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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: Peter and His Wonder Team
I am down a ton on bother of these. I do not need to liquidate but not sure what to do...hold or sell. Since they have both been hammered lately would it be better to wait for a rebound before selling? On the other hand do they have any longer term potential? Your thoughts please!
Thanks...your insights are always valuable as we retail investors navigate through tricky waters!
Dr.Ernest Rivait
Read Answer Asked by Ernest on June 20, 2017
Q: Thank you for answering my question on the names of the companies that have been deleted from the portfolios for underperformance. You told me in advance that it would take some time to respond, but you did. And that's why I subscribe. It's great to align with people who keep their word and are up-front. While some of the choices we make could turn out well or not, integrity can always be upheld. I hope you charged me about ten or twenty questions for the response. -Jerry
Read Answer Asked by Jerry on June 20, 2017
Q: Would you put money into biotech seasonally ? In the past I have done well on Celgene ... However , I have taken quite a hit on Gillead, so I am cautious.
Or should I look at the ETFs for a broader/safer play ?
Read Answer Asked by Thomas on June 20, 2017
Q: I bought RBA at 30, rode it to 52 and now it is 39 and change as of Friday. I thought it would be a steady stock for a good or poor economy. Last quarter was bad, but was compared to a record quarter from the previous year. What is your opinion of this stock: hold or sell? Thanks
Read Answer Asked by Richard on June 19, 2017
Q: My question concerns a robust method to estimate free cash flow.I have been running some calculations as part of my investment process and I make use of Free Cash Flow extensively in my models.

Usually I just use Operating Cash Flow - average of last five years CapEx. However in many cases such as GIL there are large variations in working capital from one year to the next. Management can boost operating and free cash flow by reducing working capital in the short run. This is a one-off rather than permanent boost to cash flow and can give a misleading measure of sustainable cash flows. The opposite is also true and management can make short term investments.

Some authors recommend removing changes in working capital from the calculation and defining free cash flow as Post-tax profit + Depreciation and amortization - stay in business CapEx. The stay in business CapEx is then estimated as the greater of the average of last five years CapEx or 120% of depreciation. Sometimes this adjusted definition of Free Cash Flow is also called owner earnings or Cash Profits.

With respect to GIL this approach certainly seems to give a much better free cash flow figure, but I wonder if this is wishful thinking? Is a company that over five years or more has to constantly deplete its working capital really showing us that it actually has a higher CapEx requirement? I would appreciate your comments.
Read Answer Asked by Andrew on June 19, 2017
Q: I manage an income portfolio for my wife who is 69 years old. The sole purpose of this portfolio is to provide income for life. Therefore the dividends are important and the actually ups and downs of the price of the stock less so. Some of these stocks pay quite high dividends. My question is are any of these company dividends at high risk of being cut due to raising interest rates or a downturn in the market and should be replaced with stocks that have lower yield but with safer dividends. The stocks are:

A&W Revenue Royalties

Artis REIT

BCE Inc.

Bank of Nova Scotia

Brookfield Renewable Partners

Chartwell Retirement Residence

Chorus Aviation Inc.

Cineplex Inc.

Dream Global REIT

Enbridge Income Fund Holdings

Extendicare Inc.

Pure Industrial Real Estate

Richards Packaging Income Fund

Royal Bank of Canada

Sun Life Financial Inc.

TransCanada Corp.


Apple

Whirlpool Corp.

Read Answer Asked by David on June 19, 2017
Q: Preference shares
How does the market value preference shares? Disregarding variables such as credit quality and characteristics of different issues, these shares strike me fundamentally as a series of cash flows discounted to a present value. I suspect that the market is driven by institutional traders who are guided by a particular benchmark to establish a discount rate to determine the value of the cash flows If I am correct, what benchmark rate do the market makers use and does it vary? For example, do traders always use a benchmark of x bps over Canada bond yield for equivalent terms and is there an established amount for x which doesn't change over time? Without predictability in this regard, there would be no way to assess whether reset shares will trade at par on their reset date.
Read Answer Asked by Carl on June 19, 2017
Q: Are you able to reasonably estimate when a company will produce positive (EPS) earnings per share (i.e 1-3 year out)? If so, when will GEI (Gibson's Energy) have positive earnings? Are there any services /sources out there that does this type of projection?

On a different matter, are my question credits carried over should I not use all my question credits by my renewal date?
Read Answer Asked by LARRY on June 19, 2017
Q: I have investments in the listed Investment Trusts for income.
With the problems in the Retail Sector (Sears, The Bay, etc), and the growth of on-line shopping, are the values and incomes of any these Trusts exposed?
REI.un and CUF.un have been on a steady decline.
Thank you in advance for your comments.
Dietrich
Read Answer Asked by Dietrich on June 19, 2017
Q: Presently has 6.25% of portfolio in Energy consisting of 2.5%,2.5% & 1.25%.of ALA.R,KEL(down 38%) & HWO(down 28%)respectively.Is this a good entry point for ENB? If so,my exposure to the energy sector maybe too high,so thinking of selling HWO.Please advise.Appreciate u usual great services & views
Read Answer Asked by Peter on June 19, 2017
Q: Whenever I rebalance my portfolio, I find it somewhat troubling that I am treating a dollar in my RRSP account as equivalent to a dollar in my TFSA account or a dollar in my unregistered account. I am very near to the time when I will be converting my RRSP to a RIF and withdrawing mandatory amounts starting at 5.28% and rising in subsequent years. I will have to pay tax on these withdrawals and my marginal tax rate is not much below 50%. Moreover, I do not expect my marginal tax rate to change much over the remainder of my life. This means those withdrawals will be worth only about half as much to me after tax. Of course, when I withdraw a dollar from my TFSA or my unregistered account I get to keep the entire dollar. So I am inclined to treat a dollar in my RRSP account as equivalent to just 50 cents or so when I am totalling up my total assets and doing the rebalancing. Does this make sense to you?
Read Answer Asked by Philip on June 19, 2017
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