There are lots of things happening in the markets - the recent run-up in North American markets have led me to suspect that we will see a few dips in the following days. Lots of value is still available, despite recent run-ups and regardless of whether I am right or wrong. As I have said so many times, opinions are worthless - its all about the facts, jack. Having said that, based on evidence and current conditions, I recommend every stock that I have mentioned so far in my blog - every single one is still a buy - many are available at attractive prices.
This week, my favorite Canadian bank reported earnings above expectations, but still managed to drop in share price. It is indeed a very strange world we live in. RBC profit jumped 19%, they hiked their dividend, and shares dropped. Makes perfect sense.
Capitalizing on market irrationality is one of my favorite investment strategies and any time a company beats expectations and raises their dividend and shares drop, your antennae should perk up. Look for the reason why. In the case of RBC, "market expectations for the bank's earnings rose on Thursday after Toronto-Dominion's profits blew past analyst expectations." Apparently, because TD blew beyond market expectations, Royal was expected too as well. Shares for Royal shot up Thursday, and went back down Friday after the earnings report, slightly higher than what they were trading at Wednesday at closing.
I recently profiled Royal on this blog – inspectorSTOCK.com. As I said then, I like Royal because it is a boring and conservative Canadian bank and they consistently raise their dividend. Generally speaking, Canadian banks are all very safe places to invest. Canadian real-estate continues to be red-hot, unlike in the US, and thus the mortgage business is still doing well, though some of Canada's biggest subprime mortgage lenders are cutting back due to the asset-backed commercial paper market drying up. The recent US subprime crunch has left the Canadian banks largely unscathed, including Royal, which cites “minimal” exposure to U.S. subprime residential mortgage-backed securities and collateralized debt obligations. RBC chief executive Gord Nixon also cited "nominal" exposure to the previously-mentioned asset backed commercial paper market which has recently dried up in Canada.
Another reason I like the big-five Canadian banks has to do with the effect the US sub-prime crunch is going to have on the Fed's future decisions and the bond-market, and therefore, the interest rate that borrowers need to pay for their loans and mortgages. Essentially, nobody is expecting any rate hikes any time soon and some are calling for rate cuts - this ultimately leads to low interest rates. And, since alternative mortgage lending will be more and more difficult, this bodes well for the big five, as they will surely continue to dominate in the traditional mortgage market. Of course, everything could derail if credit dries up too much, but the Fed and central banks will unlikely allow this to happen without a significant battle. This is good news for the housing market in Canada. Barring any major global market disasters that has the force to ruin everybody's economy, Canada's fundamentals are solid. So, as the saying goes, shake your money-maker!
DISCLOSURE: I do not own shares of Royal Bank yet. By the time you read this though, I very well may have picked some up. Always do your own research before buying a stock. As always, tell your friends (and the enemies of your enemies) about InspectorSTOCK.com !
Looking for a safe bet in this crazy market? Well, sometimes a crazy market can create investment opportunities not normally available.
In an article today in the globe, Boyd Erman points out that "shares of takeover targets have dropped." He points out that shares of BCE Inc. have gone down along with the rest of the markets, leaving them well below the price at which they have agreed to be taken over at. So, assuming the take-overs go through as expected, a decent return is yours for the taking. In the case of BCE, you could make around 10% at the current share price of $39.42.
. . . BCE closed yesterday at $39.07 (Canadian) on the Toronto Stock Exchange, well below the $42.75 a share that a group led by the Ontario Teachers' Pension Plan has agreed to pay for the company in the largest leveraged buyout in history. Investors who buy BCE now will also get at least two more dividend payments of 36.5 cents a share if the deal closes on schedule in the first quarter of 2008
Getting 10% in six months with little risk is a nice return, especially in a market where losses are common-place. As a conservative investor, I like the risk/reward ratio and have picked up some BCE shares as a result.
