Investment Q&A

Q: here is my personal mea-culpa

over 35 years i have lost an embarrassing amount of money in the market

i am an aggressive investor and have lost money in every single way imaginable - you name it, i have done it

mercifully i am getting 'better' and lose less, less often; yet being in the market means you will have losses

my biggest mistakes show up in these 2 areas:

1) impatience
2) buying hope

so regarding today's massacre of RHT I offer this:

peter's team provides an excellent framework on how to allocate assets; how to keep portfolio positions small (5% max) and 'second to none' fundamental analysis (P/E's, cashflow, balance sheet info etc)

most importantly - this information simply tells you WHAT to buy

to know WHEN to buy you must have a brief look at the chart (technical analysis)

for example; he can tell you all day that 'fundementally' BNS is a good solid company and should be owned; yet looking at the chart, a three year old with a crayon can tell you that it has not finished going down yet

why is it going down? who knows, and really who cares?

so i learned long ago to be patient.....and buy only when the stock has stopped going down --- therefore i no longer try to catch the knife; call the bottom etc etc - and therefore I lose less

and this brings on #2

as you have all heard before - hope is not a strategy

as humans, we are hardwired to believe we 'know' better and nowhere is this more dangerous than investing

when our stock (of a 'good' company) starts going down we buy more because "it's a daily mis-pricing"; then it goes down more and we 'double up' because "it's a great business and i can't believe how stupid some people are".......and then the poor news comes out and we sell (because we never did actually understand the company and we bought on hope (or greed) based on someone's recommendation...........or buy we more to "trade ourselves back on side"

a look at the RHT chart shows it has been going down in a perfect line since february - why was that? who knew? more importantly who cares? the chart has been telling you 'something ain't right"

to summarize

always look at the chart and most importantly....

IF YOU ARE IN A HOLE, STOP DIGGING!!!

i have made every stupid investing mistake; most of them many, many times....

i am probably not finished making stupid mistakes

but i hope I am.......

bob

Q: Please comment on my perspective below. Am I wrong?

A bond matures and you get a known amount of principal back (on top of the distributions paid out along the way). As such it provides a safety component in your portfolio. The safety comes from NOT being at the mercy of the market (all you have to do is wait till it matures).

A bond ETF does not do this. The principal you put into it is eternally at the mercy of the current market price of that ETF. Even when any bond matures, the ETF just goes out and buys more bonds at current market prices. Therefore it does not return a known amount of principal as a bond would. The whole concept of "maturity" or "yield to maturity" disappears. So these ETFs are a lot more like equities than bonds. If people are following advice about the percentage to allocate between bonds and equities, in my opinion it is a mistake to treat the bond ETFs as in the bond category.

(The exception to the above being "target date bond etfs which do mature and return your principal").

Q: Hi Peter,
Jim Keohane from Hoop was on BNN Friday and was explaining his absolute return strategies he uses to run the HOOP Pension plan. He was explaining the approach for lower risk vs return vs a equity only approach. Is it better ? Are there any strong funds like this available to the average guy ?
Thanks, Paul

Q: I have read that the spread between US treasury 10 year and 2 year bond yields has been narrowing, and is currently sitting at 30 basis points. Assuming that the US spread continues to narrow and possibly invert, can you comment on the effect that would have on the Canadian financial and housing markets? And in your experience what would be time frame once the US yield curve inverts for those markets to be influenced? Many thanks!

Q: About 25% of my non-registered portfolio is in US dollars. Other than currency risk, is there any disadvantage to buying Canadian dividend stocks listed on US exchanges, such as the banks, utilities, etc. As an income oriented investor that seems preferable to US dividend stocks which have less favourable tax treatment for Canadians.

Q: Hi Team,

Is it a good idea to have a stop loss order for some of the high volatility stocks such as PHO, RHT, COV, TSGI and tech stocks and what should it be set at.

Thanks

Q: I've got a small investment in this company. They are listed on the CSE as SPR and now on the OTCBB as SRUTF.
What kind of security do I have on these types of listings?

Q: Peter,

To get copies of financial statements on Canadian companies I use SEDAR. What one can I use for American companies such as Pepsico?

