Economic Sectors Outlook

I might post little or none in the next two weeks, but I thought I'd leave you with some useful information while you eagerly wait for my return :-) . I've just received my latest copy of InvestmentReporter and they publish a very useful table that summarizes the 6 to 12 months outlook for the different economic sectors. They also recommend to invest in stocks found in some of the depressed sectors since there is better value in these currently (there's a lot more in that newsletter and I highly recommend it).

Sector	Sub-Sector	Outlook
Financial	Bank and Trusts	Outperform
	Investment Co’s& Funds	Outperform
	Insurance	Outperform
Utilities	Gas/Electrical	Match
	Pipelines	Match
	Telephones	Outperform
Manufacturing	Building Material	Underperform
	Chemicals	Match
	Fabricating	Underperform
	Engineering	Outperform
	Steel	Match
	Technology	Underperform
	Transportation	Outperform
Consumer	Communications	Underperform
	Food,beverage &tobacco	Match
	Health Care	Underperform
	Merchandising	Match
Resources	Gold&Precious metals	Outperform
	Oil & Gas	Outperform
	Metals & Minerals	Outperform
	Paper & Forest products	Match

Although it's hard to predict, I will personally keep a lot of banks&insurance/metals/transportation ... You should do your own research and not rely on my stocks advice!

Junior mining plays: uranium bubble!

As you know from a previous post, I sometimes gamble on highly speculative stocks with small amounts of my hard earned money (more fun than the casino though :-). I do not recommend this to anybody, but if you are still curious, here's my latest play:

Ditem Explorations (DIT-X), a junior uranium company, up 73% since I've bought it 10 days ago. As usual, I have no clue when I should sell. In the past, I've always sold too early, missing out on huge profits (but I've prevented most losses). This uranium/commodities boom is clearly a bubble driven by global demand. It will bust at some point, but can I manage to sell before that? I promise to keep you updated.

Here's also an interesting link from Chris on uranium companies.

Global real estate ETFs recommendations from Rob Carrick

In his Globe and Mail column, Rob Carrick talks about following the same investment strategy as the Canada Pension Plan since it's a good model of safety. While investing in private equity is hardly (idea a model of safety in my opinion, diversifying in global real estate is a great idea. That's something I had not done so far. As you've seen in my recent posts, I am increasing my international holdings. Here's the recommendation from the article:

SPDR DJ Wilshire International Real Estate ETF and DJ Wilshire REIT ETF

Notes: The SPDR Wilshire ETF offers exposure to real estate stocks and real estate investment trusts in markets around the world, but not the United States (Canada accounts for 7.3 per cent of its assets). The American market is too big to ignore, so put about $2,000 into the DJ Wilshire REIT, which holds U.S.-based REITs, and the rest into the global ETF. The DJ Wilshire fund is a bargain thanks to an MER of 0.25 per cent, while the SPRDR fund's MER is 0.6 per cent.

There's a TSX-listed ETF that focuses on REITS in the Canadian market, but it's not an ideal choice here because it lacks global diversification. This is a major consideration right now because Canadian REITs have had a sharp runup in price lately and may offer less upside than global peers.

To go in Real estate (or not!)?

I've thought many times about buying an appartment building to diversify my revenue stream. I haven't made the jump yet. I was wondering if doing it in partnership with somebody would make the first step seem less steep or if it would just make the whole operation more difficult ...

what are your thoughts on the subject?

ETF : international dividend achievers from Powershares (PID-A)

You like CDZ (Claymore Dividends Achievers) but are looking to diversify your ETF holdings internationally? And, like me, believe that dividend achievers are the way to go? Then have a look at PID-A. It's a relatively new ETF from Powershares available on the American exchange but is based on the well established Mergent's Dividend Achievers indexes.

Instead of a passive index like XIN from iShares, PID favors companies that have been increasing their dividend payouts for the last 5 years. That gives you exposure to international companies that have a better chance at faring well under adverse markets in my opinion. Chances are that they'll keep increasing their dividends in the future as well.

So although the yield might always look small (around 2-3%), it will become greater for you based on the current buying price as the 'stock' price keeps increasing. (Notes: all the international companies in PID are ADR - American Deposit Receipts - which mean they trade on US markets. You should also look at the tax consequences of holding foreign equities.)

I would not put all my eggs in these types of ETF but I think they're a good complement to market value weighting types of ETF (passive). And it's way safer

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The Dividend Guy Blog has 10 reasons why dividend investing is good.

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Canadian Capitalist commented on ETFs ...

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For those of you who like to read lenghtier stuff, Dividend based investing has a good interview with Lowell Miller author of the Single Best Investment guide ... interesting quote from it:

When you are actually talking about investing (and that should be the major part of your assets because in today’s world, you know, lots of us are going to live to be 100 or more), you really have to avoid fixed income and you want a diversified portfolio of high yielding stocks where the dividend is going to grow. And to repeat myself – as I always do over and over again – the increasing dividends will prevent your purchasing power from being degraded by inflation, and the increasing income will also cause your principal to increase over time.

