Investment Q&A

Q: I thought this post at CornerOfBerkshireAndFairfax does a great job stating what we've been unfortunately seeing in the last few days and is worth highlighting:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/valeant-pharmaceutilcals-international-inc-(vrx)/3200/

"How to crush a stock in a few days 101:

- Pick a vulnerable company that has uncertainty surrounding it for whatever reason. Make sure the company is complex enough that it will take time to clear the air.
- Start shorting the stock
- Put out a hit piece, spread internet rumours, make a comparison to Enron for good measure (point out a couple of similarities and not the million differences), make a mountain out of a molehill
- Because there is already uncertainty out there, your message will get traction from traders/the media and make weak hands sell
- Do this in a coalition with your hedge fund buddies, who also short the hell out of the stock
- Selling begets selling, momentum day traders pile in, margin calls result in more selling
- Market panic is successfully created and stock gets crushed
- Enjoy the profits

On one hand, this creates opportunities but it really undermines the credibility of the capital markets. You could do everything right in your fundamental analysis and get crushed by unethical people who would shout fire in a crowded theatre."

Post at your discretion.

Q: Could you please comment on my sector weightings?
Non-Registered CAD account. Income Bias.
70% Equity
30% Fixed Income

Resource(non-energy)8%
Consumer 8%
Banks 16%
Other Financial (Insur, MFunds, Fintech)16%
Utilities 11%
Telecom 8%
Precious Metals 2%
Energy 8%
REIT 12%
Technology/Industrial 11%

Thank you

Q: Hello,
Can you please remind me what the five `i` `s stand for, in your company name? I recall only the most important one - independent!
Thx, Rob.

Q: Greetings: Here is summary of TSX stocks, showing current dividend yield and the next ex-dividend date. I spot checked a few stocks and guess that the yield data may be a few days behind, but it's a good summary. One can download the list Excel and then sort it on the yield column. A staring point for further analysis. http://dividendhistory.org/tsx/

Q: I am a retiree with substantial cash set aside for things like a new car, appliances on their last legs, some renovations, and a trip. My questions is: do I include this cash as part of my portfolio when determining asset allocation %, both in equity vs fixed income and, more importantly, when calculating what % of my portfolio is in individual stocks and what % is in any given sector? Obviously, %s change dramatically if I only count the $ actually invested! Thanks again for your steady hand.

Q: Good morning,

There seems to be a lot of opinions about excess shorting by U.S hedge funds that is causing considerable disruption to stocks in the Canadian markets. I have never been an advocate of shorting as it is destructive by nature, but it is what it is.
My main concern is that there may be a return of excessive naked shorting and there is little defense against this activity.

What are your views on this? and how can we protect ourselves against this.

Is the uptick rule still in place or has that gone the way of the Dodo ?

Thanks Peter

Q: What is the rational behind a cease trading after market close and resume trading before market open? BIN for example. Thanks.

Q: My question is not about Wajax specifically, but using Wajax as an illustration in the context of my question.
In previous answers, you have repeatedly expressed a leaning towards shedding losing stocks and replacing them with others currently showing promise, on the premise that there's an opportunity cost involved in holding the "loser".
Assuming the company (Wajax in this case, on which I'm down almost 50%) is a well-managed company, and in the absence of known problems, and the company is merely being battered by economic conditions WHICH WILL (EVENTUALLY) TURN AROUND, wouldn't any replacement stock have to double in value (including reinvested dividends) before reaching breakeven? And isn't it likely that the loser stock, Wajax in this case, will likely double in value sooner than (almost) any replacement stock (provided the replacement isn't of substantially higher risk profile)?
Or, to put it a different way, isn't the opportunity cost of continuing to hold the losing stock effectively nil?
Thanks for your and your team's continuing effeorts to educate us! Lotar.

Q: For investing books, what would you guys recommend for the middle of the road, fairly experienced, investor, thanks?

Q: I often see you and others mentioning that a stock price went up or down "on high volume". How should we interpret this? Obviously the high volume means there were many buyers. And of course there were equally many sellers. Is this a good sign for the future (lots of buyers) or a bad sign (many sellers)? I am quite puzzled about how high volume should be interpreted.

Q: More a question about strategy. It seems my discount broker charges me around 2.5% for the exchange conversion when I buy a US stock, and probably the same for dividend payments and sells. Is there any way I can reduce these charges? Thank you.

Q: Rajeev asked a question today about CCL.B in which he stated the RSI is now 14. On TD Waterhouse the RSI is currently listed as 55. So the natural question is to ask you what you would use a reliable source for RSI? Thank you.

Q: Hello 5i team. Suspect you've been asked this before, but wasn't able to locate the topic on the Q&A part of your site.

Are you (or any of your subscribers) able to provide a reliable source of information on current payout ratios for Canadian dividend stocks? I've been relying on the Globe Investor 'Watchlist' tool, but sometimes the ratios quoted don't seem right e.g., TransAlta at 27.30% compared to latest edition of Money Magazine at 720%. Lots of dividend-focused websites out there, but the ratios quoted seem all over the map.

Any suggestions would be appreciated. Thanks.

Q: Can you list five or more small cap companies that have initiated dividends in the past two years or so? Where would I find this sort of info, I don't have Bloomberg. Thanks.

Q: Follow-up question re. yesterday's 8 cent drop on high volume. I noticed volume picked up around noon yesterday and the price started dropping. Lots of different brokers on the sell side. The really big volume trades occurred much later in the afternoon and at much lower prices. It almost looks like the traders and computer programs detected a large SELL order from say a mutual fund (for quarter-end window dressing??).
If this is true, how do the other brokers/traders "smell" this out and front-run the large sell trade?? I'm assuming that any quarterly reports reflect the mutual fund's trade date position (ie. not settlement date).
Please help me out in understanding what took place yesterday. Thxs, Ralph.

Q: Two fund managers on BNN have referred to VRX as "broken".
Is this another way of saying "sell", no hope?

CV

Q: Hi Peter
I have read that U.S. building permits are by far the most reliable leading indicator on where the economy is headed,where would I go to find this information, and would you use monthly data over a 3 or 6 month period to form your opinion.
Thanks

Q: My broker is suggesting that I sell half my position in bank stocks and buy the:
TD Canadian Banks Index-Linked Autocallable Notes Series 9 due October 14, 2020 (non principal protected).

In his justification he is stating that "price decline in bank stocks has created an attractive Cdn Banks auto-callable note with a 10% payment at the anniversary date. I'm not sure if the bank stocks will rally that much over the next 12 months but, they only have to hold their value for this investment to payout 10%."

I appreciate your opinion on this switch as well as your opinion on linked notes in general. I found them so confusing and it appears to me that the issuer is making money in any situation they consider.

I echo other members who complements the excellent value of your service. Unfortunately it doesn't work for those who naively think that the market will always go up and every recommendation will make money in up and down market.

Thanks

Q: Peter As a 5I member for a long time your service has been great ,This current market turmoil will pass and if you have good companies you will be ok in time.
stan

Q: Hi Peter and Team!! Between seeking alpha, some financial papers and Jim Cramer, there is a lot of noise out there. For a small retail investor, things can get a little confusing and panic generating at times. I subscribe to 5i and the Investment reporter...my two beacons in the fog... could you suggest any other reliable information sources that give a level headed view of the markets both here and in the world overall? Kind Regards, Tamara