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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Peter & Associates

Using Enbridge Inc. as a bellwether, yearend numbers from 2000 to 2009 produced the following averages: A mean P/E of 16.5, (several years in the 13 range) a growing dividend with an average yield of 3.1 % representing 50% of earnings and 75% of 10 year TBs when they ranged from 5.4 to 4 %. A check of a recent brokerage report places its debt level at 60% which seems well in line with those over the referenced period.

Clearly the dynamics have changed. Might what is playing out in industries which traditionally need constant access to new capital, be it common or preferred shares are seen as better planning tools providing them with greater option flexibilities than fixed income alternatives? Whereas interest payments must be made, dividends must be declared? With concerns being expressed, a 10 year rate over 3% could do more harm than good, is ENB oversold and at this price too good to be true? It would seem rates would have to rise a lot to actually come into competition with the yields ENB equities offer.

If someone were investing in an ENB for yield, it would seem logical to suggest they would also seek moderate capital risks, far less than what this one has experienced. Is a projected forward P/E of 20 and a dividend over 6% which ENB claims will increase, warning signals? Assuming it is a good bellwether security, how much more downside could this stock potentially see and/or how likely/ risky the need to eventually cut the dividend ( common)? Albeit a very different industry and dynamics, energy stocks had to make cuts to reflect their financial realities; even non CAD banks went through well documented challenging times. The point, no industry is immune from economic realities and their balance sheet realities. Concerns over debt are being expressed as rates rise.

Having a well balanced portfolio is a protection but, so called bond proxies are found in multiple sectors and collectively can add up to an important exposure. There is an expression, things tend to eventually revert to their mean. That said, might we be seeing the start of that occurring since these are not generally seen as growth stocks where earning growth is the offsetting factor to deal with these high ratios?

Would very much appreciate your insight. Thank you.
Mike
Read Answer Asked by Michael on February 07, 2018
Q: Hello, in my last question you recommended CLS as an addition to the technology part of my portfolio. Could you explain the reason? From what I see, it's share price is at the same point than 2 years ago, no momentum, no dividends. Are there some interesting developpement in the business? What rating would you give it? Thanks.
Read Answer Asked by Jean-Bernard on February 06, 2018
Q: I am following the BE portfolio. In tech, I already own Constellation, Kinaxis and Photon. If I want to add to technology, which of CLS or SYZ should I choose at the moment? Any particular stock with good momentum? Last time you answered AVO but I was too late in purchasing. Thanks!
Read Answer Asked by Jean-Bernard on February 05, 2018
Q: Hi 5i: Why all the negative sentiment on Intrinsyc? Over the last several quarters revenues have grown quarter to quarter and Management has clearly stated that Q4 will have accelerated revenue growth. Based on what has been reported in 2017 and expected in Q4, revenues year-over-year should show good growth. Q3 was profitable and Q4 should be too. The Company has also said they have a record backlog which should bode well for 2018. I know the stock price has drifted but this could be an interesting entry point despite the Company's current market cap. Also the Company has a good cash position and no debt. What am I missing?
Read Answer Asked by Charles on February 02, 2018
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