Investment Q&A

Q: I'm confused by the following 5i answer excerpt in response to Dave's question on August 16th.

"5i Research Answer:
The key here is that when reading our remarks, our comments are meant to reference the 'company' and not the stock price. A declining stock does not make a company 'bad'. We cannot predict sector movements nor stock prices, but we try to focus on the quality of a company."

Do I take from this that 5i doesn't take into account the fundamental "value" of a stock when making its recommendations? If so, I feel this is missing the point in making profitable investment recommendations. The highest "quality" company may be the worst possible investment if its stock is outrageously over-priced.

There also seems to be some inconsistency here as well. In the same answer, it was stated that a company like CRH may have more investment potential than another company since its stock is oversold. Another answer on the 17th suggested that the asker not chase the stock of Chorus Aviation (CHR). These answers indicate to me that stock price is being taken into account in 5i Research recommendations.

So what is it, is stock price ("value") taken into account in 5i Research recommendations or is the "quality" of a company the only criteria used in making the recommendations?

Thanks,
Colin

Q: Hi 5i Team,

I'm still new to investing and in my spare time I enjoy reading the responses you guys give to other member, but I feel like there are always more to know. I'm wondering if you guys have any suggestions on books that can help fill these gaps. Hoping for suggestion on books for new and intermediate investors.

Q: Hello 5i,
Please post only if you feel this might be beneficial or appropriate.
This is for Dave, who, I hope, gets to read it. I have been with 5i for several years now and find them not only invaluable for my portfolio structuring, but interesting, informative and often even humourous. The members and the Q&A are a huge benefit to me. But now, speaking to Dave's specific concerns: I have had the identical situation happen to me as well with some companies. But, the reverse has been equally true. One of the things I have noticed over time is that time is the crucial element. You must have patience - without it, you will be up the proverbial creek. Sometimes good things happen to bad companies and bad things to good companies and the market reacts, perhaps out of proportion. CGX is a case in point at this time; however either positive returns from their diversification efforts and/or a strong Fall or Christmas movie slate or even an acquisition can change that on a dime. More than once I have a chosen to sell a 5i - recommended stock for a particular reason while it was down, only to see it spiral up to new highs within weeks of my selling it. More patience on my part could have vastly enhanced my profit margin, but the fault is wholly mine, not 5i's because the stock tanked at one point for some reason.
I don't know if this has helped, hindered or confused, but I hope that Dave will take heart from my lessons and give 5i a bit of a break and perhaps consider why he is buying any one stock that 5i is recommending and give more weight to the time-frame for holding an equity.
I apologize if this isn't a particularly clear or cohesive post, and for the length, but I really felt compelled to let Dave know that he isn't alone, but also, that being really clear about what you are buying, why you are buying it and how long you can really afford to keep it if/when it does take a downturn are our (5i members') responsibility, not 5i's.
So, Dave, please give 5i another look within the context of the above and you might see more positive than negative.
Wishing you all the best!
Cheers,
Mike

Q: Peter and His Wonder Team
Recently CDI was bought for $8.25 by a private company to close this quarter. For several weeks it has been trading between $8.20 and occasionally touching $8.25. Today on heavy volume of 837K it traded as high as $8.32. I did not think it would go above the purchase price of $8.25. What do you think is happening here?
Thanks for your speedy reply and great service!
Dr.Ernest Rivait

Q: While working at buying into 5i investment methodology - invest long enough to see profits grow and stock prices to follow - I find my 5i sourced holdings negatively hitting my portfolio value.

I have to ask, what is the role of 5i and its methodology in preserving capital and/or helping to avoid investment losses?

In reading 5i answers, it is often noted that stocks need 5 years yet I am starting to see this as a way to avoid sell recommendations.
I read from you, HR is a good investment for income so I hold with a profit only to now see a price decline and profits change to losses.
I read from you, CGX was sold from 5i portfolio "but does not need to be sold". Now we are down substantially.

When you write, a stock is expensive, the stock is already up +% in the year, should this be taken that even though you write you are okay with a buy, a smart investor will not purchase as this time - decline is likely. Many of the stocks I have purchased with positive inference from 5i, are now down 20% (sometimes in one day).

I write this as I must determine where 5i fits in investment efforts. My 5i Stock losses have mounted through the past couple months. I need to find a way to interpret when 5i sentiment toward a stock really changes and not wait until the stock is slowly backed away from by 5i.

So, how does one differentiate between, a good Buy recommendation and 5i being positive on a stock but there is a great likelihood the stock price will decline? I am not please with reading positive remarks only to see investment profits disappear or losing 20% within days of a purchase.

Is there something in your words that should be interpreted to help me protect my gains and Capital and/or avoid losses within days of buying a recommended investment?

Thanks
Dave

Q: Could I get an opinion on "Timing the Market" vs "Protecting my Capital"? If I use my RRX position as an example, I have a good company but with big oil industry head winds. I am in at about $9 on the stock (2.5% position at the time so less now). There were a number of "new 52 week lows" where technically I "should" have sold but I held onto the "quality" company.
Basically, whats a good strategy to prevent large losses in these type of situations when they come along----trade technically, or use a stop loss strategy, or other? No single stock more than %3-%5 of my portfolio is helping in this RRX example.

Q: are public companies required to host conference calls to discuss results or is this an option of the company?? Thx

Q: Would you recommend for a short term hold?

