Investment Q&A

Q: I have heard pros and cons of a bought deals vs a marketed deal in order for a company to sell additional equity to raise cash. In a bought deal it is usually offered at a discount benefiting the underwriter at the expense of the existing shareholders. In a marketed deal the prospective underwriters seem willing to short the stock to get it at a lower price until it is priced for a deal, again at the expense of existing shareholders. Am I correct in my assumption and if so which way is the least painful in your opinion?

Q: Until now Keith Richards at ValueTrend was the only technician posting regular blogs about the TSX. There's a new kid on the block, for those interested in charts (Taylor Dart):
http://setyourstop.ca/tsx-turnaround-possible-weighing-daily-weekly-charts-direction/

Q: In response to Paul's question below regarding an iPad app I have been using Real-Time Stock Tracker by W. Tang for a few years now. It is an excellent source of information and well worth the cost.

mobile app mobile app April 07, 2016 (asked by paul)
Question: I am about to purchase my first I-Pad. Does 5-I have a mobile app that I will be able to use?

Thanks

Paul
5i Research Answer:
Our site is mostly mobile friendly, and we have a Google Play app, but not an Apple app.

Q: What are your thoughts of using HUV as a hedge in a down looking market. How would you decide what percentage of portoflio to use and how long to keep it.
Thanks and happy Friday

Q: I am 30 years old and have built a sector diversified portfolio of around 25 names from the TSX worth approx 200k. I also have a pension invested conservatively in bonds/mutual funds worth approx 100k. I would like to invest all additional cash for the next few years in 3 or 4 ETF's to diversify out of Canada instead of adding to my Canadian portfolio. Do you see any major flaws in my theory? also could you suggest 2 or 3 ETF's to start out with. My thoughts were: VOO, VEA, and IJR. Thanks

Q: Hi Peter, I know the question I am asking is very hard to predict/answer. Although I would appreciate if you give it a shot.

I currently have your growth portfolio and some stocks from your balance portfolio on a margin account. I have some US growth stocks too(like AGN, CERN, BIDU). I have enough cushion but I do have 30% of my portfolio on margin. I would appreciate if you just do not advice me not to use margin(like other financial professionals).

My question is do you think considering all current turmoil and risks looming(US election, oil price, global recession), should I be better off taking some profit off the table? I was reading Prem Watsa's 2016 letter and he was very negative things to say regarding current valuation. Basically what do you think Canadian/US market would be at year end? Do you think there might be some opportunity(like last August or October or like Feb 2016)? I would really appreciate your insight. What would you do in this situation if you are in my shoes?

Q: I'm concerned with the exuberant rebound in the markets since the sell off in Jan./Feb. despite earnings estimates falling (e.g. S&P earnings estimates falling but S&P rising). Might it be prudent to insure against a sell off with e.g. SH, RWM, and PSQ? I wonder what the "smart" money is doing right now? I appreciate your opinion. Thanks.

Q: If a young person 26 years old wanted to start a DRIP which stock would you recommend for this?

Thanks
Dolores

Q: Re; my question what is the stock market : As I lay awake in the wee small hours, it came to me that the stock market is a record of sales of stocks listed by and sold through that market, a tally, so to speak, and weight in the market means what percentage of the stocks in that list we collectively hold of any particular stock or class of stocks. Hoping this is less clueless than my question! ( Chose whether or not you think there's any point in publishing)

Prior question.: I was made rudely aware that I don't know something I assume everyone else does. What exactly does market weight mean? Who "holds" the stock market holdings and where and how are they held? I guess the question is what, exactly IS the market? Sorry for what is probably a lame question.

Q: Hello Peter!

I am getting ready to make my 2016 TFSA contribution.So far I had only contributed in CAD dollars and I hold in my TFSA only Canadian stocks.
For 2016 I have room for contibution in my TFSA for $10000.00 CAD.
I have in my US margin account $35000.00 USD ,my question is: can I use my margin USD to make contribution to my TFSA in USD for futer purchase of US stocks and how do I calculate amount to be contributed in USD to cover my limit($10000.00 CAD) for 2016 TFSA.

Andrew

Q: I use 2 online brokers and subscribe to a couple of premium data providers (capitalcube.com and GuruFocus.com) . In addition I use well known commonly used sites, including for example: FinViz.com, stockcharts.com, Yahoo and Google Finance.

I often find differences in ratios as reported by the different sites. I am referring here to significant (meaningful) discrepancies , not to non-material data. The two bank-owned online brokers also have differing ratios between each other.

Do the various providers not use the same or similar data providing services (e.g. Factset, Bloomberg , Thompson-Reuters).
How would a retail investor know which ratios one can rely on? As one example (out of dozens) : OZM.us is shown as having dividend yield of ~24% at RBC Direct Investing; it is 8% at GuruFocus. The actual yield is very different : as a shareholder,even after I gross up the dividend for withholding tax, I find actual yield based on cash received is less than 4%.