The declines are attributed to the "general slump in markets and contraction in lending: Many hedge funds that were betting on the takeovers have had to sell to raise money to meet redemption requests or margin calls on investments linked to subprime mortgages."
There is no such thing as a risk-free investment, it is all about measuring the risk against available data and your comfort level. As pointed out in the article, "an investor who buys in now is taking the risk that the turmoil in stock and debt markets will keep the deal from closing. . . But given that most of the deals pending have committed financing from banks, that risk is relatively remote because banks are unlikely to risk long-term damage to their reputations." We shall see!
DISCLOSURE: I own shares in BCE for the aforementioned reasons - I believe the take-over deal will go through as planned. Remember, always do your own research before buying any stock.
Whatever you do, don’t panic – don’t sell into weakness. Hold tight – and if you have the cash, perhaps pick up some battered blue chips. Timing when to buy is the real trick, but there should be ample opportunity as down-days will continue on.
A good solid company that has been hit hard by both the current market conditions and a flat third quarter is Canadian Tire. Check out Canadian Tire’s chart and other info on Google Finance. About a month ago they were trading around $87 and as of this writing CTC.A is trading around $73. Has Canadian Tire suddenly stopped being a good company? Not at all – and this represents good value at this price point. Will the share price continue to drop? I suspect it will trend down for a while, but long-term, this is a solid company and a solid stock and a safe bet. They have an awesome credit-card division and a retail business solid enough to put Walmart in check in the neighborhoods it operates in. Oh, and their website/online shopping is top-notch.
DISCLOSURE: I do not own shares of Canadian Tire though if I can scrape up some cash I will pick some up. Do your homework before you buy a stock!
There are lots of opinions out there, on both the bear and bull side of things. I believe there are some solid buying opportunites out there, for the long run. There will be lots of cause for panic in the coming weeks and months, and there will be many sell-offs I'm sure. In his column, also in the Globe, ROB CARRICK quotes Miles Zyblock, chief institutional strategist at RBC Dominion Securities:
"Mr. Zyblock suggests investors stick to blue-chip dividend stocks like Power Financial Corp., Canadian Tire Corp. Ltd., Manulife Financial Corp. and Fortis Inc. in the Canadian market, and with names like Johnson & Johnson, General Electric Co., PepsiCo Inc. and Wal-Mart Stores Inc. in the U.S. market. Focus on buying quality investments and forget about capturing better stock bargains ahead, he said.”
Vincent Delisle, market strategist at Scotia Capital, predicts that the leading sectors on the Toronto Stock Exchange are about to change.
Energy and metals stocks had a great run, but they're going to be overtaken by technology, telecom and industrials. Oh, and financials, too. They were a natural selling target this week as a result of concern about subprime lending, but Canadian banks may not be as deserving of this rough treatment as their peers in the United States and Europe. Earlier this month, Dominion Bond Rating Service said that while the Big Five Canadian banks do have some exposure to subprime loans in the United States it's not significant enough to alter their credit ratings. "We think that once Canadian banks report their fiscal third-quarter results, it will probably alleviate the fear in the market right now that anything financial is linked to potential problems with hedge funds and subprime," Mr. Delisle said.
In previous blog posts I reviewed and recommended Royal Bank and GE. I'll also throw another company I reviewed and recommended into this group, which is Rogers. Though it has not been traditionally viewed as blue-chip, it’s certainly on its way.
