Monday, April 29, 2013

Median Calculations

It is one method to calculate an "average" number. Median is the middle value of the given numbers or distribution in their ascending order. So if you have an odd series of numbers, it is the middle number. If you have an even series of numbers, it is the average of the two middle elements. See a site called easy calculation to see the method used to calculate a median number.

Median goes together with mean and mode gives us three ways to calculate averages. The mean of a series of numbers is your usual average. That is you add up all the numbers and then divide that number by the number of numbers in the series. The mode of a series of numbers is the one number most frequently repeated.

Most of the calculations I use in my spreadsheets are median calculations. This is a current preferred way of many analysts to compare current ratios to historical ratios.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, April 24, 2013

Investing Mistakes

No matter how carefully you investigate investment choices, you are going to make an investment mistake. It happens. I have certainly made my share of investing mistakes and I look forward to future mistakes.

The thing you got working for you is that you can only lose what you invested in a stock. However, an investment in the stock has no limit to what you can earn. So, if you make a mistake, learn from it and move on. If most of your investments work out you will have no problems.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, April 22, 2013

Gold Stocks

Gold stocks have crashed especially Barrick Gold Corp. I did not have a spreadsheet on this stock, but I have known about it for years. I had not realized how badly hurt gold stocks were until listen to a video of an interview of John Mauldin and Grant Williams at Mauldin Economics.

I do not have much money to invest because I have living off of my portfolio. However, this was too much to pass up. I have not got much in resources and certainly gold stocks have never been on my radar. However, pick up this stock up at \$18.32 with a 4.48% dividend yield is a good buy.

I did not buy much, just 100 shares and this should be a fun buy. At the moment I do not know how long I will keep it. As I have said, I do not have much spare money to buy stocks so that is why I only bought 100 shares. Now, I need to do a spreadsheet and decide if this is a stock I would want to keep.

The thing is we are in unsettling economic times. It is hard to know how long the current debt cycle will last. Certainly few countries, especially in the Western world seem motivated to pay down their unsustainable debt.

I picked Barrick to buy as I already know this company, but I have not particularly tracked it as I have no spreadsheet on it. Barrick has other problems than just the price of gold. However, I do believe that the market overreacted when it sent this stock so low. The market typically overreacts to bad and good news.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, April 17, 2013

Dividend Growth Companies

The reason I like dividend growth companies is that they can provide much higher dividend increases than the rate of inflation. You may start with a lower dividend, but over time you collect much more in dividends that if you go for a higher dividend and low or no dividend growth. This is the joy you get from owning dividend growth companies.

A great time to buy such companies is when the current dividend yield is relatively high historically. (And, that is why I just bought some Canadian Natural Resources (TSX-CNQ) stock. I was introduced to dividend growth stocks by an early blogger named Mike Higgs.

What I have gone for is a reasonable income that increases faster than inflation rather than a high income that is relatively stable. Every time there is a recession, dividend increases slow down, sometimes quite a bit. Some companies cut or drop dividends, some keep them the same and other will raise them. Overall, in recessions dividend increases will slow. So I went for faster than inflation over all dividend increases for normal times.

I have written about this subject before in Dividend Growth Companies item in which I compare and contrast Chesswood Group (TSX-CHW) and Stella Jones Inc. (TSX-SJ). Chesswood has a high dividend and Stella Jones is a dividend growth company.

I have also talked about the types of Dividend Stocks. I also did another article on why I liked SNC-Lavalin a Dividend Growth Stock.

I have also wrote about the Dividend Yields on Original Investments. Nothing beats Canadian Banks on good yields and good growth in dividends.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, April 15, 2013

Not Just Platitude

I put a warning at the bottom of each blog entry on stocks of "This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional."

You should take this seriously. If you want to be a good investor, you must take responsibly for all your investment decision. To make good decisions, you have to research any company or fund you invest in to ensure it is good investment for you. What might be a good investment for me, just may not suit you.

When it comes to investing you need to make your own decisions. You need to be in control of your investing. I think you also need to review what others think of different stocks and why they feel the way they do.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, April 10, 2013

Cash Flow Statements

The cash flow statement is one of the easier ones to read. It is also the statement that counts the most because cash flows are important and because it is hard to fool around with the cash flow statement. Cash Flow is not like earnings where earnings (EPS) are rather a fake number. The value of the EPS is that it allows people to compare different stocks on the same basis.

