Investment Q&A

Q: Dear 5IResearch,

Having experienced some unprofitable results for the past few summers, I am now going to re-balance my portfolio, away from its total reliance on US equities, to include some Canadian names and then to weld it shut until October.

Currently my portfolio is 42% Berkeley Hathaway (BRK.B), 15% Wall Street bank (GS), 15% High-end US housing (PHM & DHI), 7% US Railroad (CSX), 7% Technology (GOOG or MSFT, but not AAPL) and 8-10% Cdn hedged index on SP500 (XSP)

I propose to reduce investment in GS, CSX, Technology and SP500, in favour of some good Canadian names.

My short list for these is:

Northland Power (NPI),
Agrium (AGU) or Potash (POT),
Pembina Pipelined (PPL) or Inter pipeline (IPL.UN),
Gold bullion (CEF.A),
and a western Canadian Reit (to be selected)

In the Fall, I expect to go back to a broad perspective of the entire North American economy, at large, hoping that Obama stops stalling the pipeline, by then. The asset allocation will likely be adjusted, to cope with the October 2013 - A.pril 2014 period.

Can you please comment on my proposed purchases of Canadian stocks? Danger signs would be appreciated.

Have a good summer.

Q: Hi Peter, some stocks have weathered the current downturn well and have generally held their ground. I'm wondering if these are buy candidates because of their current strength. Perhaps they are just a safe haven for now, and could lose value when the correction is over and the money goes to the beat-up stocks. Some examples are MSI, GEI, FCR, TRI, BNP, MG etc. What do you think? Thanks Tim......

Q: How does one get a report on the following stocks:
BBD.B
ZRE
AQN
XHY
IFC
AIF

What should be the number of stocks held in each account eg.
RRSP, RESP, TFSA, Investment Account.

Thanks

JRM

Q: I am 80 and we need to booster our US Social Security to a livable income, but my wife, just 65, also needs growth to keep up with inflation. We are both Canadian/US citizens and US dividends can be hit by 20% as a result. In a rif, 2 tfsas and our joint portfolio, we have over $500G invested in about 30 Cdn stocks; 5 major banks, 4 pipelines, oil (HSE,CPG, BTE,CVE), REITS (rei,ax,cwt,d), power (aqn,bep,ema,fts) and tel (bce,t,mbt), plus some pot,tck,mg,enf,pwf, etc. I just sold a bond and now have about $140Gs to invest, so would like some advice. I'm intested in CSX in the US as I think we need to be in a railroad, but should I just add the rest of the money to our present stocks? I know this is a tough one but we need income and, at least, to keep up with inlation for my wife.
. , .

Q: I have moved all my investment accounts (TFSA, RRSP, Cash, etc) to one online brokerage. I did so for convenience in trading and accessing the account. However, it occurred to me the other day that I am perhaps unwittingly taking on unnecessary risk. I never take delivery of actual shares. What is my exposure if that online brokerage goes under? Thanks.

Q: Hi Peter, I have not been able to follow the market for a bit but have seen the decline. Is this a correction, are we going down much more or are there other factors driving the market lower. Thanks, Nick

Q: My TFSA doesn't have enough cash yet to diversify. I decided to use a broad index ETF to diversify 75% of the account and to specify a single stock for the remaining 25%.

I feel that an investor has a moral responsibility to buy specific stocks based on merit and not just indexes. As the portfolio grows I'll be able to diversify later and add a variety of specific stocks.

I just joined 5I reseach this evening and I've got 75% invested in a ETF covering the Canadian market as a whole (VCE - FTSE Canada Index) with the remaining 25% invested in Blackberry (BB). I plan to select from your "A" stocks in small and midcap companies to replace Blackberry if it becomes overvalued.

I can afford to lose the money in my TFSA but hope to build a TFSA that can withstand rough waves. Is this a reasonable plan and how should I go about selecting from your lists to replace Blackberry when the time comes? Should I replace it with one of your picks now?