Q: Does your opinion of cbl change at all after their 2nd q results release? I have about a 2% weighting (as of today) in an rrsp acct, down about 30%. I'm think of selling considering all the quality stocks with far fewer "issues" that are on sale right that I could replace it with. After watching what happened to efn after a rumor and no short interest, it has not recovered at all from it's significant drop so I can't see anything, other than a prompt privatization of cbl, that will turn it around. I don't think this q results will help at all either.

on a side note I think it could be a wise move to basically sell all stocks just before earning seasons and wait for the dust to settle before buying back. all stocks that miss, a lot that meet, and even some that beat get clobbered with very few that make a good run after a beat, dr is a case in point here which I hold. even with trading fees (about $5/trade) this seems like a very profitable possible strategy. I know it's not your style to trade like this but with the markets being as reactionary as they are with the hedge funds and day traders so active a swing of 10% plus swings could be very profitable and more than offset the very few that seem to move up on earnings.

thanks Tom

Q: Hi, in a bad market, a slight miss of whatever metric leads to a big drop of price. It is Ok for long term investors who got in long time ago and had huge gain already and took some profit. What is your recommendation on the above mentioned stocks for those lone term investors just bought in recently. Buy more, hold or sell? Thanks.

Q: For an investor with a higher risk tolerance who is always fully invested, do you think it is possible to profit on a risk adjusted basis from buying into a market dip on margin (assuming a "reasonable" margin rate of <6%)?

Given your experience, what would be reasonable parameters of a system to do this? I am thinking something along the lines of: If the market (e.g. index tracking ETF(s)) drops 10%, deploy 10% margin, drops another 10% deploy another 10% margin, ... subsequently deleveraging by a similar scheme on the way back up. Are there other schemes in the same vein you are aware of which are profitable?

Would it instead make more sense to wait for the market trend to reverse before deploying margin? For example, say you sit idly while the market drops 30%. Then you wait for the trend to reverse (e.g. Spot price > 200 SMA) and deploy margin, perhaps in 20% increments monthly as the trend continues eventually delevaraging at a new market peak.

Thanks as always.

Q: Hello team,

Is there any site that gives you the short% and its change on Canadian stocks?
The shortsqueez.com only gives the short interest on US stocks.
Thank you!

Q: How does this class action lawsuit work for investors who bought or owned this stock between Nov 15/14 and July 10/15. If i owned and bought this stock during this period, am i entitled to be involved in this settlement, and what do i have to do? These dates were on the Siskins law firm website.

Q: I am very interested in the question and answer on free cash flow. I have no doubt it is an excellent indicator but like most others, not fool proof. In looking over the list of top 10 FCF companies, I was gobsmacked by Yellow Media in the list. It is and has been a disaster for it's investors over the years.

Q: Hello 5i, My financial advisor for my RRSP is with Scotia Wealth Management and I'm not happy with him. If I want to take control of my account do you know what the procedure is? Also are there certain types of investments that can't be in a self directed account?

Q: With so many potential valuation and growth metrics available, it's hard to know which ones are REALLY important. I would love to use a handful (3 to 6?) of metrics that I could use to screen companies in order to create a "to buy" list.
Do you have any recommendations for a group of "must-use" metrics?

(Some that I am considering are: EV/EBITDA, PEG, Price/Cash flow, P/B, Price to Sales, P/AFFO for REITs, Debt/Equity, Dividend yield, Dividend Payout ratio, and a company's history of raising the dividend)

Would I want to use different metrics for growth vs. value companies?

Also, is there some place that I can look up a company's metrics (i.e. EV/EBITDA, P/B, etc)?

Thanks!

Q: Greetings Peter and team,

Again, thank you for your logical answers to my previous questions.

In the 60s, a self-made, wealthy graduate of the Benjamin Graham, Columbia University program which warren Buffett praises, recommended that investors keep half of their portfolio in cash. When the market drops 10%, he recommended that they use a third of that cash to buy stock bargains. Today, that would be a US market index ETF. If the market drops another 10%, he recommended that they use all their cash to buy bargains, again, say a US market index ET. And if the market drops another 10%, he recommended the investors margin their portfolio fully.

I would appreciate your views on this seemingly risky approach to investing money not needed for near-term use.

Thank you,

Milan

Q: Hi,
ORT stopped trading a few months back. I have a small holding left in this. Is there any possibility of this stock trading again and if not what is the procedure to have this removed from your account?

Q: I recently saw a feature on BNN that indicated a study by CITI that said the most reliable metric to use is free cash flow per share when evaluating a stocks performance and future growth potential. Is this something that you can use when you screen and include in a company report

Q: Just a comment, I’ve been a member since you launched your site. I read a load of investment things daily, and your offering is unparalleled. While I don’t ask many questions, I truly benefit from the Q&A every day, and of course the insight gleamed from your portfolios.

Since your company has grown a lot, obviously the demands - the sheer volume of questions alone - has clearly grown with it, because over the last while I’ve noticed a very big difference in your answers. They’ve lost the choppiness: the quick, short, get-to-the-point way in which they were always written. Now, they’re very smooth, all corners are rounded, very well-written quite frankly, so I assume that answers are now being dictated, and a ‘writer’ is putting them together for publication. Very nice, easy to read in a mellifluous kind of way. But I have to say, I miss the choppiness!

Had to comment on it, it’s just that marked a difference. Thank you for the excellent service, I look forward to staying with you until you hang up your hat!