The value of the Cash Flow Statements is it is not a vulnerable to manipulation as other statements can be. (Also please note that accounting is more art than science.) When determining cash flow per share, analysts often will exclude changes in working capital in calculating Cash Flow from operations, no matter what the company does in their annual reports.

If we do not exclude working capital form the Cash Flow from operations, the cash flow we are looking at may not properly reflect how a company is doing. Note that changes in working capital are changes in current assets and current liabilities.

You can generally find financial statements at a company's site. (I always include a company's website when I review a stock.) I need information from the cash flow statements for my spreadsheets in order for me to analyze a stock. Also Google Financial and Globe and Mail Investing both analyze and give a breakdown of financial statements for many companies.

For a good explanation of the cash flow statement items look at information on Investors Friend. There is also an Investopedia article that talks about why Cash Flow is better than Net Income as a metric of a company's financial health .

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, April 8, 2013

Oil Sands

Could it be that US environmentalists are so hyper about the oil sands in Alberta because they want to deflect attention away from the fact that half the electricity generated in the US is from coal plants? These coal plants are more environmentally damaging that our oil sands.

I notice that people go on and on about the oil sands using strip mining. However, there are plenty of other strip mines in US and Canada and no one is making a fuss about them. They are doing strip mining the BC. However, BC is complaining about the oil sands and how environmentally unfriend it is. Let me tell you all strip mining is environmentally unfriendly.

No one seems to be complaining about say getting oil off the coast of Newfoundland. However, spills can happen. Just remember what occurred in the Gulf of Mexico. A spill in the Atlantic Ocean would have a huge environmental effect, but no one is saying that Newfoundland should not go after the its oil. The Atlantic Ocean is colder and a lot rougher than the Gulf of Mexico and therefore any spill would be far worse.

I do not think that there is any doubt that Americans are funding oil sands protests in Canada. Their avowed purpose is to shut down the oil sands. This has not stopped them from going after oil in US or doing strip mining in the US. Without the pipelines, Canadian oil will be shipped by train. I understand that oil spills due to derailments are far worse than oil spills from pipelines.

Perhaps I am missing something, but I do not see the oil sands as the epitome of evil, nor do I see the Albertans as evil for wanting to develop the oil sands. There seems to be a lot of hysteria about protests to the oil sands. In my view, hysteria prevents people from thinking logically or just prevents thinking totally.

As far as pollution on lands is concerned, I feel that, especially in the Western world we have been cleaning up our act. Wilderness areas are coming back. We have other animals making a comeback. I live in Toronto and there are now coyotes in the city and this is a rather recent development. People have also said that they have Wolves in TO.

There used to warnings all the time about the beaches around Toronto being too polluted to swim in. I have not heard a pollution warning for quite some time. Our Great Lakes are reviving. BC has cougars again and there are wolfs, again, in Yellow Stone park. I must admit that from what I have seen and read, things are getting better.

I am afraid I worry a lot more about what humans are doing to life in the oceans. Could we be on a path to destroying life in the oceans? This would be a true catastrophe. Fish species are still disappearing from the oceans and the ones being caught are a lot smaller than they used to be. There is an article on this by the BBC.

In Canada we have had a moratorium on cod on the Grand Banks since 1994. That is almost 20 years and they might be slowing recovering, but not enough to lift the moratorium. This is not talked about much anymore and the most recent article I can find is from 2010 by CBC.

This is just the tip of the iceberg on the oceans. After all, this article is on the oil sands. I do have hope that we humans will find our way to more renewable energy sources and away from oil and gas. It is hard to say when this will occur, but I have not doubts it will.

One good thing about all these radical environmentalists screaming in our ear is that it may push us to take better care of our earth, which we really need to do.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, April 4, 2013

Proxies

Most companies have financial years ending at the end of the year. It takes a while for the annual reports to come out and proxies to be received by shareholders. I have signed up for all that I can to be delivered electronically.

In the last while I have received a bunch of proxy notices. I have always read and voted on the proxies even when I had to mail them back to the companies, although I used online voting as soon as I could. Proxies can take up a lot of time. I had taken a speed reading course at one time and this probably helps.