Its all about conservative and safe in these tumultuous times. In the next little while I will profile some more safe and conservative stocks. After-all, we don't have the benefit of hind-sight. In the case of Dick Cheney, I wonder if he had his memory blanked. Check out the transcript of the youtube clip embedded above:
Q: Do you think the U.S., or U.N. forces, should have moved into Baghdad? A: No. Q: Why not? A: Because if we'd gone to Baghdad we would have been all alone. There wouldn't have been anybody else with us. There would have been a U.S. occupation of Iraq. None of the Arab forces that were willing to fight with us in Kuwait were willing to invade Iraq. Once you got to Iraq and took it over, took down Saddam Hussein's government, then what are you going to put in its place? That's a very volatile part of the world, and if you take down the central government of Iraq, you could very easily end up seeing pieces of Iraq fly off: part of it, the Syrians would like to have to the west, part of it -- eastern Iraq -- the Iranians would like to claim, they fought over it for eight years. In the north you've got the Kurds, and if the Kurds spin loose and join with the Kurds in Turkey, then you threaten the territorial integrity of Turkey. It's a quagmire if you go that far and try to take over Iraq. The other thing was casualties. Everyone was impressed with the fact we were able to do our job with as few casualties as we had. But for the 146 Americans killed in action, and for their families -- it wasn't a cheap war. And the question for the president, in terms of whether or not we went on to Baghdad, took additional casualties in an effort to get Saddam Hussein, was how many additional dead Americans is Saddam worth? Our judgment was, not very many, and I think we got it right.
We need some Rod Sirling voice-over and Twilight Zone theme music for that . . .
Google seems to think it owns the earth – I mean they even re-branded it. How clever is this company? Well, think about how Google makes its money. Google is a massive pyramid scheme, making massive money at the top, riding on the suckers below. AdSense generates a ton of cash for Google while webmasters do all the hard work. Webmasters have to create the content to get people to visit, and hope a decent percentage of their visitors click on the ads. Google invests nothing but a few lines of code and at worst, if the website generates no clicks, they lose nothing. If the website does generate clicks, well then they charge the AdWords subscribers, take a hefty percentage for "their work" and pay out to the webmaster a miserly amount. Oh, that is, when they feel like paying their AdSense publishers. Google has been known to not pay, thanks to their Terms and Conditions, that work entirely in their favor. And I do mean, entirely. Google can refuse to pay without giving any specific reason. Here is an excerpt from their Disabled Account FAQ
Why was my account disabled? Can you tell me more about the invalid click activity you detected?
Because we have a need to protect our proprietary detection system, we're unable to provide our publishers with any information about their account activity, including any web pages, users, or third-party services that may have been involved. As you may know, Google treats invalid click activity very seriously, analyzing all clicks and impressions to determine whether they fit a pattern of use that may artificially drive up an advertiser's costs or a publisher's earnings. If we determine that an AdSense account may pose a risk to our AdWords advertisers, we may disable that account to protect our advertisers' interests.
Lastly, please note that as outlined in our Terms and Conditions, Google will use its sole discretion when determining instances of invalid click activity
In other words, "fuck you! We have more money and more lawyers than you can even imagine and there is no chance in hell that you can mess with us – so don’t bother trying." Thanks – got the message loud and clear. Even if there has been NO invalid click activity, there is little or nothing you can do about it. Google is judge, jury and executioner and they wont even tell you what rule you broke. They can accuse you of anything and there is nothing you can do about it in return, guilty or otherwise - and they will keep any money you are owed. Welcome to Google.
OK, whatever, screw AdSense. Lets look at how Google rose to prominence. Well, it indexes other people’s content and allows people to search for stuff – other people’s stuff. Google maintains huge data-centers that literally cache the entire internet many times over and index the hell out of it using web "crawlers." Again, they make money off of other people's content – others people’s property (are you down with OPP? – Google sure is). Granted, Google spends a lot of money on research and development, a lot of which is frivolous, some of it useful – a lot if it thrown away – they take a "let’s throw shit at the wall and see what sticks" approach. I guess they can afford to do that.
Now, Google has gone even lower (and darker, and more evil than ever) offering suckers, I mean, Google Business Referral Representatives the opportunity to earn "up to" $10 for taking digital pictures of local businesses and providing information, to be potentially used on Google Maps. What do you need to do to get "up to" $10?
