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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: Currently holding (exclusively) Mawer Canadian Equity (MAW106) in a TFSA account targeting an “all-weather” (i.e., buy-and-hold) long-term investment, to which the maximum allowable has been contributed each year including for year 2018. The appeal of this product was the low fees (for a mutual fund product) and record of long-term out-performance relative to the TSX index, though note that recent 1 and 2-year results have dipped below the TSX index, and now showing a 3-star rating on GlobeFund. Appreciate your insight on the scenario for a 10-year hold, no withdrawals, maximum annual contributions, volatility not a concern, and seeking only to maximize the available balance at the end of 10 years. Things that come to mind are: 1) Percentage to place in Canadian investments versus international markets; and 2) Where the long-term edge is in terms of relying on one or more low-cost mutual funds, or jumping into pool of ETFs, or jumping into individual stocks (and which portfolio to model). Thanks for continued great service.
Read Answer Asked by Michael on February 12, 2018
Q: Hello Peter et al.

We seem to be getting the market pullback that is much needed for the market to go higher. The Canadian market is a big laggard though. However in all of this turmoil these three stocks have appeared to be on fire. Can I get your opinion on these three stocks. They all hold about a 1-1.5% of my portfolio. Would you buy,sell or hold at these levels?

Thanks,

Brendan
Read Answer Asked by Brendan on February 12, 2018
Q: 5I
When looking at a company's ability to pay a dividend the common ratio people look at is the dividend payout ratio. However from reading some of your information over the years I realize there is much more to it that that. Can you please list the other important factors such as interest coverage, free cash flow etc. Listing them will be fine. I will search and come up with the calculations and then go to the financial statements.

Thank you

Paul
Read Answer Asked by paul on February 12, 2018
Q: I am looking at the payout ratio. Capital expenditures have a big impact on the calculation, which based on EPS or FCF, makes the dividend look perilous.
Considering the distinction between "accretive" and "maintenance" capital expenditures and the maintenance of debt to equity ratio/debt coverage etc., are you comfortable in general and, in particular, with your rating of B+ in March last year?
In general, what is the difference in the allocation of capex between EPS and FCF (or the comparable calculations for a REIT)?
Read Answer Asked by Carl on February 09, 2018
Q: I use an advisor and pay 1% annually on my assets under management. My mandate is for income and they have me in about 35 equities, a corporate bond ladder and a Govt. bond ladder.

A friend says I should use a basket of mutual funds and self manage. I'm considering switching to your income portfolio along with a few other holdings, but my question pertains to my current situation. What's better, a diversified basket of equities or a basket of mutual funds? I think I know you'll say a diversified basket of equities, but where do I see these statistics for myself? I would really like to be able to tell my friend (respectfully) that they are wrong...historically, a basket of mutual funds doesn't outperform a basket of stocks.
Read Answer Asked by Gregory on February 09, 2018
Q: Trying to decide how to allocate a full position or two half positions in a TFSA. We are growth investors with a 20+ year investment window. Currently most underweight in materials, energy and industrials. Plus I would like more non-North American exposure, if possible. WSP seems like it might be a good option. With the current market climate, what opportunities are there for me? Energy companies provide the least growth atm, correct?
Read Answer Asked by Ryan on February 09, 2018
Q: Hi 5i Team,
I own positions in IPL, ENF, KEY, ALA, and PPL. I am a long-term income investor who (like many) is a bit disappointed with the relative (to the market) decline in the share prices of these companies. All of them have been good at growing their businesses, earnings, and cash flows, and dividends - cornerstones of my investment strategy. On a fundamental basis, I don't see anything wrong with any of them, and am inclined to stay the course, thinking the market will eventually reward these companies. I recognize that many of these companies carry significant debt (at low, long-term rates I would think, and not variable rates), and the current Canadian regulatory environment is a negative for the industry.
Can you poke any holes in my investment strategy with respect to these names?
Read Answer Asked by Brian on February 09, 2018
Q: Hello Peter, Ryan & Co.
The Canadian banks are core holdings in my portfolio, which I intend to hold for a very long time. I am a bit perplexed, however, at the recent selloff. I recognize that the current pullback/correction in the market is very broad, but it seems to have been triggered by a fear of rising interest rates - don't banks & insurance companies actually benefit from rising rates? The banks' shares seem to have fallen as much as the interest-sensitive stocks this week (like REITs & utilities), which makes no sense to me. Can you explain?
Read Answer Asked by Brian on February 09, 2018
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