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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: Sherritt Int. (S) I have a small “speculative” position (ACB $3.73) that I had been acquiring on the premise that they would do something with the Coal assets and become predominantly a Nickel Miner/Refiner and when the Nickel market improves have a good mid/longterm upside potential.

They have sold the Coal assets but I hadn’t contemplated the Obed spill and George Armoyan’s “activism” and the pending “Proxy fight”. Shareholder activism is generally a good thing. If nothing else it tends to remind the Management and BOD of their responsibility to the Shareholders. In this case I am not sure what George Armoyan has to offer if he is successful in his effort to basically take over the BOD. I am not aware that he or his two other BOD nominees have any International Mining experience.

Your thoughts will be appreciated. Would you hold a “small speculative position” and see how things play out or get out of the way and watch from a distance? I am basically a mid/longterm investor and have learned that having patience with a company that is going through a rough patch can be very rewarding.
Read Answer Asked by Richard on January 20, 2014
Q: Hi - your views on XMW and minimum volatility equity strategies in general. Also, your views on CRQ and fundamental indexing strategies as well. cheers.
Read Answer Asked by Al on January 20, 2014
Q: I just ran across a rather interesting stock Mercadolibre (MELI -Q). I realize that Canadian stocks are your main focus but I was wondering if you knew anything about this security and if you could comment on it.
Read Answer Asked by shirley on January 20, 2014
Q: Some think that 2014 will be the year for the Cdn stk mkt to shine. If you agree, what sectors would be best and what mutual fund(s) would best cover these? (I have mainly stocks in my accounts that are similar to you model, but am trying to get back to a few good mfs as well.) Thanks for you help. Alan
Read Answer Asked by Alan on January 20, 2014
Q: The recent question on BEP.UN caused me to check the Holy Grail of info for this stock, the Investor Relations pages of the company website, which is a far more accurate and often underutilized source than brokers or other services. Distributions, not dividends, of $.3625 US for the last 4 quarters totaled $1.45 US and with their stated goal (from the 2012 Annual Report) of 3 to 5% increase annually, it seems that the next distribution is in line for an increase (proposed record date March 31). All Brookfield companies, to my knowledge, report earnings in US $ and pay out in US $, and differences in currency translation could account for different reports in C$.

Also, as you summarized, in the "Highlights" discussion in the A.R. management states, "The primary reason for this {the reported IFRS net loss} is that we recognize a significantly higher level of depreciation for our assets than we are required to reinvest in the business as sustaining capital expenditures. As a result, we also measure our financial results based on Adjusted EBITDA, funds from operations and net asset value to provide readers with an assessment of the cash flow generated by our assets and the residual cash flow retained to fund distributions and growth initiatives."

When considering these other factors in the financial results, and that the company stated NAV per LPU of $32.35 US is far above the current market price, I understand why 5i recently added to its position in the model portfolio. If memory serves me, I believe it has traded much closer to NAV in years past, so it should be only a matter of time before patient investors are rewarded, while collecting 5.7% to wait. My question is about the discount to NAV: is 21% about normal at this time when comparing similar sized companies in its industry, such as Fortis or Emera? Thanks, J.
Read Answer Asked by Jeff on January 20, 2014
Q: Hi Peter, Happy new year to you and your team.I sold some Patheon when the deal was announced at around $9.72, then I sold some at $9.85,then $10.00, and a few days ago at $10.17. The US dollar has moved quickly and to my benefit.The deal is expected to close early March. My concern is that the US dollar has moved to fast in one direction. Should I sell the rest of my PTI position or keep the rest until the deal closes. Does the US dollar still have momentum or is the move running out of steam? Thanks, George
Read Answer Asked by George on January 20, 2014
Q: In a very recent article on momentum stocks (not yet posted on this site) Peter Hodson wrote: "Bloomberg has a great function key on analysts’ revisions, showing the degree of earnings estimate changes. It can be an important factor in trying to determine which stocks might catch momentum." Where can we find this? Terrific site, BTW!
Read Answer Asked by Kurt W on January 20, 2014
Q: Hello 5i
We looking for advice on the order/strategy for adding our 2nd position to your model portfolio. We have money earmarked to add 1-1.5% to each holding which is fairly equally weighted btwn 3-4% depending on the performance. We started your model portfolio with no VRX or AYA in mid November. We also purchased AD(-28%), SJ (+7%) Verizon(-4%), Ambev (-3%) JNJ, Unilever.
We want to add gradually over next 6-8 weeks. Which 7-8 stocks should we start with? Should we start with the ones that are doing best with momentum or the ones that are under performing?
Top performers are: ACQ(+6%), CSU (+15%)CSS, FSV,ENB(+4-5%), ESL and SJ (+7), KBL (+15%), TOU (+17%)
Top underperformer's: AD (-28%), FSZ(-8%), VZ(-4%)
Everything else is up or down slightly from start price depending on day. Could you please advise which stocks to start with and strategy for moving forward. Any other recommendations are welcome. Thank you,
Kerri
Read Answer Asked by KERRI on January 19, 2014
Q: Hello i5 Team,
Can you recommend sector weightings for a conservative to moderate investor. Many thanks.
Read Answer Asked by Kathy on January 19, 2014
Q: Hi Peter
I know you like Brookfield Renewable Energy Partners [BEP.UN] and the 5.63% dividend is excellent, however I worry that TD Waterhouse only shows earnings of $0.24 per share [with a P/E ratio of 117.3], and the dividend is $1.58.

To add to the confusion Stockhouse show earnings of $0.24, P/E of 46.6 and dividend of $1.516. The data from Morningstar are even more confusing and contradictory.

I know you like to look at the free cash flow, as you wrote to Claude on Dec 13th, which is huge, but I really don't understand how this works. You said "various non-cash accounting charges" need to be taken into account but if the money is spent it isn't there to pay dividends. So what is a "non-cash" charge? Sounds like a shell game or cheque kiting to me!

If all the cash flow covers expenses and capital investment how can there be enough left over to cover the dividend? Surely NET earnings must exceed the dividend if it is to continue on a sustainable basis without the company having to borrow money to pay it.
Thankyou..... Paul
Read Answer Asked by Paul on January 19, 2014
Q: There have not been any questions on HLP. Would you recommend a purchase of the common or convertible debenture at these levels?
Thanks Guys.
Read Answer Asked by Warren on January 19, 2014
Q: Hi Peter and team, Happy New year. Which ETF would you recommend int the commodity sector and is this a good time to purchase it.
Read Answer Asked by Robert on January 19, 2014
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