As a Google Business Referral Representative, you'll visit local businesses to collect information (such as hours of operation, types of payment accepted, etc.) for Google Maps, and tell them about Google Maps and Google AdWords. You'll also take a few digital photos of the business that will appear on the Google Maps listing along with the business information. After the visit, you submit the business' info and photo(s) to Google through your Local Business Referrals Center, and we'll pay you up to $10 for each listing that is approved by Google and verified by the business.
What’s the catch? Well, read this:
[They will pay] $2 when a business referral is approved by Google; and $8 when an approved business verifies that the information you submitted is accurate. Referrals are approved by Google based on the completeness and quality of data supplied by representatives. Businesses verify their information either by sending us a response postcard or verifying their information online.
Suckers, I mean, Google Business Referral Representatives, will get $2 "when a business referral is approved by Google." And with Google, the key word is IF. IF Google approves your referral based on their own arbitrary decision making, in which you have little or no recourse to challenge, you get a big $2. Then, after Google "verifies that the information you submitted is accurate," you get $8. Verification consists of the business sending in a post-card or going online to verify the accuracy of the information.
Now, you may think, "hey – ten bucks for nothing." Think about what Google is getting in return. They are getting free labor unless they decide, at their own discretion, that the info you provide is worthy of $2. Then, once Google has the lead, they can pitch AdWords sales offers to the business and add that business into their own private data warehouse and do who knows what with their crazy algorithms. All the while, you will have been advertising Google Maps and AdWords, grass-roots style, and in many cases, for free. Brilliant! Absolutely evil, mastermind genius. Think of the money Google will make from the measly $10 they will spend! Think of how pervasive Google Maps will become with all the leads suckers, I mean, Google Business Referral Representatives, will have provided. Its just like the ancient pyramids in Egypt, that were built by slaves, that we stare in awe of.
Google conducts its business as though everything it does is benefiting the world, when in reality it is just another megalomaniacal multi-national corporation like all the rest – argualbly, they are even worse, in the sense that they don’t even pay a lot of people who work for them for free and are duped into thinking that they are going to be making cash, all the while helping them tighten their grip on internet. I give Google credit for being so cleverly greedy. However, it might be more lucrative to work for tips, bagging groceries at Walmart in Mexico.
I give Google a buy rating, long-term, based on their evil genius. Any company that can take over the world by letting everybody else do their dirty work has got massive profitability - they run a no risk business model, where-by they only pay when they feel like it – when it is beneficial to them. Beyond hiring some brilliant techies, who have the privilege of living in the upper third of the pyramid, the brick-layers and slave workers below do all the building, and keep the pyramid scheme going, making pennies while the upper echelon pile up the cash. Its all about Other People's Property.
DISCLOSURE: I do not own shares of the evil Google at the time of this writing. Like George Bush, I have used THE Google.
Tell your friends. Tell the enemies of your enemies about InspectorSTOCK.com.
My approach to investing is conservative in the best of times, and these days even more so. In these tumultuous times, I like to stick with the facts as much as possible. I’ve spoken about energy in previous posts (Petro-Canada, Cameco, Canadian Hydro, GE, and Boralex) and I like the energy sector because despite fears of a commodity down-turn, global warming is a political force that bodes well for alternative energy plays and peak oil is making it ever more expensive to extract fossil fuels, this coupled with huge demand, is making oil an expensive commodity. I’ve spoken about healthcare, specifically CML HealthCare. Whether the economy is hot or not, people are still going to get sick and the baby boomers are just starting to retire. But I will leave those areas for my past posts and future ones. Today, I will discuss another area I like (both as a sector and a substance), and that is alcohol. As stated so eloquently in Chris Krasowski’s blog post, "when times are good and when times are bad, it's a fact of life that people will drink either way". I'll drink to that. Cheers!
A company I like and which reported today is Molson Coors (NYSE:TAP). Take a look at their chart on Google Finance. What a spike! It hit over $96 from an opening of around $92 today, (August 7th) but at the time of this writing, has settled back down to around $92.
Molson Coors posted higher-than-expected quarterly profits, helped by increased beer shipments to North American wholesalers and a lower tax rate.
