Investment Q&A

Q: Hello, in your disclaimers at the end of your responses it states whether any staff have a financial interest in the security in question. Could this mean a short position as well? Also could it mean the security is a merely held in an etf?

Thank you

Q: Hi There,

Can you please explain the emergence of the Canadian Depositary Receipts (CDRs), how they work, under what circumstances one should buy them ie. what kind of investor how they trade, and your overall opinion on them?

Thank you!

Q: Don’s question of October 7 asked about Canadian vs. US dollars and whether to buy a stock on the TSX or NASDAQ. While many investors are confused on this point, Don should understand that once he buys the stock (on either the TSX or any US exchange) the future performances of the Canadian and US dollars have no effect on the actual value of his gains or losses. In other words (and for doubters), if you were to decide to split your purchase and buy half the shares in Cdn on the TSX and half in USD on a US exchange, each half of your shareholding will worth exactly the same thing regardless of any future movements in the value of the respective currencies.)

Q: Voluntary lock-ups - Why would early stage investors or VCs, voluntarily extend lock-ups periods in pre-ipo or early ipo-ed companies?

Would they typically receive warrants in exchange for this restriction in liquidity?

Is the motivation by the company to prevent sales of large blocks since they are anticipating a rapid rise or fall in share price?

I know this is hypothetical, but trying to understand the concept/reasoning.

Thanks!

Q: What are your thoughts on the recent Canadian Depositary Receipts that are now being made available through CIBC. Seems like an excellent means of gaining exposure to the large u.s. caps for the average diy investor. Any thoughts as to when other sources than CIBC will come into play.

Thanks

David

Q: Hi,
I am a member of 5i for over 6 years and I am glad I made the decision to be become a member. Thank you for the wonderful service.

Over the years I have been looking at the reports and now I am seeming more A's and A-'s..is that because these companies have met all your expectations or have you become a more lenient marker?

Also there used to be a page which lists all the coverage companies (irrespective of the portfolio they might be in ) where can I find this page?

Thank you and have a very happy Thanksgiving!

Shyam

Q: A general question about shipping/transport that may affect the consumer stocks. I'm increasingly hearing about shortages of truckers and back ups of containers in many major ports around the world. Fuel shortages in England (due to too few transport drivers), weeks of back logs at ports in NY and CA. Costco's recent comments on this topic...

All this has me wondering if there will even be enough goods to sell to meet expectations - and what will happen to high flyers (SHOP, AMZN), when sellers/merchcants simply can get stuff to sell.

Simply put, how significant is the driver/transport shortage and should we expect worse?

C

Q: NO PROFIT... NO PROBLEM...

This is a story in the Globe and Mail dated Sept 25th 2021. The article made all lot of sense and there seems to be a disconnect with growth at all cost with no profit. Maybe this is how things are done just look at how our government is run.

I don't have a specific question to any of the companies mentioned above but with LSPD in the news lately maybe it will apply. I know there has been a short report put out on LSPD and from some of the comments that I am reading from 5i that they are false.

My question is how do you know?

We don't know the real workings of a company and what we get from them is what they want us to hear. Take for example XBC, that wiped out all of value from investors because we didn't get the correct information from Management. It's what they wanted us to hear and we believed them.

I think there should be some healthy skepticism with regards to what Management says and does and investors should take away that capital preservation is paramount.

If LSPD or any company that gets shorted and can't explain the reasons for the discrepancy in a respectfully dialogue then maybe there is some truth to it but like I said we don't really know.

Who is right? The short trader or the Stock promotor?

Until we get all the information it will always be Buyer Beware and don't fall in love with any stock.

Sincerely.

Q: I have a U.S. RIF account with TD Waterhouse (Webbroker). I have requested that they transfer the monthly payment from this RIF account to my US Margin account. I am concerned over currency exchange issues.

Here is what they do - in January, they use my Dec. 31st RIF balance and "convert" it to Cdn. Dollars to arrive at a Canadian Monthly Withdrawal. Then each month they convert this Cdn. amount to U.S. dollars & then transfer to my U.S. Margin account.

I have challenged them on this, but they insist these are the Gov't RIF's rules?! (I do not have a Cdn. RIF account with them.)

Would you comment on this - thanks.

Q: Dear 5i,

I know there isn't an exact answer for this but, what approx. loss % would trigger a margin call. Is it broker, investor, net worth and stock specific?
What threshold do you think it might be for a Robinhood type investor owning ARKK ETF, Tesla, bitcoin, AMC, GameStop on margin?
With the recent market turbulence I was concerned that there might be a wave of margin calling from many brokers that would put even more downside pressure on the overall market. I would appreciate your thoughts.

Q: What are your top Canadian and US investment ideas foe times of rising inflation?

Q: Hi,

Are there any recent studies that you would recommend regarding optimal diversification (not CAPM)?

