Investment Q&A

Q: A recent customer, I am very pleased with your service. Best wishes for a happy & prosperous new year.

You have previously recommended holding about 20 equal weighted stocks in order to provide optimal diversification (with benefits of diversification decreasing as the number of holdings increases beyond 20 – and returns trend towards index-like returns). I believe that your answer to Mary Jean was to consider all accounts as part of the 20 holdings. I have several diversified accounts that are managed (by the same portfolio manager) and an account that I manage myself. Would you then suggest that I have less than 20 in the portfolio that I self-manage? If so, how much would you concentrate (less than 20 seems risky to me) ?

Q: Which stocks would you recommend for someone with no pension plan?

Q: Hello 5i Team, recently all of the news regarding the Fiscal Cliff has centered around not getting it resolved. If they do come to an agreement do you see upside potential in the market over the short term?

Q: Investment question. I appreciate we are all pretty much "fiscal cliff"ed out at this point. (Remember y2k?). However, I would be much interested in your take on the effect on the Canadian market should a resolution not occur by year end. Many seem to think that the resultant uncertainty would throw the U.S. market,at least, into turmoil (markets don't like uncertainty that they can't price in). No resolution raises the spectre of U.S. recession. They are our biggest trading partner. I'm just wondering what your thoughts would be on "going to cash" until the dust settles?
Thanks for all the work you do for us.
P.S. Do you send renewal reminders?

Q: I would appreciate any comments you might have on using David Stanley's "Beating the TSX" system as a basis for an RESP account with a 15 year time horizon. I understand that not all the current names are desirable (i.e. TA) and that the list is weighted more towards financials. Basically I would like your take on whether this approach has merit as a low cost, low maintenance, low risk way of investing for future education needs. Many thanks.

Q: Peter: general question.
Your recommended segmentation of a portfolio of say $2,000,000 ie: 50-60-70 individual stocks in the 8 or 10 major market segments. Do you have a formula? Thanks & congrats on your first 5i year.

Q: hello 5i:
could you advise where I could find, and track, the following information: earnings yield of the S&P 500, and the current 10 year Treasury Yield. And, is there a site that charts the current year earnings for S&P 500 companies that readily shows whether consensus earnings or rising or declining.
thanks
Paul

Q: There is an opinion that every 5 years we have a cyclical downturn in the stock market. Considering all the macro negative information should I be selling some or all my A and B holdings. Thank you for you advise.

Q: Do you recommend equal weighting of positions in an equity portfolio, or do you recommend the weighting vary by security rating?

Q: I have bought about $6-7K in each of the 30 stocks you've recommended as B- to A+ and am very pleased thus far with how they have done in such a short time. I also have a more mature portfolio about 40 other equities that I had before subscribing, some go back many years. In all I have about $1M in the market. I plan to inject another $500K into the market this year and am wondering what the danger is of increasing the number of equities I have; for example buying new recommendations from 5i that are -B to +A. Would you recommend that I lessen the number of different stocks I am in.? and why?

Q: Thank you for a wonderful sincere website. Keep up the excellent work.
For 10% of my portfolio do you have any suggestions for 2, 5 or 10 bagger stocks.
Yes I know, greed kills but it's fun.

Q: Over the past few years, I have on several occasions taken advantage when our loonie was solidly above parity with the US$ to purchase US$ (cash) with an eye towards getting some diversification outside of Canada. The trouble is I have yet to make any foreign purchases and US$ cash now represents about 15% of my holdings. I have been patiently waiting for a meaningful pullback in the US markets which hasn't arrived. I realize that 5i's focus is primarily Canadian, but could you provide any general recommendations (either individual names or ETFs) that you feel would be suitable for new buying at present to provide some broad diversification in the US or abroad (priced in US$). Thanks.

Q: hi peter, a hypothetical question for you . Alot of dividend yielding stocks have similar looking charts with there valuations going up and up .I am wondering if and when interest rates go up , is there any stocks one should be looking at that could benefit from a down turn in dividend yielding equities ? thanx for your time.

Q: Hi Peter,

I have to admit this fact first. What's making 5i research more popular is this QA session which covers your brief opinion on a wide array of companies compared to the actual company analysis. So hats off to that and the amount of knowledge and insight offered by these comments would definitely be helping a lot of people invest in good companies and avoid bad ones.

My question for today is about timing. Generally perceived notion is to stay invested for the long run for many years. But in today's market it might end you up where you started or much lower. Let's take an example. I invested in MMT at $1 at $1.40 and $1.66. If I exit now I would be making a good return after inclusion of dividends. On the other hand I invested in TOL at $3.75 and then at $2.19 and it went down to $1.40 and I am still holding on to my shares where I am now thinking of selling the latter position even though it might go much higher or go back to $1.40. How should one behave in these two different circumstances and when should one draw a line for profits or losses if the future direction is not very clear and the opportunity cost of investing elsewhere or staying invested might be huge. ( Another good example could be AVR which at one point was $2.50 and now languishing at $0.67)

Thanks

Q: Hey guys. Was thinking of shaving positions off of several reits I’ve ridden from when they were yielding in the high 6%, 7%, and 8% to now when they are “only” yielding in the low 5% range or slightly under for new shareholders (ie pmz.un, kmp – I guess kmp is not really a reit but anyway…).

Was thinking of substituting those names for other high yielding vehicles like weq.un, fc, bpf.un, eif (hopefully on pullbacks). With these moves I’m hoping to increase my monthly dividend income a little and pocket the difference waiting for any possible market correction. What do you think? Totally horrible idea? I dont expect comments on each of these names, just a general sense if its a decent strategy.

Q: I would be very interested if you could shed light on the process of equity raises in Canada. Specifically the potential conflict between a good investment banking client and a less than stellar company. Also, if you could shed light on financing cycles and how to know if "too much paper" is in a sector or space (or not enough). Much appreciated, Thanks.

Q: Hi.My question is what percentage should each stock be in a portfolio? Can you have too many stocks? When building a portfolio do the rules change when you have 10k,100k,or 1m plus?
Thanks.

Q: hi Peter and staff , I am hearing from different analysts that various governments have and will continue to print money. I am mostly in cash and I have been wondering how I can protect my savings if there is inflation leading to devaluing our currency . But if this is happening how are interest rates being kept so low. What would you recommend especially with high valuation on alot of dividend paying stocks. I appreciate your help.

Q: Can the VIX Index go to a zero value, why or why not?
This HUV on the TSX is being crushed, but why?
Horizons Betapro S & P 500 VIX Symbol: HVU-T
Is this reasonable level to buy?
Many thanks for sharing your knowledge with us all.
Sincerely,
ANDY

Q: In some of your writing and responses you indicate that Canadians have too much exposure to the resource sectors. For someone in their mid-40s with no need to access the capital what would be reasonable? I would include firms that sell to the resource sector. As well, do you see gold miners as a part of that? If not, what would be a reasonable amount of exposure? I have persoanally tried to diversify inflation protection to hard assets other than just gold. Thanks for the excellent service!