I use different sources to confirm the reliability of data I am using. But when there are wide differences, one is forced to go to the (very) long form financials filed with regulators. The latter is a cumbersome process for someone who is a DIY investor.

Would you care to give suggestions of the more reliable sites one can use reasonably safely?
Adam

Q: Ontario Teachers’ Pension Plan posts 13% return in 2015 and 10.3% annualized since 1990, see Globe and Mail article. Are these returns for real? Even Warren Buffett’s Berkshire Hathaway did not come close to these results. Do you know any publically traded companies that achieved similar results?

Q: Good Afternoon,
My parents are getting older now ( in their 70's) and getting more and more nervous with volatile stock markets and problems around the world, needless to say they have become nervous investors. What do you think of Segregated Funds, more specifically Guaranteed Minimum Withdrawal Benefit (GMWB)? Basically a seg fund that not only provides a maturity guarantee, death guarantee but a guaranteed income stream as well. I know all these benefits result in much higher costs. Do the higher costs associated with these products make sense for all these guarantees and hopefully more of a sleep factor? They seem very complicated though.
Thank-you

Q: What is your opinion on what to do with a new found $100,000 at this point in time. I have $200k invested in the stock market currently and have managed to do well over the past 5 years (less so in 2015). I am getting concerned about all the cash that is floating around out there. All the QE does not seem to have had the desired affect on economies/markets. P/E s on many so called safety net large caps are getting quite high although I think there are some that are still ok to hold.
So, I'd like your opinion on how best to invest/protect $100K. ie, leave it in a low interest savings account? Put it large cap "safe" stocks? Canadian Banks? DJIA? TSX 200? Any comments are appreciated.

Q: Hi Peter,

I have an idea I would like to run past you to see what you think about it.

I like stocks that pay me dividends each month. Now if companies that pay every three months would change their format to pay monthly it would be an advantage for us dividend collectors and a huge disadvantage for hedge funds that like to short stocks, as they would have to pay those dividends each month and maybe they would think twice before shorting stocks.

Pretty hard to implement but an idea.

Thanks, Charlie

Q: There has to be some consequence for these short sellers when they are spreading rumours that cannot be substantiated. Apparently in the US they have slightly different rules for short sellers. Apparently there are some regulations is in effect before the stock is driven down.
Is this true and if it is, why TSX regulators do not do something about it to help investors.
Could you shed some light on it and is there anything we can do about it.

Gail

Q: In response to Matt's question. These short attacks are becoming a contagion on Canadian stocks because these shorters are not accountable for anything they say. So how as small retail investors can we fight this ?
If the regulators do nothing then this will only get more prevalent.
Would a collective response to the regulators make any impact?
This is certainly a worrying development as your (5i's) manadate is to help level the playing field for us small retail investors (of which you are doing a great job). If this predatory behavior is allowed to continue then eventually the small investor will leave the market never to return.

My rant for the day.

Q: I am a senior with RRIFs and TFSAs. I am not currently living off these but could in the future. I read questions in this space about income producing products such as XHY. These look good but, frankly, I have a great deal of difficulty investing in a product with a total return of just 21.08% over the past five years, or just 4.2% average per year, when I can invest in XST (Canadian Consumer Staples) with a return over the same five year period of 168.8%. Yes, XHY has a great yield but almost no capital gain. And yes, XHY is less volatile but am I wrong, at my age, to be more interested in total return than just yield? I am not afraid of some volatility and am not a believer in the old outdated dictum of holding bonds in proportion to your age. And the total of my investable assets could not produce adequate income if I relied on yield. The standard deviation of the Consumer Staples ETF is still quite low at 0.35 to 1.2 and it has been by far, the best performing Canadian sector of the past 14 years. No, I don't currently own either of these products but may in the near future.

Q: I have a Scotia rrsp tirade account. I am looking to purchase some US stocks in this account. What are the advantages and disadvantages of purchasing these stocks with Canadian vs US dollars. At present my account only allows Canadian dollar purchase, I would have to open a US dollar account at $30/quarter.

Q: This is in regard to all the posts about the new "Bail-In" laws for Canadian Banks.

A little off track, but a very interesting story of how Iceland dealt with the 2008 financial crisis.
Do a search on Youtube for: "Iceland's President Ólafur Ragnar Grímsson Radio Interview". It's about 27 minutes long and starts off slow, but he eventually goes into heavy detail of what happened, what steps were taken, and the reaction of the West when he allowed the private banks to fail. He and the Citizens went through a very hard time, but were the first to come out of the crisis and lead the way in growth.

Paul