Investment Q&A

Q: What is your opinion of BAM's pivot to a focus on listed stocks and distressed debt as compared to alternative investments?
Thanks
Bob Rose

Q: I know currency's are very difficult to forecast. However, I will ask this question anyway.
With the CDN $ hovering around $.068 do you recommend taking hedges off or leaving them on ?

Q: What are your thoughts on EIT? It seems, at the moment, to be trading well below NAV. When I read the list of top 25 holdings, it mostly looks reasonable to me. But I'm not sure I understand their press release:
"[EIT] announces today that it has determined to suspend the Premium Distribution(TM) component and Distribution Reinvestment component of its Premium Distribution(TM), Distribution Reinvestment and Optional Cash Purchase Plan (the "DRIP") ".
I get that they've cancelled the DRIP but what is the Premium Distribution? What is the forward dividend at this time?

Q: Hi 5i,
Just a comment. Print if you like it. Regarding Tom's question (March 24) about ways to "lock in" an FX gain realized through holding US stocks in a US dollar account, but wanting to continue holding US stocks. Another way to do it might be to switch the cash to CAD (ideally through a Norbert's Gambit to avoid paying exchange fees) and then to use the Canadian cash to purchase a hedged S&P 500 index ETF like VSP or XSP. The FX gain would be harvested in moving to Canadian cash while the CAD is relatively low. The currency-hedged ETF would provide the percentage return of the underlying index while protecting against the longer term likelihood of the CAD swinging back to higher levels. Owning e.g. VSP would preserve investment exposure to US stocks. They would not be exactly the same stocks as were owned in the first place, so the shift from specific stock holdings to an index product would be one aspect to consider. Another would be the tax aspect, if the investments are in a taxable account. If, in his circumstances, exchange fees were unavoidable and there were a significant tax hit in the mix, that might count heavily against this approach. On the other hand, if the FX gain is in an RRSP and the account format and brokerage policies will allow Norbert's Gambit, it might be a decent way to go.
Cheers!

Q: A subscriber named Peter asked for your opinion on GMP.PR.B preferred stock on March 17, but you didn't really answer his question. Instead, you commented on the common stock. Please don't do this again as I am NOT interested in the common stock. I am interested in the preferred stock, which is now down $3 from when Peter asked his question. I know this is a lower-rated pref, but surely the current discount is overdone?

Clearly, in the current virus-riddled economic environment, GMP will have to cut the dividend on its common stock. However, they cut the common dividend to zero a few years ago, but kept paying the preferred dividend. What is your opinion on the coverage for the preferred dividend? Would you recommend that preferred stockholders sit tight, buy more, or sell?

The rate resets on March 31, 2021 at 2.89% above 5 year Canada bonds. Even if the yield on 5 year government bonds goes to zero they'll pay a 2.89% x $25 face value = $0.7225 annual dividend. This seems attractive to me, or am I not properly understanding the yield calculation?

Q: On March 16, in response to a question from Pierre, you said you were not interested in Boardwalk at $27 and recommended some of the higher valued residential REITs. BEI.UN is now down below $20 and has been below $16. At $20 it is trading at a third of book value and 40% of net asset value. It is a well run company and quite under-leveraged. Below what price does it become a screaming buy for a patient buy and hold investor?

Q: These preferred shares pay a dividend equal to $25 face value x prime rate. The issuers, BCE and BAM, are both blue-chip companies, so the dividends are presumable well-covered. However, the prices of these preferred shares have been hammered, falling in lock-step with interest rates. To me, the sell-off seems to be overdone, perhaps because they are so thinly traded. What is your view on these variable rate preferred shares as a buy and hold investment for a retiree living on investment income? What do you think prime rate will settle out at once the pandemic panic is over, say a year from now?

Q: I have 2 non-reg accts (Accts X and Y). I have held ENB in Acct X for some time, and it is now in red. I bought more ENB last week in Acct Y. If I sell ENB in Acct X now to use the loss (ie, after purchase in Acct Y), can I assume that I can use the loss because I bought the "new" ENB before selling the old ENB. FWIW, I put the new ENB in diff acct just to keep the 2 separate.

Q: Hi- do you have a few names that are high risk oil companies. I look at someone like athabasca, and it needs 60 dollar oil, but has 275m in cash as of dec 2019. Any companies that are cash rich and can be sat on for a year or two while things play out. Athabasca specifcally has been here before... WCP also looks compelling with hedges and cash flow.

Q: Are the "dividends" paid by these two Purpose ETF's taxed as eligible dividends? Thanks.

Q: One of my holdings of call options represents all of the contracts at the same strike price, expiry, etc., shown as open interest. It's easily understandable how there can be an offer to buy displayed, but how is
the price for an offer to sell (which is also shown) determined since
there is no sell order from me outstanding?
Thank you in advance.

Q: BIP.UN and BAM.A are down 47-48% over the last month (BEP.UN down 41%), and have been quite volatile intraday. The whole market is getting hit, but would have expected these to be a "little" more defensive. Why would that be? Are there any particular COVID related concerns for these stocks/business models?
Any concern for the dividend? Or is this a good time to add to these positions? Time horizon is long term

Thanks for the great service

Q: I have a diversified US dollar portfolio, hold US stocks, and with the increasing in the US$, I have a 40% FX gain. I want to continue to hold the US stocks but also lock in the FX gain. To lock it in, I take it that a hedge would be required. Please suggest ways I could do this, including the "instruments". I am asking you this because I assume it is a good idea, aka action to take.
With the COVID-19 related decline in the stock market, I now clearly understanding the reasons and impact of diversifying in other currencies other than just Canadian $s...thanks for hammer it home to me.......Tom

Q: Should I be concerned about this? It is down about half its value. Or should I ride it out?
TORONTO DOMINION BANK 4.75% NON CUM 5YR RT RST PFD SER 20 NVCC

Q: I'm looking for two comparable candidates to buy for tax loss selling particularly in same sector and low debt. Thanks for all your help in these crazy times

Q: I have been liquidating my holdings in drift and draft over the last month or so, and I am currently about 25% in cash. Can you recommend a relatively a safe place(s) (stocks, etfs, bonds, etc) that pays a dividend/interest for the next 6 months to a year.
Cheers,

Q: I have a loss in VZ and was thinking of selling it and buying AT&T. Is AT&T buyable at it's current price?

Thanks

Q: RA and INF were integrated March 9th.
Yet I deal with 3 banks and none are showing the integration. Looking for the new market cap and new discount to NAV.
The yield shows 17.6 %, dividend shows $ 2.39 but this is RA only as before the merge.
Again looking to see what would be the yield with INF merged.

Many thanks,

Q: Hello 5i
I've been reviewing your answers regarding which stocks to buy in this environment and noticeable by its absence is SHOP. Given it has been a top performer in Canada for a few years and has suffered a drop with the others I'm surprised by its omission.
Care to comment?
Thanks
Dave

Q: I'm thinking of switching etf's, selling VGG and buying VSP to take advantage of tax loss selling (VGG) and also buying into a CAN dollar hedged fund as the CAN dollar has taken a beating lately and should rebound looking forward, appreciate your professional opinion? Thank you!