Thanks for being there to help - I look forward to your answer - Doug

Q: Peter - concerning the model portfolio I have quite a bit of personal hesitation entering into some of the names due to valuation. I am ok holding high PE (or P/CF or P/B or low PEG) stocks but the valuations on some of the portfolio seem stretched when compared to their historical average and max valuations. Specifically, K-Bro or many of the other industrials or business services stocks in the portfolio seem like they are stretched which then causes me caution. Of course, depending on where we are in the business cycle if earnings or cash flow are accelerating they may be cheap. Also, the sector usually plays a bigger part of total security capital gains than individual stock selection so maybe they are in the right sectors. I understand all of that but then I still pause and want to go for a stock trading within a historical range. Any advice for someone like me?

Q: Peter - as people enter into the individual issues in the model portfolio (or a reasonable chunk of one) for Canadian holdings do you consider using a stop-loss to limit downside after a position is entered into? Thanks!

Q: I am trying to develop a check list of ratios or analysis essential for a do it your self investor to consider before investing. Could you provide some direction in this respect. Thanks.

Q: Hi Peter, can you give us some insight on the use of stops. I was stopped out on a couple of stocks latley that I planned to keep. How tight do you keep them? Do you use them? How to determine where to set them especially for income stocks? Tks

Q: thank you for your reply to mine re the model, as I start accumulating into the model, can you suggest which 5 stocks are least likely to a pull back in a market sell off assuming a spring market pull back i.e. the sell in May scenario

thanks again, cy

Q: Re the model portfolio, do you plan to incorporate on your site a live update of the model's performance or YTD monthly reports.
I already own several of 5i reported companies and wondering how to accumulating the model. The 5i "B rated and higher" companies not in the model that I own, should I consider these as adding "higher returns at a higher risk" or would you recommend selling these and putting the funds towards the model
Your views are much appreciated.

cheers, cy

Q: Hi Peter,

If a company makes an all time high does it merit an investment.
I bought kbl and wpk on those grounds coupled with your fundamentals and its working nice for me. It would also be nice to know when to book profits.

Thanks
Paul

Q: Peter; What would you think of a switch from a REIT to an oil company at this stage of the economy and the large price differential in western crude? Thanks. Rod

Q: Peter,
Thanks for putting out the model portfolio. A few questions.
a) What should the portfolio sizing be if the portfolio is say $50k or $1M. How many investments should be held in those?
b) How should we add to the portfolio on a monthly basis? Say someone had $2k to invest every month, how should that be allocated?
c) How would you categorize this portfolio like defensive, aggressive, growth etc. If this for example is a conservative growth portfolio, do you have plans to roll out other model portfolios categorized differently?
Thanks

Q: Do you advocate buying and holding through all market cycles or would you suggest a trading strategy that tries to take advantage of wide market swings and if the latter strategy is the best, what methods would you employ to identify optimum market timing strategies

Q: This is really a comment not a question. In early January I asked 5i for some advice on how to get into the market as an older, conservative investor unwilling to risk too much for fear of capital losses. The advice was to enter in carefully and purchasing a diversified portfolio - basically a balance of the B+ or better rated stocks and four large caps for even greater balance (26 stocks in total). Since then ATP has crashed by roughly 50% (highly unusual) but the good news is EQI and FSZ are up ~20%, BAD and BYD are up ~15%, ESL and KBL are up ~10%, the rest are either up or down but nothing drastic. All this to say my portfolio is still up over 2% in 9 weeks (~12% annualized) even though ATP crashed. The diversification protected me. No one's going to get it all right all the time. That's why the balance is needed. Cheers.

Q: Hi Peter and Team, apologies in advance to all but I need ask the following question; watched a fellow on BNN, Charles Nenner, a professor who has a mathematical system which has apparently been correct so far, so he says, that calculates the DJIA to fall to 5000...absolutely crazy, isn't it?? Have you heard of this fellow? He states that those who bought in 2009 are the ones selling into this ralley and going cash! He is all cash currently, so he says. Please see him on BNN today, and your thoughts on this would be greatly appreciated. I am currently fully invested with minimal cash on sideline. Thanks as usual!

Q: Hi Peter, This is just a general question. Funds in my company registered pension account are managed by Great West Life. Right now i have 100% money in high risk account (Leith Wheeler). I am looking at 10 - 15 yrs horizon. What would be the right approach as i can transfer funds from one fund to another fund like US Equity Index, conservative fund and bonds without paying any transfer fees??? Should i be moving money from aggressive to conservative in case of correction and move back to agressive once there is indication that correction is over. Thanks for the guidance