I am also quite focused on what I am looking for and this certainly helps. I have read a lot of proxy notices and there is generally a certain format to them. Some information circulars that company's produce are well organized and they tell you where you can find things. Others are just awful and it is difficult to find what you are looking for.

My basic policy is to vote with management unless I have a specific reason not to. For some of our biggest companies there are always a few outside shareholders proposal. Some groups obviously have certain axes to grind. I have seldom voted for any, but I do read them all and vote on them.

One of the most common outsider shareholder proposals is to have a quota for the number of women on the board. I personally would like to see more boards with more women, but I do not believe that quotas are the way to go. I would go for a resolution whereby the company must state their policy on diversity for directors, but not on quotas.

I also do not want to vote for any resolution that tries to tie up the company and make it difficult for directors and management to do their job.

I certainly advocate that shareholders, especially if you are a long time shareholder, should read the information circulars and vote.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, April 2, 2013

Turnaround Situations

I recently wondered if investors really know what a true turn-around situation is. I thought that I would talk about this today by illustrating some ones I know about. I have only documentation on ones that I took advantage of.

TransCanada Corp

The first one to talk about is TransCanada Corp (TSX-TRP). For long term viability reasons, the company wanted to reorganize. This started in 1998 when they started to cut the dividend. Dividend cut occurred over the next two years and the dividend dropped some 35%. The dividend was at the lowest in 2001 and the dividend was completely restored and surpassed old levels by 2006.

The stock price fell some 70% between June 1998 and February 2000. It then started a long recovery and was back to old levels by the end of 2005. See the chart on this stock at Globe and Mail. I had had my eye on this stock for some time, but thought it was a little pricey. However, my March 2000 I noticed the price drop and bought stock. Buying good stock at a very low price certainly helps your long term total returns. This is a stock in a turnaround situation that I have held on to.

Teck Cominco

Teck Cominco (TSX-TCL.B) is the next company to talk about. This is a different sort of story. From a top in 2008 to the bottom in 2008, this stock fell some 92%. I bought some shares in November 2008 and sold them in May 2009. The stock price in that period increased some 240%.

This company's buying of buy Fording Canadian Coal Trust was probably badly timed in retrospect. They needed credit for this buy, but it occurred just as credit was freezing up due to economic problems in 2008. The company cut the dividend in 2009. It was not because they could not afford the dividend as they had good earnings and cash flow. The problem was trying to finance debt.

I believed that the market had over reacted and that is why I bought. The stock recovered and they restarted dividends at the end of 2010. However, dividends are not yet back to where they were in 2008. In 2008 dividends were \$1.00 per share; in 2013 they are \$0.90 per share. See the chart on this stock at Globe and Mail.

Canam Group Inc.

The Canam Group Inc. (TSX-CAM) company is into constructions, with exposure to the US market. It got into trouble in 2011. Between April 2011 and November 2011, the stock price fell some 66%. They paid two dividends in 2011 (the ones for March and June) and then stopped paying dividends.

Companies that cut or delete dividends are heavily punished and I thought that the market over-reacted to the company's problems. That is why I bought in November 2011. I did not buy much, but after making a couple of thousand dollars, I sold in April of this year. This was fun.

The stock price has recovered under this company. They have not yet restarted dividends, but I suspect that they will. The stock price increased some 105% between when I bought and sold. There is, of course, always a risk in such situations. I just thought that the market over reacted to prudent management. See the chart on this stock at Globe and Mail.

RIM

RIM or Blackberry (TSX-BB) is a different sort of story. I also know about RIM because ever since this stock has fallen by some 65% in 2008 people have been talking about it being a turn-round situation. There have been some false starts, but no turn around. This is a tech stock that lost its edge in the tech market. Will it recover? This is really hard to say. People are again talking about it recovering. See the chart on this stock at Globe and Mail.

Conclusion

Most turnaround situations involve a big drop in stock price. The can be caused by such things as re-organizations, credit problems, market share losses or recession. If it is a dividend paying stock, it will involve a drop or cut in dividends. A lot of companies with dividends have debt covenants which says under certain circumstances, a company must cut or eliminate the dividend.

Each turnaround situation has to be judged on its own merits. Questions to ask are possibly "Has the market over reacted? Is management being prudent? Can the company recover from its problems?" In any event, these situations are of high risk. If you guess right, you can get a nice reward.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.