Investment Q&A

Q: 10:29 AM 7/3/2014

Hi Peter :

Having just read your answer to Doreen July 02 regarding Element Financial EFN you said : "The stock is expensive, but we expect very rapid growth, and would put the management team in our list of Top Ten companies."

So I cannot but ask if you could please list your "Top Ten" Management teams.

Also I, like many others, are eagerly awaiting your Growth Portfolio and maybe trying to anticipate your choices.... any chance at a sneak peek at the list, or some suggestions? Maybe some your Top Ten Management companies will be in the Growth Portfolio.

Always appreciative of your excellent advice.... Paul K.

Q: When speaking about stocks, the terms "buy hold and sell" are commonly used. I think I understand "buy" and "sell" as they seem quite precise but am confused by the term "hold". If a stock is good enough to "hold" in a portfolio why would it not be good enough to "buy"? So. when you or others in the industry use that term, what exactly do you mean?

Thanks for the education and best wishes for a speedy recovery. I hope that the car looks worse than Peter, though.!

Paul F.

Q: Hi Peter,
Did you invite members to meet you some afternoon this summer at a local "watering hole"? I can't recall the date.

Q: SU.to

Peter,

In your view. Do you feel that SU would be trading higher if all the cash used for buyback was returned to shareholders with dividend increase instead?

Many thanks

Q: Good Morning,

I would appreciate knowing your thoughts on market timing. Specifically what you think about The Dow Theory and the Schannep Timing Indicator.

Q: Peter & 5i, please include the closing price of the stock you're discussing for reference and context. This is time-saving as sometimes I may not log in until weeks later. Thanks.

Q: Good morning 5i Team. Would you please explain something to me. ESL closed on the TSX yesterday at $35.80, it shows in our portfolio closing at $34.40. Why the difference? I suspect it is after hours trading, where can I check this out. Thank you.

Q: Should I liquidate my portfolio (which is largely blue chip, high-yielding Canadian equities) and buy it all back if/when (i.e. when) the market corrects?

Q: What is your opinion of Saskatchewan Pension Plan. Is it a viable alternative to use in your RRSP?

Q: Good Morning
Quite a few years ago I began investing through full fee global mutual funds. I graduated to purchasing individual stocks through a discount brokerage account but held on to the mutual funds which now comprise about 15% of my portfolio. The mutual funds have performed OK, nothing spectacular, returning a little over 9% annually and have doubled in value. The MERs are high at about 2.75%. I would dearly like to switch into global ETFs. If I sell the mutual funds over a number of years, I will limit the capital gains tax bite to about 15%. I calculate that going forward if the mutual funds average 7% then the ETF should average 9.5%. I arrive at this by adding the 2.75% MER back onto the 7% gain and then subtracting .25% for the ETF MER. At this rate it will take 8 years to recover the 15% lost to capital gains tax and achieve the ongoing benefit of lower fees. Is this a valid strategy or am I missing something?
Thanks
David

Q: Hello, Peter
When a company grant stock options, do they have by "law"to:
1/Disclose the price granted
2/ Disclose the strike price
3/ announce within a certain limit of time after the said grant

And if I may, when insiders of a double listed(US and CAN)buy or sell shares, do they have to "press release" the operation and if yes how much time are they are given to announce the operation.
With much appreciation for your answer.
CDJ

Q: Speedy recovery Peter and a Happy Canada Day to both Ryan,you and your families. My Model Income Portfolio weighting is a bit out of sorts but rather than try to balance now I am retiring at the end of September and will getting a substantial amount of cash that can be used to rebalance then. Are you comfortable with this time frame? Thanks for all you do and also on a side note can you post a map of your journey in the fall so we can follow you as you pedal across Canada.

Q: Peter & 5i, what metrics do you use or you have found to be useful in determining if the market is overvalued? Shiller P/E? Buffett Indicator (Total Market Cap/GDP or is GNP?) Do you depend on them in great respects? Do you often build up cash at these metrics even though we're long term investors (in great companies, dividends, etc)?

Q: Hello Peter,
I just want to add my voice to the many who have wished you well after your accident. And also another big thank you for your guidance and generosity with respect to our portfolio. Happy Canada Day to a wonderful Canadian.

Q: Hi Peter & 5i: Just a comment. It is difficult to know what to do with the numbers when the market hands you outstanding returns. It isn’t all your own doing and yet if you didn’t make some of your own good decisions you would not have done nearly so well. You want some credit and frankly you deserve some credit and nothing sells the service like the odd eye-popping number. So on your “Join” page your first checkmark point in the sales pitch is: “Who else will offer a Model Portfolio (up 34.1% in 2013), with no obligations or management fees?” You didn’t promise the return; you just mentioned it, parenthetically at that; and after all, it’s a fact isn’t it? Sure. And for me: not a problem. I come to it knowing that 2013 was a great year in the markets but I also know you outperformed any likely benchmark. I know that number is much higher than your portfolio is likely to deliver over the long term, even over the medium term. I even know, because you have owned up to it, that the downward spiral of 2008 produced an absolutely brutal result in the portfolio you were running at that point. And all of that seems perfectly reasonable to me now because I also have several years of experience in owning stocks and watching the markets. But I can imagine someone with much less of an experience base reading that number on the “Join” page and thinking: hey, here is a way for me to earn a 34% return; here is a guy whose stock picks go up. I can imagine that number contributing to the creation of an unrealistic expectation.
The fact is that when you buy a stock, unless you are buying at a longer term bottom (you’re probably not!), so long as you are thinking you’ll hold that stock for a reasonable period of time, it is very likely that at some point while you own those shares they will be worth less than what you paid for them. Think about that for a second. In fact, if they never are any lower, it’s just pure unpredictable luck.
Of course, the flip side is also true: unless you buy at a longer term top and provided you have sufficient patience, it is very likely that at some point your shares will be worth more than what you paid for them.
I feel for the uninitiated though, because the thing is, I’ve never heard anyone say the former fact. I’ve certainly never seen it acknowledged in a sales pitch. That said, I have the absolute greatest respect for Peter and 5i and the services you are able to offer to investors and I would recommend 5i as a great value and a great resource to anyone who ought to be interested.
You can publish this if you think any of those points are worth others' contemplation. Thanks!

