Skip to main content
investor newsletter

Sometimes starting from scratch can be the best move.

It's a bit disquieting that he used the rise of Nazi Germany as a metaphor, but author and venture capitalist Morgan Housel's column "The Full Reset" provides a useful investment strategy as the new year approaches.

Mr. Housel writes that the reason the German military became so quickly and dangerously powerful in the 1930s was that it started from scratch. Stripped of military capability after the First World War, the Germans built their armed forces with the most modern weapons and training, having no legacy organizational or equipment supplier issues to overcome.

Mr. Housel applied this idea to portfolios, "How many of us, if given a blank slate, would create an identical portfolio to the one we have now? Some would. Many of us would do something utterly different. But we don't, because we're burdened by past decisions and, like the military with an aging fleet, are unsure if updating our equipment is worth the high cost."

Assessing your existing investments with a 'would I buy this today?' is an important exercise in my opinion, and the beginning of a new year is a good time for it. There are, however, significant hurdles to extensive portfolio re-shuffling, the most importance of which is the potential cost.

Investors who pay commission for each transaction could find it prohibitively expensive to sell numerous positions and buy others. It's also the case that research shows an inverse correlation between the number of portfolio transactions and investment returns – the more trades you make, the lower the performance tends to become.

The other major hurdle to big investment shifts is a psychological one – ego – and that is something it's better to ignore. Selling an underperforming stock often carries with it an admission of failure, that an investment idea we were once excited by has turned out poorly.  Maybe if we just wait a bit longer, we think, it will turn out we were right the whole time.

It's a fine line to walk. Too many changes risks future performance but falling in love with an investment and holding it even though the market's clearly indicating it's a piece of garbage is also a terrible idea. It can be uncomfortable to skeptically review portfolio holdings, but it's an important exercise and a great way to start 2018.

-- Scott Barlow, Globe and Mail market strategist

This is the twice a week Globe Investor newsletter. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.

NEW: We've launched a new Top Business: Evening Edition newsletter providing a summary of the biggest business headlines of the day. Sign up here for it and more than a dozen other Globe newsletters, including the new Real Estate newsletter and Evening Update newsletter.


Stocks to ponder

Canada Goose Holdings Inc. Earlier this week in Wednesday's Breakouts report, Jennifer Dowty highlighted GOOS as a growth stock that may surface on the positive breakouts list, which it did after it reported quarterly results on Thursday. Toronto-based Canada Goose is a designer, manufacturer and distributor of premium-priced clothing, selling its products worldwide. The company's primary focus in outerwear, more specifically, jackets. Here is the report.

Enbridge Inc. With Enbridge's shares sinking last week amid growing concerns about its dividend growth outlook, John Heinzl presents a Q&A to help investors put the pipeline giant's challenges into context. He looks at the lofty price targets analyst have on the company, why they are so positive while the market is negative and the outlook for the company's dividend. Read his report here.

StorageVault Canada Inc. Storage lockers aren't the most attractive real estate asset, but investors looking for a simple, low-cost business that revolves around the "Four Ds" – death, divorce, downsizing and dislocation – may be interested in owning shares of StorageVault Canada Inc., the country's largest and only publicly listed storage company. While shares of the TSX Venture Exchange-listed company have nearly doubled over the past year, some analysts and fund managers say the stock is a better bet since it retreated from a record high of $2.85 in mid-June. Brenda Bouw reports.

Cineplex Inc. If movie theatre stocks rallied with blockbuster hits and fell with every flop, this would be the world's easiest trade: Buy on Star Wars, sell on Tom Cruise. But stocks such as Cineplex Inc. are affected by more than the latest review: They have been struggling with the more profound challenge of luring customers to their theatres at a time when the options at home – Netflix, surround sound – are growing more appealing. These steep declines must beckon to bargain-hunting investors; so what has to go right at Cineplex to make an investment today pay off down the road? David Berman examines the stock.

Rocky Mountain Dealership Inc. This stock appears on the positive breakouts list and may be of interest to investors seeking a combination of income and growth. The company offers investors an attractive yield of 3.8 per cent. The stock has an unanimous buy call on the Street with six analysts recommending the stock. The consensus target price suggests there may be 17 per cent upside potential, and if you include the dividend yield, that represents a potential total return of over 20 per cent over the next 12 months. The share price continue to rebound. Last year, the stock price rallied 55 per cent. Calgary-based Rocky Mountain rents, sells, and leases used and new agriculture and industrial equipment through its dealership network across Alberta, Saskatchewan, and Manitoba. Jennifer Dowty reports.


