Good morning. The National Basketball Association this week announced that 49 “star” players will not be allowed to miss nationally televised and in-season tournament games or be rested for extended stretches unless legitimately injured. “This is ultimately about the fans,” says NBA commissioner Adam Silver. “And that we’ve taken this (load management) too far.” It sounds good in principle: you want to see the stars if you pay $200 to see a game. But these players also play the most and are under the most pressure. A rest, they say, is as good as a change, especially as the playoffs and ultimate payoff approach.
The same kind of thinking applies to investing. If you’re constantly buying and selling, you’re missing opportunities to reflect on whether you’re doing the right thing for the long-term prospects of your portfolio. That’s just one of the many things I’ve learned from having Investment Industry Hall of Fame member Tom Bradley on board for the past six years.
The chair and co-founder of Steadyhand Investment Funds has written a biweekly column for the Financial Post during that time, contributing a steady stream of thoughts about why investors behave the way they do, market analysis and advice for almost a decade — unpaid, I might add — in the interests of making all of us better money managers. Now, 58.2 per cent of you may trust artificial intelligence to run your portfolio, according to a summer survey by HelloSafe, but I’d rather listen to people such as Bradley, Peter Hodson, Martin Pelletier and David Rosenberg, all of whom have contributed regular columns to these pages for years, rather than some bot that has tried to collate their thoughts and others into something cohesive.
Of course, you could also just rely on your advisers, but nobody knows everything. “Investors believe their advisers know more than they do,” Bradley says. “That’s a mistake, and it’s important, because it creates unrealistic expectations for an endeavour where realistic expectations are a must.”
|
Admitting you don’t know something is better than blindly following market forecasts and stock price predictions. Remember when Nortel Networks Corp. was worth one-third of the S&P/TSX composite index? The networking company doesn’t exist now. Research In Motion Ltd. in 2007 became Canada’s most valuable company, according to investors. Today, it’s known as BlackBerry Ltd, and is putting parts of its business up for sale. It’s worth a fraction of its former value. Could that same kind of rise and fall afflict a company such as Nvidia Corp.? Perhaps, but it’s worth thinking about before piling a bunch of money into it.
Investors tend to overreact to bulls and bears, often at the exact wrong time. We pull money out at the bottom of the market and put money in at the top. “You’ll remember how investors jumped on the tech bandwagon. Most got on it late and rode it down, but it wasn’t just chasing past glory and being undiversified that caused the damage,” Bradley told an audience of advisers at a Portfolio Management Association of Canada Conference in June. “Just as big an issue was the hangover of the tech wreck. People were disillusioned and, as a result, were underinvested for years. They went up with substantially less in stocks than they went down with. As you know, that’s a bad formula.”
Remember, someone else is profiting off your bad decisions. There’s always someone buying when you’re selling. Same dime, two sides, so it’s worth figuring out why others see something you don’t. That doesn’t mean they’re right and you’re wrong. Everyone who bought Nortel on its way down lost their shirt, but that’s because they didn’t see what you saw when you sold out. And when everyone else is selling, there’s an opportunity to increase the average quality of your holdings, a concept Bradley calls high grading.
But one key thing we should always keep in mind is that the “stock market will forever be unpredictable, erratic and prone to exaggeration. That’s what it does,” says Bradley. For example, the Ark Innovation ETF, which owns technology stocks, went from US$44 in March 2020 to almost US$150 in 2021 and then to less than US$40 in June 2022. Oddly, despite this year’s rise of the Magnificent 7 megacaps — all in technology — the fund has more or less levelled out around US$40 so the only thing investors gained was a whole lot of headaches. That’s why sitting out a game or two is sometimes a good thing. I think Bradley would agree.
|
Andy Holloway, editor of the FPI and Financial Post Magazine, and senior features editor of the Financial Post. If you have any quips, queries or comments, get in touch at [email protected].
|
Why now’s the time for investors to buy Canada
|
The S&P/TSX composite index has largely been rangebound this year, notching only a five per cent gain compared to the S&P 500’s 17 per cent. But that gap is only one reason why economist David Rosenberg and strategist Marius Jongstra see the Canadian market as the one to pay more attention to going forward.