It seems these days that in bad markets everything falls regardless of sector, region, size etc. So I am trying to figure out if it’s worthwhile holding “safe” securities that return a fraction of what higher growth names would-since these safe plays still fall significantly in down markets, albeit much less than the high fliers.
Specifically, I am interested to see if someone (reputable) has proven that in the long run (10+years) it is worth holding ANY slow growth stocks returning say 5% per year and “only” fall 25% in down market versus having an aggressive portfolio of high growth stocks returning 20+% per year but fall 50% in a down market. I would think the compounding of high growth portfolio would more than offset the larger loss in a down market-but looking to see if this has been proven.

thanks!
Brad

Q: Hi 5i,

When I try to estimate a stocks 12 month target price I assume a multiple and growth. My eventual target price usually ends up lower than what most analysts calculate. Do most analysts use current multiples even thought there may be short term multiple expansion? The overall market especially in the US seems to have experienced significant multiple expansion in the last couple of years. I would appreciate your thoughts on how analysts arrive at their target prices and forecasts. (they seem to be an optimistic bunch)

thanks

Q: LSPD has issued a response to the short attack:

https://stockhouse.com/news/press-releases/2021/09/29/lightspeed-comments-on-short-seller-report

I would be very reluctant to sell shares in LSPD and more inclined to purchase more. Like previous short attacks on high growth companies like SHOP and NVDA, I'm quite sure this one will prove to be bogus and just another cynical attempt to profit from the resulting sell-off. In the case of SHOP and NVDA short attacks, the short-sellers who issued the reports even pledged to give lavish donations to charities if the stocks recovered (In the case of SHOP, $200,000 USD was pledged if it ever rose above $200!). Wouldn't we all love to buy SHOP for that price today?

My only question in all of this is whether there will ever be any regulatory control over short-attacks that can be proven to be opportunistic.

Q: Hi 5i,

In regards to AMZN, MSFT and GOOGL.
At a high level why are rising interest less desirable than having low interest rates. It seems the market gets spooked if it believes interest will rise. I hope you can explain the overall thinking.

Q: Hi guy's i have been with you now entering my 3rd year nd extremely happy. My question is if i would like to join your portfolio manager would i be just paying the difference from regular to portfolio. And my other question i have been with a financial planner now for many years jumping from one to another, with your guidance i believe that i am ready to leave them now because the fee's are killing me every month even thou it is only 1.5% on over $450000 thousand including my wife it is quite a bit. My major question is if i drop them i already have an rrsp account set up with TD it is a self direct rrsp can i get everything transfered over with out them selling my shares which means keep the same companies they have and then i can make my own adjustment when it is my hand, The reason why i am asking everytime i have done this that they sell my shares the portfolio shrinks by a couple of thousand dollars. Thank you and i am really looking foward to joining up with your portfolio.

Q: The markets pre-COVID were rising at a reasonable rate year to year, with the odd market downturn. Since March/April 2020 the markets have shot up and stocks are trading at much higher multiples than pre-COVID. Eventually, reality may kick-in. There are many companies trading at very high evaluations. If you look at the overall market (i.e. Nasdaq) you see an exponential growth curve for the past 18 months, definitely not sustainable and possibly overpriced.? I still buy stocks but sometimes feel that if the market turns around, it could be years for it to come back. (I am more concerned about companies such as SHOP, NVEI, TTD, LSPD, NVDA, TOI, UPST, ... all of which are great companies but if we overpay, payback could be much more than 5 years.) I thought same about Netflix, I was totally wrong and missed out on one of the biggest lifetime opportunities BUT there must be a point where the price is definitely too high. Are we overpaying? Will we regret this at some point? Your thoughts? Thanks.

Q: I am trying to understand the impact of a 75% Capital Gains inclusion rate. Today with a 50% inclusion rate, assuming a 50% personal tax rate, you keep 75% of any taxable gain. With a 75% inclusion rate you would keep 62.5%, or 16.7% less. Is my math correct?

In a 75% inclusion rate, can 75% of the loss be used against gains? ie. a $100 gain would be offset by $100 loss meaning no tax would be due just as it is today?

If this is true, you may be best to lock in gains and save 16.7% if its a holding you plan on selling in the next year or two anyways. You can always buy it back immediately after locking in the gain. 16,7% seems significant

On the LOSS side, it seems more black and white. Today you can claim 50% of the loss and if there is a change to 75% inclusion rate, you can claim 75% of the loss next year. If there is no change to the inclusion rate a 50% loss claimed this year or next year is marginally better to claim now but if the inclusion rate changes from 50% to 75% it will be worth 50% more next year. It seems to me you are better off waiting until next year to claim any losses.

Is this a valid analysis or am I missing something.

Many Thanks
Scott

Q: What percentage of each would you suggest for a good balance between Canadian and US stocks at this time? (Thanks so much for your help. I have benefitted immensely from your good advice for a few years now.)

Q: Where could a person find as near to "real time" as possible all of the holdings of mutual funds and ETF's - when looking at company documents on their websites they can be months behind current. I even tried SEDAR but could not find.