Investment Q&A

Q: Hello Team
Could you please state 3 significant indicators of an imminent market correction or market re-evaluation that the retail investor could watch for or be wary of.
Thank You
Clarence

Q: Will there be a repeat of Fridays market call, or are you going to re-broadcast on line? I would love to send it to some potential subscribers.
Thanks
Bob

Q: Peter and Associates,
The question of rising rates and their impact on bond proxy alternatives.

There was a time one could somewhat believe a certain reasonably consistent relationships existed between investment alternatives? There also used to be a principle that government and corporate bonds tended to move in opposite directions depending on the economy, especially downturns? Financial engineering has created paradigm shifts, anomalies/distortions, if not bubbles?

In a low inflation environment as rates went low, one could still find 5 year government bonds ( i.e. Provincials) producing 5% +/- returns. In today's artificially low realities? How many TV guests suggest the last BOC increase was a mistake or at least not wise? Is what we are hearing suggesting the Canadian economy and likely even less, highly indebted consumers are capable of handling significant rate hikes? Are there not suggestions technology and globalization are causing , deflation as part of our new economic paradigm?

Given yields on bond proxy alternatives, how real is the likelihood of fixed income rates becoming a strong competitive alternative in the immediate future? Other than giving central banks dry powder wiggle room, more than a few professionals are of the opinion we are in for years of low rates? Somehow a 2.09% 10yr rate (BOC stats) has not only a long way to go, but multiple hurdles to be a disruptor? Is stagflation a concern?

Using the Buffett principle, if corporations cannot find good uses for excess cash, they should return it shareholders? Are corporations acting like we are entering a period of strong economic expansion ? What message does consolidation and right sizing with closures/ job cuts give? My reading of the tea leaves , a tepid bull market cycle? Low grow and rates for the foreseeable future? Reasons to increase and/or declare special dividends for shareholders?

I n a world where the half empty/full glass is used to divide optimists from pessimists, direction and content are often overlooked, if not lost? The fact is, a lot of money can be made regardless to the direction of any market! Low rates, optimistic pessimism?! My conclusion, rates will remain borrower favorable and if so, what will the likely "new" normalized rate structure look like?

For all, capital appreciation is always desired but for retirees ,economic repression and its consequences on needed reliable income of far greater "interest"? Any feed back or counter opinions would be much appreciated. As usual, thank you for sharing your expertise, it is always trustworthy and extremely useful.

Season's greetings and best wishes for a prosperous 2018!

Mike

Q: question - if I sell a TSX listed stock through an on line broker on Dec 28, is it considered a capital gain/loss in 2017 or 2018? The settlement date is, in theory, not for 2 trading days later, Jan 2, so does that make it a 2018 capital gain/loss?

Q: In June you wrote an article in the NP where you provided some insight on 5 smaller U.S. stocks that investors should consider. Any plans to publish a similar updated article in the New Year?

Q: Where can I find a complete list of new highs for stocks on the tsx?

Q: Good morning, i have passed the CSC, The Canadian Securities Course for investors and have a decent understanding of Financial Ratios and statements, do you know how i could get a deeper understanding of the ratios, since the same ratio in one industry can mean something totally different in another industry. it seems to me that a thorough understanding of these can go a long way in making investment decisions, thanks?

Q: What is your recommended sector allocation within the Canadian Equity market and top pick within each segment today? (Discretionary, Staples, Energy, Financials, Health Care, Industrial, Tech, Materials, Communication, Utilities?)

Thanks! Nick

Q: Hello,
My question is portfolio construction strategies for a RIF. Assume the value allows for sufficient diversification to total 20 positions, as long as a max 5% (say $5,000.00 per investment) weighting is respected in each. Also assume one wants foreign exposure and uses ETFs for that portion with a goal of maintain a minimum 25% (say 5 positions) exposure.

Based on the above, that would mean +/- 15 individual CAD stocks can be purchased. I like the fact individual stocks can provide greater returns and outperform the index and/or its sector. But they can also produce far more portfolio carnage for a variety of reasons? Capital preservation is an important consideration but low volatility is acceptable. Other investments can be drawn on to avoid selling in a market downturn and I am still a few years away from reaching 71. I am assuming the value of the portfolio is stable and the strategy would change if the withdrawals started reducing the portfolio value below an amount where a reasonable diversification could be maintained. I believe it is a useful exercise to have an objective yearend review. It helps to understands risks and plan/structure investments going forward with a vision.

