Investment Q&A

Q: Appreciate valuable information Peter and colleagues. Just a comment about Vector Vest. My personal experience was that it was less useful than other sources of info. I dropped it when I encountered inaccurate information and I received a very inadequate explanation.
Your choice to print.Joan

Q: Most of my investments are in SDRSP,RIF & TFSA accounts. I have started to build a trading account for dividend paying stocks in order to take advantage of the dividend tax credit. Currently my holdings are:
Aston Hill (AHF) 7%
BMO Eql Wgt Reit Index ETF (ZRE) 24%
Gamehost (GH) 21%
Ishares US hi Yld Bnd ETF (XHY) 26%
Valener (VNR) 20%
Cash 2%
Some of the percentages are high, but I prefer buying board lots. I have additional funds to put in which should reduce the percentages by half. I am ok with some risk. What would your suggestions be for adding to and/or changing the existing mix.
Great job on completing the bike ride dream & contribution to an important cause plus many thanks for all 5i does.

Q: I have been a VV subscriber for many years. The timing models are useful to indicate the where things are going but I do not buy or sell any more just solely on the indicators. I don't think that VV would recommend that either. The strength of VV is the Unisearch. I use it to identify when to buy stocks and it is very useful. I have built my own screening models within VV and it has helped me to find stocks that are about to turn. The most important point is that you cannot rely on only one service. I subscribe to 6 pay services including 5i as well as numerous free services. I also watch BNN and CNBC.

Q: Today, Reuters (Mike Dolan) published a piece "Financial Market Storm Brewing.." and the last paras stated:

"If investors are surprised by financial storm, it won't be because they weren't warned. Financial watchdogs have been waving a red flag about overstretched markets for the past year and stressed concerns again this month.

"There are increased signs of complacency in financial markets, in part reflecting search for yield amidst exceptionally accommodative monetary policies," the Bank governor Mark Carney said last week, citing conclusions of the G20's Financial Stability Board which he chairs.

"Volatility has become compressed and asset valuations stretched across a growing number of markets, increasing the risk of a sharp reversal."

Particularly because of Mark Carney's comments, this caught my attention. Any thoughts on how this might play out?

Q: This is more a general question that a company specific one. Tax loss selling has been mentioned a lot recently and while I know what it is,I don't know how (if?) I can it to my advantage, as I have only had registered money up until now.

From the conversations, it would appear that we should expect a lot of selling around stocks that have fallen quite a bit - AVO, BDI, BAD to name a few. I am down on these stocks too but I am committed to hanging on for several months yet. But is there a value in selling them to realize a loss and buy them back in 31 days as there is little likelihood they will rise in that short time or is that too much like gambling on market timing?

Also, it seems that this activity occurs in the late fall. Why? You can claim the loss at any point in the year so why does it seem to concentrate then?

Finally, if all this selling is expected to occur, is there a way to take advantage of it?

Thanks for the education. If this is not the correct forum to answer this, perhaps you could direct me to where I could learn about this "phenomenon'.

Paul F.

Q: I would be interested in your opinion about Vectorvest methodology and the opinion of any members that follows them. I have twice tried their methodology unsuccessfully. But with their claim of huge returns I am wondering if it was the way I applied their methodology or the short time I used them, that was the cause of my failure.

Thanks

Q: Peter and team: What is your view on the current correction that the market is going through? Will it test the 50, 100 or 200 day moving average? Is there support at any of these levels? Would you suggest liquidating some of the portfolio now or just ride this turmoil out?
SS

Q: Hello,
Is there any significance in the fact that some stocks that I own are added to S&P TSX Small Cap Index (BLX, CXR, HWO) and some others are deleted (FSV, PKI, WSP).
Thanks,
Tony

Q: I would like your thoughts on the Vanguard vfv, vsp-hedged or the Ishares xus, xsp-hedged? Is this a good investment view the US markets getting stronger? Do you favor one over the other? And could you explain what it means to be hedged to the cdn dollar?

Q: Hello Peter and team,

Tax loss selling season is two months away. What good companies do you think will be “popular” tax loss selling candidates in 2014? What criteria would you use to predict this? I know that portfolio managers like to clean up their portfolios before year end: how would they choose what to sell so their portfolio holdings don’t look so bad?

