Investment Q&A

Q: I would like to clarify my understanding of convertible debentures. AFN.DB, for instance, matures Dec 31 2014 and pays 7% interest. It is callable Dec 31 2013 by the company. I understand that its conversion rate was set at 22.23. Assuming that AgGrowth does not call the debenture and that I was to purchase it in early January, I believe I could expect two interest payments in 2013 and then 22.23 shares if the shares have reached their target price of $44.98 or higher by the end of 2014. Presently, the debenture is priced at about $40. If the shares do not gain further value in 2014, do I get $1000 in cash at the end of 2014 when the debenture matures or does the company change the conversion ratio in order to return the value in shares? Is there a negative impact; i.e., a significant dilution, on the stock price when the company suddenly releases all those shares to pay back the debentures? What is meant by the premium on the debenture? Is it the difference between the present value of the debenture and the value at the conversion rate? I thank you for your information and look forward to your reply.

Q: Hello Peter
Olympia Financial Group just declared a $10 per share special dividend. So now we have to work out what will happen to the stock price right away, and also after the dividend is paid. Does the share price rise now in the expectation of the dividend? Does it stay at the present price after the dividend is paid or does it drop $10 after the dividend? The company may be "dividending" out the profits to the large insider shareholders [and the rest of us]in preparation maybe for selling the company to another bank who might just bid a higher than current price to get it. What current strategy would you advise?
Thank you for the excellent advice. Paul

Q: I would appreciate your input regarding which 3-4 companies in your Model Portfolio represent the best value currently. A brief explanation for your selection would be helpful . Thanks.

Q: new year, new model portfolio?

Q: Further to the earlier question today on DHX Media, I'm curious why it ran up so much on the news. Seems counter intuitive to me. Thanks.

Q: HI 5i,

Now that tapering appears imminent, how badly do you think dividend stocks in my portfolio, like Telus, IPL, Suncor and PBH will be affected?

I sent you this question a couple days ago but haven't heard from you. (Perhaps i sent it to the wrong address?)

Thanks G

Q: In a recent answer you mentioned the concept buying SLF as interest rate protection, Could you please elaborate. I assume you mean the insurers will do well when interest rates go up despite their recent run. Can you clarify why. Do you think the same would be true for the banks? I hold lots of bank stocks and this would please me very much. I hold few insurers an asking should consider holding my nose and buying more.
Thanks, Manfred

Q: I believe I have read that it is unwise to purchase mutual funds in december because they allocate certain amounts that accumulate over the year therefore you could be in for a capitol gain or other tax liability that you did note participate in. I have two funds left to liquidate as a result of moving all my accounts to a discount broker and reallocating resources to individual stocks and ETFs.
Is there any advantage to selling these two funds now to avoid this year end fund activity? I would be doing so early in the new year anyway.

Thank you so much for an educational and profitable year. All the best for the Season and 2014 to the 5i team and members.

Q: A really general question but could you provide a prognostication/guess on the January markets in general. Do you foresee a major shift to the downside and should investors be more defensive than usual.
About 80% of my names are good dividend payers....but I have a few that would suffer when the tide goes out.

Q: Please inform me on the difference between Alimentation Couche Tard stock ATD.A-T and Alimentation Couche Tard stock ATD.B-T

Thank you:
Duane Campbell

Q: Merry Christmas to one and all!

With TFSA season fast approaching, I was wondering if you had any thoughts about how to proceed with buying stocks with this in mind: being fully invested I have little free cash on hand in each of our TFSA accounts. Cash grows, albeit slowly, with left over DRIP money. So, $5500 would seem to limit us to stocks trading at, say, $55.00 per share or less. Stocks I might like to acquire (BAD, VET, BNS, etc., etc.)exceed my ability to buy in what I presume is a board lot, i.e. 100 shares. So, would you prefer buying lower-priced stocks in multiples of 100 or buying a higher-priced, but arguably "better" stock at less than 100 shares? The thesis is "Buy and hold" for distribution/dividend income which first and foremost would be "Dripped". I rarely sell unless there is compelling news that warrants a trade or re-balancing/diversification come into play.
Thanks,
Mike

Q: HI…as investors should we be overly concern with, “Deflation” in the market place.??

Q: merry christmas to all. i have read somewhere,do not remember where, a statement that buying more expensive stocks $200.00 a share and upwards is a better investment due to stability and strength. is there any merit to this statement.

Q: Given the fact that "defensive" stocks seem to be out of favour at the moment and that "growth" stocks are the flavour of the month would it be possible for you to look at each sector and list your top five stocks or more in each of the sectors.
I realize that your primary focus is on the Canadian markets but you if could include some US stocks that would be a bonus.
Thank you so much for this wonderful service.

Q: I read a comment that your team may be setting up a "portfolio analysis" for your members. I would gladly pay a fee for the team at 5i research to look at my portfolio and make suggestions and improvements on my retirement goals. People are looking for a trusted resource such as this. It is difficult to find a qualified AND trusted group to monitor and help in stock selection. Sign me up!!!!

Q: RE DHX: I'm considering re-entering DHX after this gap pullback finds a bottom. Is there anything of concern at DHX fundamentally - is it still a Strong Buy? Is there anything else you would like more for capital appreciation in the new year? The fiscal cliff chatter will evidently be looming again quite soon - lol - Your thoughts going into 2014 are greatly appreciated. Thanks.

Q: Could you please elaborate on an Enterprise Value as a benchmark in establishing a value of a company?
I am usually looking at the Book Value but maybe the Ent.Val is more accurate?
For example : Is it correct to assume that if the Market Cap value is lower than the Enterprise Value
the market is trading at a discount to the true value of the company and it might be
potentially a good buy (considering that other ratios like P/E, Revenue growth etc. are also favourable) ?

Huge thank you for your great market insight.

Aga

Q: I currently have a 12% position in consumer discetionary stocks that includes a 6% position in cineplex, and 3% positions in dollarama and tim horton's. I was thinking of adding between a 2% and 3% position in Alimentation Couche Tard (ATD.B).

Do you see anything I am missing in this weghting and basket of consumer discretionary stocks? How much of a weighting would be considered too much for a consumer discretionary sector?

Thanks again. I probably wont be writing in again till after the new year so to all the staff at 5i, and its subscribers, have a terrific and safe Christmas and holiday season.

Q: Good Morning,
I find it a little bit harder to find a good stock right now. From your model portfolio, if you would sell one stock, which stock would you replace it with?

Thanks.

Q: I would like to find out any information that is provided on warrants. Thanks for all or any info . Regards Don