In your opinion, what factors might be prime considerations to simply move the funds entirely into ETFs?

Given some recent questions, I would like your insight into FOREX and Covered Call options on ETFs for my foreign exposure. Other than travel, our living expenses are CAD. Consider foreign bank ETFs ZUB and ZBK as a good example since you have provided responses on them . Would buying a block of each which add up to my desired individual investment weight also give some FOREX exposure but a defensive position thanks to the hedge? Similarly, would a strategy of picking two ETFs one with a covered call and the other full market exposure increase capital appreciation potential while enhancing monthly returns?

Thank you for your insights. Season's greetings!

Mike

Q: What would you consider to be the ideal sector weighting for a Canadian equity portfolio? (Discretionary, Staples, Energy, Financials, Health Care, Industrial, Technology, Materials, Communications, Utilities) And what is your top pick in each space?

Q: What sort of circumstances would a company redeem their preferred shares? Are they more likely to be redeemed if they are trading at a premium (above $25.00)?

Q: Do you use Stop Losses? If so what would be your criteria ?
Thankyou

Q: I realise this is a bit out of your focus area but I have a quadruple in a British company Games Workshop (GAW). I am wondering if I should sell some shares or hold.

Q: Congrats for you terrific job!
I am often wondering when you recommend certain etf over some great money manager (like phn, egdepoint or mawer) for just half a point of management fees and on the other hand, you recommend full active management with your own model portfolio.
I think with all the money flowing into indexing and closet-indexer and quants, we are gonna see some benefits in years ahead for truly and talented active managers.
With respect, your model porfolio have proven their ability to beat the index as some greats money manager (as mentionned above).
Comments please

Q: How is my TFSA doing? Has anyone prepared an analysis like this: assume one started a TFSA when they were first introduced, and added the maximum allowable contribution each year in Jan., and they received an average annualized return of X (pick some decent average)...therefore the total value of TFSA portfolio should be Y.

Q: I have an opportunity to invest in a private enterprise that has developed new technology in the music industry. The technology is both significant and international in scope but the company is still in the early stages. Capital investment seems to me to be high risk, but if the company is successful, there could also be high rewards. With 5i's experience in venture capital over the years, I would appreciate your words of wisdom.

Q: We are quite elderly, have a small pension and, to augment it, invest with BMO in a portfolio of 22 stocks that pays close to $35,000 annually in dividends. I'm looking for relatively stable income with safety and a modest chance of growth. Could I have your comments please, and any suggestions.
It is composed as follows:
Cash - 3%
ALA - 4.36%
AX.UN - 4.23
BCE - 5.10
BIP.UN - 4.58
BMO - 4.79
CM - 4.88
CPX - 3.91
DRG.UN - 4.91
ECI - 3.95
EMA - 4.58
GEI - 4.12
NFI - 4.27
NPI - 4.51
PKI - 5.01
PPI - 4.3
REI.UN - 3.77
RNW - 3.63
RY - 4.84
SJR.UN- 4.11
T - 4.27
TD - 4.44
TRP - 4.26

Wishing you all a Very Merry Christmas, and a Happy and Prosperous New Year.

Cheers, Edward

Q: Good Morning Peter, Ryan, and Team,
Tax loss selling season is coming to a close for 2017.
In your opinion which company(s), within the Balanced Equity Portfolio, appear to be sold down unnecessarily as a result of tax loss selling ???
To me GUD, WCP, CLS, and GC appear to be candidates. A company outside of the BE Portfolio that has really been thrashed is PEY although the gas market in Canada is brutal right now.
Thank you very much for your sage insights. DL

Q: Canadian companies that pay dividends in U.S. dollars: In your Nov. 29 answer to Patrick, you listed some companies; MG, MX, BEP.UN, AQN, TRI, OTEX, CSU, AGU
Are there any more beyond this list? By the way, it may be good to identify this somewhere on your web site. Thank you.

Q: Today Norman Rothery has a column about Canadian microcap investing where he took microcaps and ranked them by low P/E and then ranked this group by recent momentum. Where can I get a Canadian service that will allow me to do this? Search databases of stocks and then rank them for criteria? Thanks.