I think the list could include ACQ, AVO and BAD. They rose quite a lot in 2014, and have come down quite a lot as well (more than 30% from their peaks this year). I have waited months and months for an entry point in these stocks, and think now is a good time, but I can wait another two months as it may be the same or a better opportunity during tax loss selling season.

I don’t think a stock like IPL would be a popular tax loss selling stock, the trend has been mostly up in 2014 with some minor dips along the way.

I already nibbled on AVO in June on its way back up (so I thought), but I am now down 20% as of Friday.

I am sure that there will be some real losers or speculative stocks that investors will sell. However I am interested in “good companies” that investors overpaid for (e.g. $40+ for BAD, $80+ for ACQ) that investors would just sell to create a loss to offset gains elsewhere.

Your comments please.

Paul J.

Q: Amaya went to 37$ recently, and seems rather volatile. In a TFSA, would you advise 'timing' the market ? Now it is at 32.70$, 11% less. It seems to make sense to do some market timing for 10% or over with no tax consequence. Same principle for a RRSP. Do you agree ? If not, exactly why ? It seems to work with volatile stocks (with no tax consequence).
One might argue that AYA being quite volatile, it might jump much higher in no time, and timing the market is always a risky game. Would you use this argument (and again I would stress that this seems useful only when there is no tax consequence) ?

Q: Hi 5i team. When Ms. Wilkins (No. two in the BOC) referred to 'neutral' interest rates in her speech, did she mean short term rates, 10 years or long government bonds? Thanks. Henry

Q: Since we are having a correction, I need to free up some cash to buy stocks I have been waiting for to pull back. Do you recommend selling a partial position of a winning position or selling a losing position(precious metals of course).The new positions I want will help diversify my portfolio. I am tempted to sell the losing position. Also, could you guys give any recommendations on a course of action with this correction and any possible future outlook of the economy etc..... Or any nuggets of wisdom you wish to throw out there.
Thank you

Q: Waiting for an entry point on your A rated stocks. Held on to excess cash for this reason. Should I just go with A rated or lower? I know you don't like to time the market but what might be the turning point clue?

Q: I have an acquaintance who says that he is fully diversified by holding Berkshire and Fairfax exclusively. What is your feeling please.

Q: It's said that a buy time could be on a 10% index correction. Would that apply to individual stocks as well as the index. If so, that may make selected energy stocks a buy now.

Q: The Russell 2000 index is now negative for the year and looks (to me) like a topping pattern. Is this likely to be an early warning?

Q: Veresen (VSN)

Hi Team,

I am following up on my earlier question regarding Veresen's payout ratio as reported on CIBC Investor's Edge. You have suggested that the dividend payout to cash flow is more meaningful than dividend payout to income. Does it follow then that price/cash flow (P/CF = 23.10x TTM) is generally a better metric than price/earnings (P/E = 50.99x TTM)? If so, would this typically be the case or would it depend on the sector?

Thank you again for your advice.

Michael

Q: Hello Peter and co.
Your rational thought process and in-depth stock analyses have helped me be disciplined and cool headed; thanks a lot.
Sensing that some kind of correction would soon happen, I raised, at the end of August the cash level of my RRIF portfolio to 15%; half of it was earmarked for the income I will withdraw in January 2015 (I'm early perhaps, but I sleep better) and the other half was to nibble at stocks that I already own but in need to be topped up. So far so good because my total return to date in 2014 is 13% while my annual objective was 7%.
I take the opportunity to thank those who have responded to my search for a website that would help me track my various portfolios and watch lists; I decided to stick to the free version of Globe Investor + my own excel spreadsheets.
Cheers,
Tony

Q: Veresen (VSN)

Hi Team - I was hoping you could please explain the apparently high payout ratio of Veresen. According to CIBC Investors Edge, the payout ratio is 439.63%. From what I can see with FASTGraphs, the payout ration has been over 100% (sometimes well over) since 2001.

I don't understand how this can be possible over such a long time period. I've noticed this with other companies as well from time to time. Generally though, the commentary you provide suggests a low payout ratio is best.

Could you please help educate me?

Thanks very much. Michael