I see good things for this stock. First of all, the merger between Molson Inc. and Adolph Coors Co. has been very successful, despite some analysts' fears that it would not work - they have proved them wrong. In North America, their performance has been great and this is key to their ongoing success, in my opinion. Molson Coors is competing fiercely in the low-priced beer segment, which in the past has eroded the traditional brands’ market share (make’er a laker!). The majors have hit back, no longer ignoring the "buck a beer" brands that got very successful under their complacent noses . Not any longer - they are competing hard in value and getting the sales.
I like beer, and I like Molson Coors. I think it is a safe bet.
DISCLOSURE: I do not own shares of Molson Coors yet. . .
With the banks falling out of favor, in large part due to the "credit-crunch" that is taking place in the US and affecting world-wide markets, some bank stocks are looking like bargains. Royal Bank of Canada has fallen recently with the rest of the banks, though the stock is up today (August 2nd 2007).
A major catastrophe could strike and affect Royal, and affect all Canadian banks - for example, should a major hedge-fund go belly-up, any exposure to that titanic-like disaster would affect the stocks of any involved parties. However, nothing in the books actually looks bad for RBC. First off, they have no exposure to the US sub-prime mortgage/loan market meltdown that I know of. Secondly, the real-estate market in Canada is still read-hot, unlike in the US, with a healthy mortgage market alive and well in the great white north. Lastly, Royal Bank is traditionally very conservative, i.e. very tight with their money. They do not take the kinds of risks other banks have made the papers for recently (CIBC cough, cough, BMO cough , cough.) Well, OK, who knows what shady deals RBC might be involved with – I mean they were involved with Enron (like everybody else) – but we haven’t heard of any lately.
Royal Bank of Canada is in the exclusive club of stocks that has consistently increased their dividends, and as they do, their stock price goes up. Its one of the safest and most boring stocks you can own – almost as safe as a savings account, but pays out more than a GIC when you combine the dividend and the stock value increase. Lately, the stock has fallen along with the other financials.
I have always wanted to own Royal, but every time I looked, it was higher then the last time, and I felt like I had missed the boat. Well, the stock price is looking attractive now amongst the sell-off and market jitters spreading like wildfire, but I don’t think this bank is going to fall prey when the dust settles from the impact of the credit crunch punch hitting all the banks.
I like Royal Bank – unfortunately it has gone up about a dollar in the last day – I should have posted this yesterday when I began writing this post. Oh well - hindsight is always perfect. In any case, I believe the market will see-saw up and down for a little while yet, so look out for some down days to get in, if you are so inclinded. A little bad news that hits all financials will drag Royal down along with it. If you want in, as always, buy in phases – this is true of all long term investments – don’t buy all at once, so as to average your “book” price.
In this sell-off climate, I like a safe play like RBC. Even though financials and commodities are conventionally what you want to get out of during a climate like the one we are in, in the case of Royal it is a safe bet.
DISCLOSURE: I do not own any Royal Bank of Canada shares at the time of this writing. As a long-term, conservative investor, I like Royal and its fat dividend – but always do your own research to make sure any given stock is good for your portfolio and your risk profile.
Remember - tell your friends and tell the enemies of your enemies about inspectorSTOCK.com
Welcome to my blog dedicated to stock market analysis and investment advice. I am a stock enthusiast with a solid track-record. The focus of my blog is INVESTING in small, mid and large cap US and Canadian publicly traded companies. I typically go for a 12 – 18 month investment window. Making money is hard work and you must put in the time if you want to be consistently successful.
I am a stock enthusiast with a solid track-record, which you can SEE FOR YOURSELF! There is no need to take my word for anything - track my picks in Google Finance or Yahoo Finance – I’ll let the facts speak for themselves. My focus is INVESTING in small, mid and large cap US and Canadian publicly traded companies. I typically go for a 12 – 18 month investment window.