WHOA, CANADA
|
Warren Buffett’s intrinsic value mantra might lead you to boring companies but predictable cash flows
|
Investing is focused on laying out money now to get more money later, which means you need to have confidence in how much cash you will get, and when you will get it. Portfolio manager Martin Pelletier says that’s one reason why he likes boring companies that have dividends of five or six per cent.
A BIRD IN THE HAND
|
Investors need to remember that market see-saws always have two ends
|
What goes up must come down. This is obviously the case with see-saws, but investors forget it happens with markets, too. Right now, everyone is focused on the Magnificent 7 tech stocks, but well-known investor Richard Bernstein says there are clearly more than seven growth stories in the entire global stock market.
RIDE THE SEE-SAW
|
Good news for resource shareholders: Half of the TSX30 is now made up of oil and gas companies as well as miners as attention turns to the energy transition. In the No. 1 spot is Calgary-based Paramount Resources Ltd., whose share price increased by 1,913 per cent over a three-year period.
Good news for Sigma Lithium Corp. shareholders: The junior miner’s stock on Wednesday rose as much as 18.8 per cent after it revealed it has “attracted interest from potential strategic partners, including global industry leaders in the energy, auto, batteries and lithium-refining industries.”
|
Good news for oil investors: Demand for West Texas Intermediate will eclipse supply by 1.2 million barrels a day on average during the second half of the year, according to an International Energy Agency report on Wednesday, a day after WTI rose 0.6 per cent to close above US$90.
Good news if you want to buy Apple Inc. shares: Over the past five years, September has been the worst month of the year for the iPhone maker, with an average decline of 4.5 per cent even though it’s when its new products are released. But that often provides a good opportunity to buy the dip since Apple’s average gain in October is 3.8 per cent.
Good news for Dollarama Inc. shareholders: The discount chain’s stock rose 5.9 per cent after second-quarter sales climbed 20 per cent from a year earlier as the number of transactions rose 12.9 per cent and the average transaction size increased 2.3 per cent. The company raised its expectations for comparable store sales growth to between 10 and 11 per cent.
|
Who is in charge if both the testator and the executor of a will are deceased?
|
One reason your will needs to be regularly updated is that your life changes, as does the life of the person who agreed to be your estate’s executor. Lawyer Ed Olkovich walks us through what happens if the named executor dies or is otherwise unable to perform their duties and how the courts decide what to do next.
GET THE ANSWER
|
Don’t leave free cash on the table: Tax tips for students and parents
|
Hey, post-secondary students and their parents: it pays to know a few things now to help maximize the benefits and reduce the taxes payable come next April … and beyond, says tax expert Jamie Golombek. The first and most important thing is to file a tax return since there are several benefits only available to those who do.
PAY ATTENTION, CLASS
|
This retired woman needs to figure out what to do with potential $50 million in savings
|
There’s a growing shift away from the traditional nuclear family and that presents different problems for single people in retirement. We asked financial planner Ed Rempel and portfolio manager Graeme Egan to help a 50-year-old woman who has a pretty big nest egg already built up, but is unsure what to do next.
FAMILY FINANCE
Worried about having enough for retirement? Need to adjust your portfolio? Wondering how to make ends meet? Drop us a line at [email protected] with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a story about it (we’ll keep your name out of it, of course).
|
How to keep a wedding’s costs in check without experiencing a hitch
|
Getting married can be an expensive proposition if you get carried away and that could mean starting off your life together facing a mountain of debt. Fortunately, debt counsellor Sandra Fry has some tips so you don’t turn blue after your big day.
SOMETHING BORROWED
|
|
|
