Investment Q&A

Q: Hello Peter and team,

Tax loss selling season is two months away. What good companies do you think will be “popular” tax loss selling candidates in 2014? What criteria would you use to predict this? I know that portfolio managers like to clean up their portfolios before year end: how would they choose what to sell so their portfolio holdings don’t look so bad?

I think the list could include ACQ, AVO and BAD. They rose quite a lot in 2014, and have come down quite a lot as well (more than 30% from their peaks this year). I have waited months and months for an entry point in these stocks, and think now is a good time, but I can wait another two months as it may be the same or a better opportunity during tax loss selling season.

I don’t think a stock like IPL would be a popular tax loss selling stock, the trend has been mostly up in 2014 with some minor dips along the way.

I already nibbled on AVO in June on its way back up (so I thought), but I am now down 20% as of Friday.

I am sure that there will be some real losers or speculative stocks that investors will sell. However I am interested in “good companies” that investors overpaid for (e.g. $40+ for BAD, $80+ for ACQ) that investors would just sell to create a loss to offset gains elsewhere.

Your comments please.

Paul J.

Q: Amaya went to 37$ recently, and seems rather volatile. In a TFSA, would you advise 'timing' the market ? Now it is at 32.70$, 11% less. It seems to make sense to do some market timing for 10% or over with no tax consequence. Same principle for a RRSP. Do you agree ? If not, exactly why ? It seems to work with volatile stocks (with no tax consequence).
One might argue that AYA being quite volatile, it might jump much higher in no time, and timing the market is always a risky game. Would you use this argument (and again I would stress that this seems useful only when there is no tax consequence) ?

Q: Hi 5i team. When Ms. Wilkins (No. two in the BOC) referred to 'neutral' interest rates in her speech, did she mean short term rates, 10 years or long government bonds? Thanks. Henry

Q: Since we are having a correction, I need to free up some cash to buy stocks I have been waiting for to pull back. Do you recommend selling a partial position of a winning position or selling a losing position(precious metals of course).The new positions I want will help diversify my portfolio. I am tempted to sell the losing position. Also, could you guys give any recommendations on a course of action with this correction and any possible future outlook of the economy etc..... Or any nuggets of wisdom you wish to throw out there.
Thank you

Q: Waiting for an entry point on your A rated stocks. Held on to excess cash for this reason. Should I just go with A rated or lower? I know you don't like to time the market but what might be the turning point clue?

Q: I have an acquaintance who says that he is fully diversified by holding Berkshire and Fairfax exclusively. What is your feeling please.

Q: It's said that a buy time could be on a 10% index correction. Would that apply to individual stocks as well as the index. If so, that may make selected energy stocks a buy now.

Q: The Russell 2000 index is now negative for the year and looks (to me) like a topping pattern. Is this likely to be an early warning?

Q: Veresen (VSN)

Hi Team,

I am following up on my earlier question regarding Veresen's payout ratio as reported on CIBC Investor's Edge. You have suggested that the dividend payout to cash flow is more meaningful than dividend payout to income. Does it follow then that price/cash flow (P/CF = 23.10x TTM) is generally a better metric than price/earnings (P/E = 50.99x TTM)? If so, would this typically be the case or would it depend on the sector?

Thank you again for your advice.

Michael

Q: Hello Peter and co.
Your rational thought process and in-depth stock analyses have helped me be disciplined and cool headed; thanks a lot.
Sensing that some kind of correction would soon happen, I raised, at the end of August the cash level of my RRIF portfolio to 15%; half of it was earmarked for the income I will withdraw in January 2015 (I'm early perhaps, but I sleep better) and the other half was to nibble at stocks that I already own but in need to be topped up. So far so good because my total return to date in 2014 is 13% while my annual objective was 7%.
I take the opportunity to thank those who have responded to my search for a website that would help me track my various portfolios and watch lists; I decided to stick to the free version of Globe Investor + my own excel spreadsheets.
Cheers,
Tony

Q: Veresen (VSN)

Hi Team - I was hoping you could please explain the apparently high payout ratio of Veresen. According to CIBC Investors Edge, the payout ratio is 439.63%. From what I can see with FASTGraphs, the payout ration has been over 100% (sometimes well over) since 2001.

I don't understand how this can be possible over such a long time period. I've noticed this with other companies as well from time to time. Generally though, the commentary you provide suggests a low payout ratio is best.

Could you please help educate me?

Thanks very much. Michael

Q: My portfolio currently is a little overweight in REITS and light on US exposure. REITS have generally gone sideways or declined somewhat over the last few months and I realize that you generally are of the view that REITS should not be expected to have any capital appreciation of note over the next year or so. Accordingly in order to seek some capital appreciation and some US exposure I am thinking of selling a significant portion of my REIT holdings (Calloway, American Hotel, Artis, Summit) and purchasing some of AAPL, GE, BCR, DE, MFST, NWL, PG, TXN. Do you see anything questionable in my logic or do any of these US holdings present a concern? Thanks in advance.

Q: Do you have any suggestions with regard to selling your losers? For example, I own Avigilon (AVO) and currently have a loss of 41% and keep on holding it with the hope that some good news will be on the horizon and the stock will head up. Frankly, I wish I had sold it long ago. I know that some investors have a rule if a stock drops 7-10% from purchase price, it is sold. Do you have any general recommendations for selling losers? Thanks, Bill

Q: Peter, CONGRATULATIONS on your last day of your cross-country bike trip. You and your bike mates are simply amazing!!!

Q: On your latest blog "Value Stocks with Momentum", I am a bit confused with the company IBG.TO. My records shows that this company does not issue a dividend. Is this correct or not? Tnx

Q: Dear Peter,
I'm glad to see that contributions to your ride are continuing and you are now at 98%. Way to go! My question is about investing in European securities. It was mentioned in a recent answer that 5% of a portfolio be in Europe and 10% in USA. What do you think are the best way(s) to invest in those areas?
Linda

Q: On your research reports, how are you calculating the dividend (expressed as a percentage)? I am assume that this is some kind of yield calculation? Also, in the '5i Report Card' sidebar on the left hand side, would you consider adding dividend growth as a criteria?

Q: Hello Peter..not a question..just want to say.."enjoy the ride" and thanks for all you do!
Be safe!

Q: This is not a question- but a challenge to all 5I members who have not yet contributed to Peters ride. If you have benefited from your membership here & the advise you have received please contribute what you can! Peter has raised 88% of his goal- lets not let him come up short!
Les

Q: Re; Meeting Peter
If you want to meet Peter, attend the Money Show in October. He was the Master of Ceremonies last year. I attend the Money Show regularly and from the literature I have received, he will have a similar role this year.

Dennis