The Rundown
 

These overlooked stocks have easily beaten the TSX in 2017

Despite the recent rally, it has not been a great year for the Toronto Stock Exchange. While the U.S. markets were powering ahead, the TSX was virtually flat for the first eight months of 2017. Even with the recent gains, which have pushed the S&P/TSX Composite to a record high, we are only up 5.2 per cent for the year. Contrast that with New York's S&P 500, which has gained 15.6 per cent year-to-date. We are the poor country cousin. But there are a lot of stocks that have outperformed the index by a wide margin this year. Gordon Pape outlines the stocks that have done well.

The 'sleeping giant' within the TSX that could be the market's next outperformer

You can certainly call it a comeback. After spending most of the year sitting out a near-universal stock market extravaganza, Canadian equities have stormed back with a decent year's worth of index gains packed into the past two months. The S&P/TSX composite index recently reached record territory for the first time since last February, largely the result of bank and energy sector gains. Keeping the drive alive, meanwhile, likely depends on beaten-down materials stocks conforming to the uptrend. Tim Shufelt reports.

Canadian marijuana stocks rally on Trudeau's dollar-a-gram tax

Canadian marijuana stocks surged Friday after Prime Minister Justin Trudeau's government proposed a tax of one dollar a gram of legalized recreational marijuana. The government said Friday the tax shouldn't exceed $1 a gram or 10 per cent of the producer's price, whichever is higher. Retail sales levies would be applied on top of that. Bloomberg News reports.

Why bitcoin enthusiasts need to be fearful of the five-year rule in investing

There's an old rule in investing that insists whatever asset is red hot right now will be ice cold in five years. The latest evidence for that maxim comes from the gold sector. Appetite for the precious metal hit a peak in 2012. It has since slumped to its lowest point since 2009, according to a World Gold Council report published on Thursday. Since gold and bitcoin appeal to similar audiences, many of the same promoters and brokers who used to peddle shares of small gold miners to retail investors are now busily selling that same audience on the opportunities in cryptocurrencies. Ian McGugan reports.

The smart way to play the AI revolution

Intelligence is good, but artificial intelligence is even better. That's the essential sales pitch for the AI-driven investment funds that are now marching into the market, offering to manage your money with robot brains. As marketing appeals go, it is very much on trend. Canada's first AI-managed exchange-traded fund, Horizons Active AI Global Equity ETF (Toronto: MIND), hit the market in late October, close on the heels of the first U.S. offering, AI Powered Equity ETF (Nasdaq: AIEQ). But investors may want to apply some intelligence of their own before buying in. For starters, there's the basic question of plausibility. Ian McGugan examines the issue.

How an award-winning dividend fund manager beat all his peers

Building a diversified Canadian portfolio necessarily means looking much different than the S&P/TSX composite index. "So much of the index is dominated by the banks, the energy and materials companies," said Conrad Dabiet, a portfolio manager at Manulife Asset Management. "But we can find opportunities in companies that aren't as followed, or aren't large weights in the index. And we've been able to do this without giving up much of what you'd expect from a dividend fund." Specifically, that means a decent yield, the prospect of good income growth and the stability that typically comes from a basket of dividend payers. By running a fund that combines balance among Canadian sectors with strong dividend fundamentals, Mr. Dabiet and his team have managed to realize award-winning returns. Tim Shufelt reports on this year's Lipper Award winners.

Why this major commodity could be poised for a painful correction

Speculation in copper is approaching extreme levels where corrections in the spot price have recently occurred. The non-commercial net futures position as reported weekly by the U.S. Commodity Futures Trading Commission, which is used as a proxy for hedge-fund speculation in futures markets, show 47,500 more futures contracts betting on higher copper prices than lower prices. Scott Barlow reports.

Here's how to tell when metals markets are about to turn south

There are times when market action isn't tough to figure out and the recent rally in base metals is one of those times. For all the talk of the lithium, nickel and magnesium that would be needed during a surge in electric vehicles, broader metals prices continue to be driven primarily by Chinese imports and also by rising global manufacturing activity.The catch is that forecasts for the Chinese economy imply the rally could be short-lived. Scott Barlow examines metals markets.

Rosenberg: Investing in the Trump era, my highest conviction ideas, and where the loonie is heading

Well, it's hard to believe that it's been a year since Donald Trump got elected, and at least the good news is that we're still alive. All kidding aside, the question that David Rosenberg has been fielding ever since Nov. 8 of last year is how we are investing around Donald Trump. The answer has not changed one iota, which is that we are not investing around Trumponomics at all. Read his research report here.

