Investment Q&A

Q: Hi Team

In looking at employment data, housing starts and a number of other indicators, it appears the US economy is moving forward in a positive direction.

I am thinking US Banking has to be in a positive light moving forward over the next 3 - 5 years.

Presently I hold Wells Fargo and have done quite well. I am looking at adding a second bank and was wondering if you would comment on USB vs Citibank & BAC (Bank of America)

I realized I am asking allot and am hoping you know how much I appreciate the help.

Thanks for all you do

Gord

Q: What's wrong with this story?

This is a Global Construction and Engineering company which appeared to have good momentum in the O&G sector, had a strong backlog earlier in the year, and is relatively cheap as per your May comment when it was trading at $74.

As of closing today it is at $67.65 and is down almost 30% on it's high for the year. Do you have any explanations for the poor performance? Is this a good opportunity right now?

Thanks for all you do

Gord

Q: What are your thoughts on Activision at this point. I am thinking of adding to my holdings once it appears to have bottomed here. What are your thoughts (ignoring issues of balance and other holdings)?
thanks
Joe

Q: Peter and company,quick pick on Alibaba.
I always wondered why a Chinese company would relinquish some ownership ''just'' to have the dubious privilege of an American listing.
Well I got the answer via 'Wall street on Parade' yesterday: they simply don't give up anything and that makes much better sense for them. Does it for you?
If you are interested, read on:

The concerns about this Chinese company’s opaque structure as a Variable Interest Entity (VIE) in the Cayman Islands are so serious that a U.S. Senator, Bob Casey (D-Pa), issued two letters this year to Mary Jo White, SEC Chair, demanding answers.

In a July 11, 2014 letter, Senator Casey drilled down to the core of the stock ownership problem, writing:

“…American investors in Chinese companies often do not enjoy the same protections and legal guarantees that they are afforded when they invest in American firms. Most Chinese firms that list in the U.S. use a structure known as a variable interest entity (VIE). VIEs are shell companies that give investors contractual claims to a firm’s profits but do not legally grant them ownership of the company. For example, according to Alibaba’s securities filing, Americans who invest in the company will not be buying stakes in Alibaba’s profitable e-commerce business, but in a related Cayman Islands shell company. These structures allow companies to circumvent Chinese regulatory restrictions on foreign investment.

“More concerning, given the Chinese government’s interest in restricting foreign ownership in certain industries, it is far from clear that the contractual claims underlying VIEs are enforceable. In fact, in recent years Chinese courts and arbitration boards appear to have invalidated VIE contracts and similar arrangements. As a result, VIE structures pose significant risks to American investors accustomed to the idea that shares sold on stock exchanges amount to legally sound ownership stakes in revenue-generating companies.”

The VIE structure for Chinese companies trading in the U.S. sounds more like an international lawsuit waiting to happen than an ownership piece of the corporate pie. If you think VIE shareholders have any right to elect the Board of Directors of this company, think again. Here’s a revealing section from the Alibaba prospectus:

“Risks Related to Our Corporate Structure

“The Alibaba Partnership and related voting agreements will limit your ability to nominate and elect directors.

“Our articles of association, as we expect them to be amended and become effective upon completion of this offering, will have the effect of allowing the Alibaba Partnership to nominate a simple majority of our board of directors…

“The interests of the Alibaba Partnership may conflict with your interests.

“The nomination rights of the Alibaba Partnership will limit your ability to influence corporate matters, including any matters to be determined by our board of directors. The interests of the Alibaba Partnership may not coincide with your interests, and the Alibaba Partnership or its director nominees may make decisions with which you disagree, including decisions on important topics such as compensation, management succession, acquisition strategy and our business and financial strategy.”

The history of Chinese companies listing here in the U.S. hasn’t exactly been a rose garden for investors either. Senator Casey notes the following in his July 17 letter:

“In the past three years alone, the SEC has charged a number of China-based companies with fraud, including China Sky One Medical Inc., AutoChina, SinoTech Energy Limited and China MediaExpress. The sheer number of fraud cases involving China-based companies listed in the U.S. reveals systemic problems with many Chinese companies’ legal structures and accounting practices. Indeed, earlier this year, SEC Administrative Law Judge Cameron Elliot ruled that the Chinese units of several large accounting firms could not audit U.S.-listed companies due to their willful failure to disclose information to U.S. financial regulators.”

This seems to be more the realm of traders than the one of your subscribers, don't you think so?

Q: . what are your feelings about alibba'

thanks don

Q: What is your opinion about northwest Pipe (NWPX )?What are other pipe line companies that are maker of pipes for TRANscanada or ,ENBRIDGE and other pipelines?Are these companies are good investment ?Your opinion appreciated Thank you.ebrahim

Q: Hi 5i: In past you have expressed a favorable view on Ship Finance (SFL). Yesterday they announced that a proposal for a capital reorganization failed to get enough votes at the company’s general meeting and was defeated. The stock has been falling very recently (with the market) and is down again today (Tuesday) on above average volume. Can you please comment on the capital reorganization proposal, the recent trading activity, and update your view on the company. Thanks!

Q: ACQ.Comment on Q by Vinod on 9/23.Carmax,KMX(US$10.5b market cap) reported record Q2 results morning,9/23,but price dropped 9.49%.It operates in 2 segments-auto sales & auto finance(including sub prime loans)

Q: What are your thoughts on RDC:NYSE

Q: What are your thoughts on WPT:NYSE

Q: T:AD - ALARIS ROYALTY CORP
Please provide me a recommend a list of Canadian companies that can benefit from us markets and us growth . I believe that AD would be an example as it is in the us or moving that way ? . I prefer dividend stocks.
Thanks
Yossi

Q: I've been considering Disney (DIS) for US exposure for a while, but it never pulls back, just keeps going up. Do you think it's a good idea to start nibbling at it here?

Q: can you comment on Hertz as a long term buy.Thx. Keith

Q: Could you please give your current views on VXS (canadian) and ECYT(U.S.). Thanks

Q: Hi Peter & 5i Team,

Could you please give me a detailed comment on the future prospects for Cliff's Natural Resources (CLF).

Thanks in advance.
Francis

Q: What is your opinion of Alibaba? Is this a stock worth investing a few dollars in?
Look forward to your reply.
Shirley

Q: Want to take some money off the table in my canadian portfolio but would like to keep some skin in the game. Thinking of an American etf of defence stocks to play the US dollar and the US need to dominate the world. At 67 years old I am willing to place the bet. Which ETF do you think would suit my needs. Thanks Doug

Q: Hi 5i,
Just wondering what your position is on VOC energy trust in the NYSE. I have a fairly large position and have done quite well with its generous dividend. With a 52 week high at 17.51 and decent fundamentals is it worth the risk to continue reaping the benefits or is it time to move on?

Thanks

Q: re: F Ford

Doesn't appear to be much interest in our forum.

Do you have any comments on Ford moving forward over say... the next 3 years? Is it cheap at these levels? How do you see the auto industry in general over the next 3 years?

Thanks for all you do

Q: Ryan; would buying UUP-n be a good way to hedge your Canadian resource holdings? Thanks.Rod