Loblaws: a classic value trap?

I was recently tempted to buy Loblaws shares since their price dipped on the news that they wrote-off a big sum following their Provigo acquisition. My reaction was one shared by many investors when they see stocks of companies they like go down significantly: it seems like a good deal that falls in the value-investing category. But then again, it might just be a value trap!
The quick summary is that a stock price might look attractive but the fundamentals are still really bad. The company might be losing a lot of money. It can be afflicted with supply chain problems in the middle of management change and maybe suffering from a declining reputation. Basically all the woes that affect Loblaws!

In conclusion, it's always necessary to do our homeworks before jumping on the first company whose stock price looks attractive...

Taxes on foreign dividend paying equity?

I've read somewhere (can't remember where) that you have to be careful when you hold dividend generating foreign equities in your RRSP since there can be a withholding tax (e.g.: 15% in the US). It's the first time I hear about this. Have any of you heard about this? They say it's worse to hold these in your RRSP since you can't 'deduct' those taxes. I personally hold DOO (WisdomTree International Dividend Top 100 Fund) in my RRSP. I'll have to double-check since it would be pointless to have a fair chunks of the revenues taken out by foreign governments.

Book to help your career (especially for tech workers)

Bizbooks has a review on a new book for IT professionals careers.

The book is called “Beyond Code: Learn to Distinguish Yourself in 9 Simple Steps!” by Rajesh Setty.

A good quote on BizBooks that I fully agree with:

"You’ll be become irrelevant if you don’t take personal branding in your own hands.In “Beyond Code” by Rajesh Setty you’ll learn ways to become invaluable to your employer. Although it was written for the IT professional in mind, it’s chock full of advice, examples, and interviews that anyone will find beneficial."

One of the readers on BizBooks adds another comment that I find very relevant:

Attitude, Good - You can train skills, but you can’t train attitude. A miserable, highly skilled person is still miserable to be around.

Indeed, how many high geeks do you know who are very good at what they but think way too highly of themselves and are often arrogant? Would I promote them if I were their boss? hmmm ...:-)

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When layoffs occur, the people who are seen as 'important' won't be those let go first. (I could be wrong here, what do you think?) I think in this era of outsourcing it's even more important to nurture your career in the IT field.

A lot of people do become complacent in their career and as programming and other IT functions become commoditized, you will need a different set of skills to thrive. I intend to read the book for my own benefit. I'll let you know what I find. The Amazon rating is 4.5 stars which is a good start :-)

No financial plan! You should be scared! (they say)

To echo some of the comments made in other blogs, here's an other example of the financial industry (planners in this case) scaring people into giving their money. As they often do, here a survey is telling us that most of us have no financial plans:

http://calgarysun.canoe.ca/NewsStand/Business/2007/02/04/3523151-sun.html

Although it's bad not to have a plan and they give some good advice, news like that look more like a covert advertisement than real public education. For example, the article above ends lke this:

"Most people fail to plan because they find the process intimidating," said Lunney, a senior vice-president and portfolio manager for the Franklin Templeton Investments subsidiary"

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On a different note, I've been posting somewhat less recently. One reason is that I've been spending a lot of time cleaning up my portfolio and registering all my past transactions in a Globe and Mail Gold (GaMG) Portfolio to get a more accurate picture of my returns and distribution of my portfolio. I like the fact that GaMG automatically tracks dividend payments. They also deduct the transaction costs from the returns.

One thing that I've learned from that is that I've traded way too much in the past! I was also surprised that my mutual choices inspired from Moneysense were very decent but they did trail the indexes ...

Globe and Mail's Rob Carrick review of stock picking newsletters

Rob Carrick reviews again this year the best stock picking newsletter in Canada. Last year he had recommended Investment Reporter which I've tested myself (they had a one year trial for 97$). It was a good suggestion since it gave me some good suggestions for my non-rrsp portfolio (e.g.: from Aliments Couche-Tard to Canadian National,etc.).

This year, Stock Pickers Digest comes in first position. It seems to be a very speculative newsletter but it came with returns of 26.1% last year and 40.9% te year before. They have a deal that comes down to 74$ a year which is much cheaper than the 300$+ for Investment Reporter.

Investment Reporter came in very good second place at 15.8% returns last year. The nice things about their recommendations is that they tend to be safer, focusing more on blue-chip stocks. So you might sleep better at night with this one than if you're using Stock Pickers Digest.

If you look at the return of the sixth newsletter, 2.1%, it shows you that you have to be really careful when using newsletters as your sole source of investment advice. The Couch Potato portfolio would have given you much better returns. Mr Carrick notes though that the US picks are really what sunk the returns in that specific case....

I might give Stock Pickers Digest a try and compare it to Investment Reporter. I'll let you know how it goes :-) In any case, I never buy blindly what these guys or anybody else recommends. I always do my own analysis and try to target value stocks like those found by using Rule #1 techniques.

18 stocks to avoid from Business Week

Business Week suggest to avoid:

• Yahoo
• Radio-Shack
• etc.