Canada's 'light touch' on penny stocks draws ire as deal fails

Investors are fuming over the collapse of a $750-million mining deal that sent a tiny magnesium explorer soaring, sparking criticism that Canada's light-handed approach to regulating its venture market needs to get heavier. Bloomberg News reports on the failed deal between West High Yield (W.H.Y.) Resources Ltd. and Gryphon Enterprises LLC.

These bond ETFs have been survivors in a nasty year

A handful of bond ETFs seem to be holding their own or even flourishing despite the challenge of rising rates in 2017. The big, broad-based bond ETFs have done what you'd expect when rates are rising – they have fallen in value over the past 12 months even after you factor in the yield on their interest payments to investors. Rob Carrick takes a look at six bond funds that have weathered the storm.

Value investor looks for stocks that can deliver rewards

For Marian Hoffmann, inspiration struck when she was still in university studying economics. There she found herself drawn to the ideas of Yale University's legendary money manager David Swensen, who was teaching a course in portfolio management. Mr. Swensen runs Yale's successful $25-billion-plus endowment fund. In her early 20s, Ms. Hoffmann had found her calling. Dianne Maley interviews Ms. Hoffmann who is part of the team at Sionna Investment Managers.

For the aggressive saver, better interest rates are there for the taking

Decent interest rates on savings accounts are out there, but only for intrepid savers who hunt them down. The Bank of Canada raised its benchmark interest rate by half a percentage point over the summer, the first uptick in seven years. Banks have barely reacted, but there's still a lot of potential to improve the returns you get from your savings. Rob Carrick takes a look at how you can boost your returns.

The new alternative investing: a restored farmhouse in Tuscany

It's not about earning a return. It's the journey. That sums up the premise behind the purchase of a 15th-century farmhouse in Tuscany by a handful of high-net-worth investors. Their goal was to turn it into a luxury vacation rental property. Joel Schlesinger reports.


Top Links

Rampant speculation in metals markets makes 'lottery ticket' bets on copper popular

Michael Lewis has identified another Big Short

Market weakness a 'dress rehearsal, not The Big One'

Others

The week's most oversold and overbought stocks on the TSX

Friday's Insider Report: Companies insiders are buying and selling

Thursday's Insider Report: Companies insiders are buying and selling

Wednesday's Insider Report: Companies insiders are buying and selling

Canadian ETFs: The latest launches

Number Crunchers

Ten U.S. health-care stocks poised for growth

Ten wealth managers attracting high-net-worth assets

Twenty Canadian companies reinvesting for future growth

Ask Globe Investor

Question: What do you think of BMO Shiller Select U.S. Index ETF (ZEUS-T)? It employs an equal weight strategy that combines value and adds a momentum screen. For a registered account, would you like to buy it for RRSP or RESP or TFSA?

Answer: Dr. Robert Shiller is a highly respected economist and Yale University professor who is recognized as one of the world's most influential experts in the field. He developed the Shiller price/earnings ratio as a tool to better interpret the historical performance of the S&P 500. It calculates the average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio).

The BMO ETF tracks the Shiller Barclays CAPE U.S. Single Stock Index, which includes the top 100 securities with the highest 10-year CAPE yield based on price and sector. A momentum filter is applied to remove 20 securities with the lowest price momentum over the last 12 months. Each security is equally weighted and the index is rebalanced on a quarterly basis. The objective is to generate capital gains by applying the old principle of buy low, sell high.

This is a brand new listing, having been launched on Oct. 4 of this year so we have no history to judge its performance. Nor do we have any idea of how much cash flow it will generate (distributions are to be paid quarterly) or what form they will take for tax purposes. The fund is very small, with only about $8-million in assets so far, and trading volume is very light.

What this all comes down to is that we don't have enough information to make an informed call about how well this ETF will do or whether it should be held in a registered or non-registered account. If you want to take a position, consider two things. One, the Shiller p/e index is higher today than just before the crash of 1929. Two, Mr. Shiller has warned repeatedly in recent months that the stock market is too high. "I'm nervous because it could fall a lot," he said recently.

--Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.


What's up in the days ahead

The ETF industry won't seriously challenge the supremacy of the mutual fund until it develops an alternative to the humble, but hugely popular balanced fund. But there are actually some options for investors looking for ETFs that offer a balanced portfolio. Rob Carrick takes a detailed look in Saturday's Globe Investor.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Click here share your view of our newsletter and give us your suggestions.

Want to subscribe? Click here to sign up or visit The Globe's newsletter page and scroll down to the Globe Investor Newsletter.

Compiled by Gillian Livingston

Interact with The Globe