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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I wanted to ask about Discovery Air, but the "ask a question" interface doesn't recognize either the symbol or the name - not sure this is how this is supposed to work. I believe that, in a previous iteration of this interface, 'DA.A' was recognized and searchable as such.

In any case, today's press release from Clairvest <http://www.marketwired.com/press-release/clairvest-update-on-its-investment-in-discovery-air-inc-tsx-cvg-2201427.htm> announces their intention to purchase (at a substantial discount) all the common shares not already owned by them or their affiliates. Supposing this occurs, does this devalue the convertible debentures, or do the debs effectively become a kind of private debt? Put another way, could this actually be good for the security of the debentures?

Edit/share (or not) as you see fit.
Read Answer Asked by John on March 08, 2017
Q: Please accept my apologies for what could be a request for a long-winded answer. You welcome to debit my 5i bankroll for 5 question credits in effort to better compensate you for your time.
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If possible, please provide your opinion on something I wish to term "Peak Credit" in Canada. We are all aware that Canadians are spending themselves into a life-long love affair with mortgages, lines of credit and credit cards. With Canadian interest rates at 35 year lows, the availability of loans and credit climb while region-specific real estate prices inflate to valuations that seem to defy logic. Young families in their 30's commonly have mortgage debt over $500k and barely earn the income to cover payments at today's rates.

In general, what is the mix of insured/un-insured mortgage debt on the books of Canadian banks? If wages are not keeping pace with inflation and the cost of living, how are Canadians ever going to own their own home? Are we doomed to a life of the English, where the concept of home ownership is more of a dream than it is a reality?

Do you feel banks in Canada are prepared for higher rates in the next 3yrs?

Is Canada showing the early signs of a credit bubble?

Do bank common stock investors have anything for fear?

Am I a coyote howling at the credit moon?


Thank you for your guidance. This topic should be on the minds of many Canadians.
Read Answer Asked by malcolm on March 08, 2017
Q: I recently subscribed to your service and I would like to implement your balanced equity portfolio.
I understand that the shares mentioned below may still have some growth potential and that it make sense to hold on to them if they were purchased at a lower price. However, I find it difficult to purchase them at their current price and P/E ratio.
Ccl.b $ 290 P/E ratio 30 ( went from $97 to $290)
Csu. $645 P/E ratio 49 ( went from $120- $645)
Kxs. $70. P/E ratio 127 ( went from $44 to $70)
Engh $55 P/E ratio 31 ( went from $19 to $55)

Could you suggest a replacement for each of those companies that will be in line with the strategy, asset allocation and the targeted annualized return of the balanced equity portfolio.
Read Answer Asked by Monique on March 08, 2017
Q: This is a question I sent in last week, and the answer:

Question:
I am new to 5i, and investing based on the Balanced Equity Portfolio. Some of the companies in the portfolio have B and even C ratings. Why are they here if A ratings are the best? It seems to me I should get the best performance if I only invest in the A rated companies in the portfolio. Or am I wrong?

Answer:
We needed to add other companies for diversification and balance within the portfolio. Also, there are not enough A rated companies to really provide proper diversification. One other point: a company could be rated C but still provide significant upside if the valuation is low enough to start with.

I'm looking for more details on this matter. If the response uses up several of my "question credits", that is OK.

Having started a little over a month ago, I have only bought into about six companies so far, all from the Balanced Equity Portfolio. This represents a very small portion of my total investments.

Below you indicate that B and C rated stocks are added for diversification and balance. At the moment, those factors are not important to me because I get diversification and balance elsewhere. What I'm trying to do is maximise my potential return with 5i.

According to the 5i Research Ratings, it would seem that an A stock is likely to have a higher return, with lower risk, than a B stock. So if I don't need diversification, then it would seem that over time the A stocks will outperform the B stocks. Or am I wrong?

Have you done any analysis of the performance of A stocks versus B stocks? What were the results?

As someone just starting with 5i, it would be useful to know the date you "opened" a position in the Portfolio. Is that information available?

How often do you update/reconfirm the stocks in the portfolio. For example, WCP has declined 32%. Is it likely to be dropped from the Portfolio or is it a better buying opportunity then before? On the other hand, CSU has increased over 400% and is still rated an A. With a great rating and momentum on its side, is CSU a screaming buy or is it overvalued and at risk of a decline?

Do you ever put on a "hold"? For example, I am interested in TOY, but the stock has recently had a substantial price increase. Is it still a buy, or should I wait for a pull back?
Read Answer Asked by Jack on March 08, 2017
Q: Hi Team,
This question is about investing in a gold ETF. Sprott Physical Gold Trust (PHYS) I believe is a closed-end fund. I read this affects its ability to issue new shares so it cannot effectively track the price of gold. This means shares could trade at a premium to net asset value and not truly track the price of gold. Is that true and if so, is it a concern? Thank you. Michael
Read Answer Asked by Michael on March 08, 2017
Q: I am considering adding pure play "Industrial" REITs to my REIT allocation. I currently have sufficient representation in the apartment and office/commercial sectors of the Canadian REITs

Please rank in order of preference the 5 pure play industrial REITs on the TSX. Am I missing any other names?

The market capitalization of the REITS are: Pure Industrial ($1.42B); Dream Industrial ($499M); WPT Industrial ($436M);Summit Industrial ($101M); and Edgefront ($68M).

Is Edgefront REIT too small to invest in?

Given Pure Industrial has Canadian and US holdings is it better than a 50/50 split of Dream (or Summit) and WPT which would give the same proportion of Canadian and US real estate holdings.

Please confirm whether WPT is traded in US dollars on the TSX.

Thanks for the excellent service.
Read Answer Asked by Stephen on March 08, 2017
Q: Good Morning. Would like your assessment of Gibson's recent earnings report along with your current opinion of this company and the "safety" of its dividend. Also, any comments you might have in regard to the oil space in general in light of recent reports about the drastically improving metrics for solar energy, and therefore long term pressure on fossil fuels as the primary energy source. Thank you.
Read Answer Asked by Donald on March 08, 2017
Q: The children and I have been debating what a reasonable long-term rate of return is if an investor held a prudently diversified portfolio and was looking at total returns with dividends reinvested, annualized over a period of 20-30 years.

My suggestion was that 10% net of fees would be exceptional and worth every rain dance.


What say you wise sages on this matter?

Thank you
Read Answer Asked by malcolm on March 08, 2017
Q: Could you help me analyse/dissect Brookfield's investment in Terra Form Power and Terra Form Global. The press release indicates a 1.4 billion $ investment by Bam.a and about 500 M $ commitment by BEP.un . Is the Bep.un portion part of the 1.4 Billion or in addition to it? Do the acquired solar and wind assets become part of the BEP.un portfolio complementing their predominately hydro-electric assets?
BAM.a is one of my largest , longest term holdings and I would like to continue to benefit from their expertise. That said, I would like to focus any additional investment on the renewable energy segment so which entity is likely to benefit most directly from this acquisition - recognizing that Bam is a growth vehicle and Bep largely an income one with some growth?
Thank-you
Read Answer Asked by William on March 08, 2017
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