Q: Regarding an earlier remark regarding Canadian Shareowner. It does provide easy diversification, at a cost. But,when you want to get out it can be difficult. You cannot, for instance, just transfer your portfolio to an online broker as a whole, as the broker will not take the partial shares that Shareowner holds. So, then, if you do switch to an online broker, you are left with perhaps many positions in Partial shares at Shareowner, each one of which you must sell individually for about thirty dollars a trade, I believe. A good service but something to keep in mind.

Q: Hi I was wondering if it is possible to setup a portfolio of high risk stocks, or fast growing stocks, for those of us who are little more adventurous. Excellent service; I tell everybody about 5i I run into. !! Thanks..as a matter of fact I can not thank you enough.. its like a breath of freash air.

Q: Hi 5i/research,

Just wondering if you were aware of a service "www.shareowner.com"
It would seem to be an almost perfect compliment to what 5iresearch
offers to individual investors. I.E. A new Member to 5i could initiate positions in MOST (approx 85% - 90%) of your Model Portfolio stocks for a single price of $40.00 ($2.00/per stock for up to 20 stocks). Purchases can also be staggered/scheduled via their SPP either monthly, or quarterly. A (true/full) DRIP is also offered that purchaces partial shares (to 4 decimal points). One can tailor their own portfolio with Stocks/ETF's from their list of 450, or select existing pre-selected portfolio's. There is also periodic/automatic rebalancing of stock allocations. Between the recommendations from 5i and ShareOwner.com it would seem to be the perfect combination of "Set-it-and-forget-it" for someone that doesn't want to do the rebalancing themselves. I believe they charge 0.05% on A/C under
$100,000 and a Flat Fee of $40.00/MTH on A/C's over $100,000.

Q: I subscribed to 5i in order to learn about investing, and I have learned a tremendous amount, although not always quickly or painlessly. Here are 3 of the many lessons:

Lesson 1: Stocks sometimes (often?) go down right after you buy them, but that is not a reason to sell. About a year ago I asked Peter about two companies I was considering, DHX Media and C-Com Satellite. I had read all Q/As about both companies and was leaning toward C-Com. However, Peter picked DHX, so I bought shares. But DHX immediately began to decline and C-Com began to rise. Luckily I did nothing. Now DHX is up about 80% and C-Com is down significantly from that date.

Lesson 2: Analyst and money-manager recommendations are not free of conflict. Sometimes (often?) recommendations are designed to generate trading activity so brokers can make money on commissions or to improve returns in a money manager's fund. I bought Avigilon at $14. and it rose to $19. but then one analyst downgraded it and the stock dropped to below $15., but in time, in spite of that analyst downgrade AVO rose to $34. Then the CFO resigned and now it is down around $22., but not because of poor earnings. Recently, I saw a money manager on BNN who is short the stock in his fund, and he suggested that because of increased competition and lower margins AVO is probably only worth about $12. dollars per share. (Now, being short, wouldn't he be happy if he could get the market to sell AVO down to that price.) I am learning that a stock's current share price is not always based on its current earnings or the long term potential of the company, so in order to make my investment decisions, I will rely on the conflict free expert opinion I pay 5i to give me. (How could it have taken me over a year to learn that simple lesson?)

Lesson 3: Re-balancing may either decrease or increase your returns, but it will always definitely decrease your risk. I bought Amaya at $5.20 and it was by far my biggest position. I watched it rise to $9.50 and thought about re-balancing, but decided to wait until after quarterly results came out, hoping to make even more. (Greedy) When the quarterly results came out the market did not like them and the share price declined, very close to my original purchase price. So when the stock rose again, on a rumour, I felt I had learned my lesson and took the opportunity to re-balance my portfolio and sold half my position at $11. Now the stock is around $22., but the weird thing is that I don't regret selling half my position at $11., even though I would have made WAY more money if I had not sold half. Instead, I feel lucky that I had the opportunity to make 100% back then, on a rumour no less. And now I'm thinking of re-balancing again, because my portfolio weighting is again way too high, almost back to where it was in the beginning.

I will probably (definitely?) need to keep re-learning these 3 lessons over and over again, but I feel very lucky that 5i is helping me learn about investing--and making me quite a bit of money while doing so!

Q: How much faith do you put on technical events identified by research provider "Recognia Inc.".