Thank you,

Paul

Q: Hi
I have a question regarding stock options.

When a company declares stock options to management or board members, etc., does the person receiving the stock option have to pay the exercise price to the company's treasury before purchasing these shares? Is that true for all types of stock options?

Q: Looking at the sell offs/drops on both sides of the border the last week, can you offer any advice? I have a long term outlook, and am ok with some risk. Do you see any stocks (on either side) the present a good buy at current levels that are likely to make a good rebound?

Thanks

Q: With the recent sell off, have any of the above stocks (contained in either the Income or Balanced Portfolios) reached the stage where you would call them "table-pounding buys"? In other words, has the market overreacted and the pendulum has swung too far?

Obviously, there is always the chance of a continued downdraft, but at some point you just step in top up your holdings.

The Income Portfolio is sitting on 10% cash...any thought to deploying some of it soon? Thanks...Steve

Q: In the current investment environment with the prospect of rising interest rates would you use stop loss orders or just hang in? Thanks, Bill

Q: It's getting ugly out there. Any general comments about what to do (esp. if you like the gains you've had and don't want to see them just relentlessly evaporate?). I realize I've answered my own question but am still interested in any comments that come to your mind.

Q: Good morning...moving forward what impact will the increasing bond yields and interest rates over the next 6 months....by order what industry categories are considered on a downward trend? Also, for the next 6 months what would you say are the 8 stocks in 5i portfolio's that you think will be (temporarily)harmed by the rising rates and yields over the next few months..
Thanks

Q: I've researched the cash ratio (as opposed to current or quick) for most if not all of 5i stocks and found lots of companies with a cash ratio > 1.00 (e.g. GUD, SHOP, PHO, WPK, PSI, GC, SYZ, AEM, KXS, COV, ET, PLC, HWO and ENG).

I can not find any cash ratio data for FFH, SLF, MRC, VB, BNS, FSV, TCN, FCR, ECN, GS or the REITS). Why? Excluding the REITS, do you have any cash ratio's for these companies? If not, can you estimate which ones you think has a cash ratio greater than 1.00.

Happy Thanksgiving

Q: hi Peter a little confused by the P/E ratios which you show on these companies profiles. if I use 2019 EPS estimates that you Kindly provided I get PBH p/e of 17.34 not 34.10 SIS p/e of 23.20 not 34.40. DOL p/e of 20.52 not 24.50 and TSGI p/e of 11.82 not 73.50. not sure what I am missing. thanks Richard

Q: Peter,

I am trying to come up with a range of debt to equity (ratio) that an investor should look at to determine relative safety of a stock. Do you have a specific ratio you consider acceptable or is it very industry and economic cycle specific? Do you trust the reported numbers you see in various on line publications or is it best to go to Sedar and figure it out oneself?

Thank you

Paul

Q: Happy Thanksgiving Peter and Team, with the change last week re: accessability to hedge funds for regular folk, are there any you would recommend ? Also, if one thought that we might be in for a medium - prolonged downturn would that affect your choice ?
Thanks, Paul

Q: Hello 5I.
I just was wondering how best to handle tax loss selling season? Do I wait till late november early december to buy some "losers" or do you strike when it falls into my range. I am just tentative as I don't want to buy way to early if a stock is probably going to drop further (best guess).. Dollarama for example..
Thanks

Q: From today's Globe and Mail: Equity markets opened lower Thursday as global bond yields surged higher. Mehul Daya, an analyst from South Africa-based Nedbank, believes bond yields are approaching the “Rubicon level,”

“The JPM Global Bond yield, after being in a tight channel, has now begun to accelerate higher. There is scope for the JPM Global Bond yield to rise another 20- 30bps, close to 2.70%, which is the ‘Rubicon level’ for global financial markets, in our view. If the JPM Global Bond yield rises above 2.70%, the cost of global capital would rise further, unleashing another risk-off phase."

Normally, 'risk off' means purchasing the very stocks which perform badly during rising rates, ie. dividend stocks. That would not seem to make much sense here. What sectors do you believe would be most and least affected by these rising bond yields? I know it supposedly helps the banks and insurers but we have been hearing that all year without much sustained impact on their stock prices. So I'm uncertain where to put new money.