.
For example with Badger, I can calculate both a Trailing or Historical and a forward or future PEG Ratio. For Badger Daylighting Ltd (TSX-BAD, OTC-BADFF), I can calculate the PEG.
The Trailing or Historical PEG would be 2.03 (18.78/9.23) which is the current P/E of 18.78 divided by the 5 year growth in EPS at 9.23%. I can also use the 5 year running average growth over 5 years which is 10.33 and gets us the PEG Ratio of 1.82.
The Forward or Future PEG Ratio would be using the anticipated EPS growth for 2013 of 22.82% and this would give us a PEG of 0.82 (18.78/22.82). You could also use the average of next 3 years of growth and dividend 18.78 by averaging the growth rates of 22.82%, 17.23% and 4.32% for a PEG Ratio of 1.27.
The P/E Ratio I was using of 18.78 is based on a stock price of $55.60 and 2013 earnings estimate of $2.96. This is the forward P/E Ratio. You could also use the Trailing P/E of 23.07 which is based on a stock price of $55.60 and 2012 earnings of $2.41. For a Trailing P/E you could also use the one based on EPS over last 12 months to most recent report of June 2013, which is $2.61. The EPS here is 21.30 based on Stock Price of $55.60 and EPS of $2.61.
Check out information on this ratio at Investopedia. This is generally a good site to get information on all the ratios that are used for stocks. There is also an article on Wikipedia on this subject. I used Google to search these sites. The search engine, especially the Wikipedia one is not nearly as good as Google.
I will talk about the Graham Price or Number in another post.
On my other blog I am today writing about Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)...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.
Tuesday, September 3, 2013
Limiting Exposure
Someone who follows my blogs asked a question the other day. It was "I was wondering what your views are regarding the weight of each stock in a portfolio? I have seen some people recommending a maximum weight of 10% while others feel 5% is safer. What weighting do you use in your own portfolio?"
The maximum weighting probably depends on the size of your portfolio. I started off with 3 stocks from 3 sectors and built up my shares before moving on to other stocks. When I got a sizable portfolio, I limited my exposure of any one stock to 10%, and now as my portfolio has gotten bigger, I am limiting my exposure to 5%, although a few a bit higher, but not by much.
However, you should also limit your exposure to different investment sectors. People often talk about a division between fixed income investments and stock investments. I used to do this, but fixed income has not been a category I have invested in for a while. I sold my last bond in 2007. There is just not much money to make there, but there are lots of people who disagree with me on this.
There should be limits to exposure to different stock investments. The most common way is to use the MX sectors of Consumer Discretionary, Consumer Staples, Metals and Mining, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Telecommunication Services, Utilities and REIT. Some people use similar but slightly different categories.
It does not matter how you categorize stocks; you should think about what sorts of things you want to be exposed to. I personally limit my exposure to Metals and Mining and Materials categories. I have little. I also limit exposure to Energy. I have nothing in Health Care. The problem I have with these categories is that they are not the sort of stocks you can tuck away in your portfolio and forget about.
I think that last thing to talk about is when buying stocks. If a stock is a safe, large cap type, I make an original purchase in the neighborhood of $10,000 to $15,000. An example would be Canadian Nation Railway (TSX-CN). If I am buying a small cap I might start with $500 to $1,000. An example of this would be McCoy Corp (TSX-MCB). For a risky stock, I might start with 100 shares. An example might be Canadian Natural Resources (TSX-CNQ). (I think all energy stocks have higher than normal risk.)
I always make an initial purchase and if it works fine, I may buy more. However, sometimes I just purchase a stock to put away for a while to see what happens. I just purchased Barrick Gold Corp (TSX-ABX) for this purpose.
On my other blog I am today writing about Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)...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 maximum weighting probably depends on the size of your portfolio. I started off with 3 stocks from 3 sectors and built up my shares before moving on to other stocks. When I got a sizable portfolio, I limited my exposure of any one stock to 10%, and now as my portfolio has gotten bigger, I am limiting my exposure to 5%, although a few a bit higher, but not by much.
However, you should also limit your exposure to different investment sectors. People often talk about a division between fixed income investments and stock investments. I used to do this, but fixed income has not been a category I have invested in for a while. I sold my last bond in 2007. There is just not much money to make there, but there are lots of people who disagree with me on this.
There should be limits to exposure to different stock investments. The most common way is to use the MX sectors of Consumer Discretionary, Consumer Staples, Metals and Mining, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Telecommunication Services, Utilities and REIT. Some people use similar but slightly different categories.
It does not matter how you categorize stocks; you should think about what sorts of things you want to be exposed to. I personally limit my exposure to Metals and Mining and Materials categories. I have little. I also limit exposure to Energy. I have nothing in Health Care. The problem I have with these categories is that they are not the sort of stocks you can tuck away in your portfolio and forget about.
I think that last thing to talk about is when buying stocks. If a stock is a safe, large cap type, I make an original purchase in the neighborhood of $10,000 to $15,000. An example would be Canadian Nation Railway (TSX-CN). If I am buying a small cap I might start with $500 to $1,000. An example of this would be McCoy Corp (TSX-MCB). For a risky stock, I might start with 100 shares. An example might be Canadian Natural Resources (TSX-CNQ). (I think all energy stocks have higher than normal risk.)
I always make an initial purchase and if it works fine, I may buy more. However, sometimes I just purchase a stock to put away for a while to see what happens. I just purchased Barrick Gold Corp (TSX-ABX) for this purpose.
On my other blog I am today writing about Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)...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.
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