Investment Q&A

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.".

Q: I am a 5i member since day 1 and I want to first of all wish Peter a speedy recovery and wish him all the best for his efforts not only to guide so many people in making better investment decisions but also making positive contributions to the society.
I want to particularly comment on the negative comments by one of the members. Making investment decisions is one's own responsibility. Even though I got very good advice from 5i to invest in quality companies, I always went the other way by investing in more risky companies. I wish I had always invested in 5i recommended companies or their growth portfolio and I would have been at least twice as rich. 5i - keep up the good work.

Q: Peter; RE; LJ.s beyond belief rant- I strongly suggest he/she is either a Mutual Fund salesperson and/or
a frustrated Investment Advisor trying to fend off clients questions as to why their portfolios are not performing . I am willing to wager that anyone who
read the outburst would applaud your offer to refund his very large yearly fee you charge - and send him/her out of this platform. Please do us this favour. Rod

Q: Peter,
I'm very glad to hear that you're improving after the bike accident! I enjoy the insightful comments from both you and Ryan, and you have a wealth of company and stock information as well as experience. I am curious about your thoughts on portfolio returns. The results of the 5i portfolios have been outstanding since inception. But I don't know of any fund manager that would ever promise such great returns! My question is - what is a reasonable expectation for annual equity return (capital gain + dividend) over a five year time frame?

Q: I enjoyed your level and straight forward response to LJ (June 28th) somewhat emotional and short sighted question.

Q: I have always put in limit orders and have never worried about putting in orders in 100 lots. I put in an odd lot with a week expiration. Part was filled that day, the other part the next day. I was charged the commission both times. Is that normal?

Q: Hi 5i,
I have 3 out of 3 dissappointments bot jun 18th wks ago.
DSG just announced dilution at $13.50. current price $15.04(dwn 4%). I got the impression you did not like companies that do this.
SGY down 4%
AVO down 11%
It's nice when you quote a 35% gain in your portfolio but that hasn't help my results to date.
I would have appreciated the advice that the market has outrun itself & Jun 18th was a time of wait, not buy.
What can u tell me that is realistic about these three underperformers & when I might expect to see something more like the 35% returns you tout in your model portfolio.

Q: HI Peter. My question is how big do you plan to take this newsletter? I hope that you stick with quality over quantity. Better to have fewer great stocks to watch than a lot of sosos. Thanks, and keep up the good work. It will pay off for us all in the end. Cheers, John Dufresne, L'Orignal, Ont.

Q: I would to echo Warren's request for dividend growth rate and add payout ratio which you usually provide.

Q: This is a comment for Warren, looking for a list of preferred shares.
James Hymas has one here: http://www.prefinfo.com/

Have a speedy recovery, Peter and thank to the whole team.
Marilyn

Q: I have $106,000 cash in a registered education savings plan. The money is to be paid out within a year. What is your recommendation for getting some return on the cash position?

Q: There are two pieces of advice that perplex me about investing and I'm not sure which ones to follow:

1. "you need to take profits" vs "you need to let your winners run"

2. "You should be raising cash to take advantage of an inevitable correction" vs "You can't time the market so you should stay fully invested at all times"

I suppose point 1 and 2 are almost the same thing...

All of these strategies make sense to me, but a choice has to be made right? In your experience which ones have you found more successful in the long run?

Thanks so much for all your help.
cheers

Q: This is by way of me trying to figure out why the market will suddenly shoot up or plunge down. I guess I can't help always seeking a reason. The reason given for today's big drop in the TSX and the DOW is tension in Iraq (or so I read on Bloomberg). This confuses me. The worst hit sectors were materials (Gold) and energy. Why would people fearing turmoil in the middle east sell off energy stocks in Canada? Would they not benefit? And isn't gold supposed to rise during times of tension? Or is Bloomberg simply seeking a reason for the fall and plucking that one of out of the air?

Q: A comment about investing whether to use a advisor or not .
I am arguably a fair income investor in my opinion the two key ingredients to be a successful investor is 1.Time and 2.Interest if you lack one of the two stay with an advisor/money manager.
My empirical opinion only
Kind Regards
Stan