February 10, 2013 Comments

Greetings and welcome to a new group of subscribers who joined this weekend after seeing an article in the Edmonton Journal.

For the benefit of the new subscribers I will mention that I usually post some comments here five times per week. Usually it is Monday through Thursday evenings and then sometime on the weekend, often Sunday evening. Sometimes I don’t have much to say, other times I will comment on one or more of the stock picks or comment on something that has been in the business news or something related to investments. I rarely have anything to say about where I expect the markets to head in the short term since I don’t believe I have any ability to predict that. Markets tend to rise in the long term and be unpredictable in the short term. It’s better to focus on trying to identify and buy some companies that are likely to do well in the future (in terms of earnings), that are well managed and that are available at good prices. With this type of company purchased at a reasonable price the future stock price may vary but will ultimately tend to reflect the growth in earnings.

Dividends are nice but are neither a necessary nor a sufficient condition. Berkshire Hathaway has made a return of literally one million percent for its investors since 1965 and without any dividend (well ironically enough it did pay a single dime out in 1967 but nothing since then). Of course many investments do pay excellent dividends. And there are examples of companies that were paying good dividends until suddenly suspending the dividends and then plunging in value. Sustainable earnings drive returns for investors over the long run. If the earnings are not growing then the only way the return is going to be acceptable is with a good dividend yield.

Subscribers often ask which stocks to purchase from the list above. I can’t make that decision for investors. I hope that subscribers will pick and choose from the list  based not only on the rating (and noting if the current stock price has changed since it was rated) but also based on reading and contemplating the reports on each company.

Of the companies on the list I tend to like all of those in my own investment portfolio but certainly can’t make any guarantees. In particular I like the prospects for Wells Fargo, Bank of America and Canadian Tire. Canadian Tire is facing increased competition and so maybe it will suffer. But my expectation is that it will report reasonable good earnings for Q4. It reports on February 21, I believe. It basically seems to be priced as if the outlook is somewhat pessimistic.

Almost all of the stocks in the list were updated near the end of 2012. The ratings were our opinion as of the date and price indicated. Some of them have subsequently risen quite nicely in price which makes it more likely that if we were to update today, then the rating might be a bit lower. In particular, Melcor is up significantly and while we still hold it we would not likely consider it to be a Strong Buy at the current price. Similarly Toll Brothers is up significantly compared to the price at which it was rated in early December. Some others have had fairly strong increases and in some cases the increase has been quite modest (making it more likely that the rating would still apply).

There will be some updated ratings over the coming weeks and months. In some cases I will update for the Q4 earnings reports. I tend to focus first on the higher rated companies in terms of doing updates. I will also keep you informed of any trades in my own account.

Patience is a virtue in investing. New subscribers should not necessarily be in any powerful hurry to make trades based on the information on this site. It makes sense to get familiar and comfortable with our approach.