For the second month this year, the only investment decision I made was…to make no decisions. I decided to stand pat. In this post I share my thought process that led me to decide to stand pat.
April saw the markets continue to melt-up and regain their losses from 2018. In a couple of cases I was able to lock in some nice gains and pick up some shares in areas that have actually been lagging the market surge. What’s even more pleasant is that the stocks and ETF’s involved below are one’s that I’ve held in the past and I think there are some takeaways we can get from it.
New Position: Bought shares in Cal Maine Foods (Ticker: CALM)
Bought more shares in iShares Pharma (Ticker: XPH)
Sold shares in Disney (Ticker: DIS) for 39 percent gain (net Forex)
Sold shares in Southern Copper Company (Ticker: SCCO) for 18.2 percent gain (net Forex)
In the last of my 5 part series where I dive into answering a fundamental question that factors into every investment decision we make, I look at the nebulous concept of valuation from a perspective that goes beyond simply buying stocks with some low valuation multiple or ratio. I also try to bring the various concepts discussed together to provide some kind of framework that we can takeaway and carry with us as we go forward and make investment decisions.
I continue on my deep dive into figuring out what drives stock prices by looking at the one metric the rules them all and factors into every investment decisions we make. There are numerous mechanical and technical methodologies and strategies that are available to us when evaluating investment opportunities. At the end of the day all that due diligence may go for naught when we bring in this important metric that drives stock prices.
For most people investing revolves around the application of rules. Buy stocks with P/E ratios below X and have Debt/Equity ratios below 0.5. Index investing is better than active strategies, which is better than value investing. The reality mechanical strategies work until they don’t. In the third of our five part series, I dig deep further to look beyond mechanical investing strategies and examine the importance of how tendencies, principles, and to a certain extent fate, play critical roles in the setting of stock prices and how we frame our investment decisions. I also look at how we react to what market does, can also be a critical factor to setting stock prices and what investing competencies we need to develop to manage these tendencies to make more successful investment decisions.
In Part 2, I start to drill down a bit further on trying to answer a fundamental questions that every investor is asking. In this episode I apply one of the core principles of market based economics. Supply and Demand. Makes sense as a stocks trade in a…market…that contains buyers and sellers. The way buyers and sellers behave plays a critical factor into how stock prices are set.
With commodity prices falling off and the Federal Reserve signalling they will pause on future interest rate hikes, the dynamics of a falling US$ and rising commodity prices including oil could be in play. I decided to do a quick analysis of CNQ which is considered among the big players in the Canadian Energy scene to see if there may be an opportunity to jump in.
Yes it been a full 4 years since I opened up my Robo Advisor account. For those new to investing, a Robo Advisor is a new wave of wealth management companies that invest on behalf of others using an online platform and a combination of algorithms and computer coding to buy and sell specific investments and manage portfolios. Four years ago these firms were just stepping into the investing conciousness, but since then they have mushroomed and even traditional investment companies are now offering some flavor of online investment management services. It all seemed quite appealing however there was one thing that many marketing materials, blogs, and mainstream media was avoiding (and still are I might add)…do these types of services make money for investors?
Since no robo advisor company back then was interested in disclosing their performance (they still avoid it) other than citing research that their strategy is superior, I decided four years ago to try an experiment and find out for myself. I setup an account with one of the big Robo Adviser firms. My goal was to go through the process and blog about my experience and more importantly, the results. I’ve always said that we need a good five years to really get a handle on how effective these services are compared to traditional wealth management services. Well, we’re at the 80% mark of my ROBO journey, so let’s check back in and take a look at how it’s doing now and see if we can squeeze any conclusions about the service.
I always get questions from people about investing. In this episode I share a few questions and offer my takes:
Is stock picking more art than science?
How do you come up with different investment ideas?
What is the first metric you look at when you research a stock?
What are the tricks in investing in the stock market?
One of my motivations as an Investment Coach is to make people more street smart when dealing with the investing industry (banks, mutual funds, wealth management companies, brokers, robe-advisers etc). Even though more people today are investing on their own, the reality is you cannot invest in a bubble, and whether you go the Do-It-Yourself (DIY) path or work with someone, you will still have to work with the industry. You have to co-exist with them.
So loyally and faithfully we will march into our local branch (or lounges), or a financial adviser’s office, or a Starbucks and begin the dance. The thing is before you even make contact they have you sized up.
They think you’re an idiot and they are going to go out of their way to make you feel like one.
The industry has developed a rather air-tight formula for getting us to shell out our hard earned savings and the core component of their value proposition is to make us feel inadequate or give us a bad money image. In this episode I will share with you this formula and give an example of this ritual and more importantly how we can overcome these negative connotations they are projecting to us.
Throughout the year I’ve shared with you the investment decisions I’ve made. It’s important to me that as someone that teaches people how to make better investment decisions, that I model the concepts and principles I teach. Well it’s that time of the year where in this episode I walk it back and see what I did right and more importantly what I did wrong…and what if anything did I learn from the experiences of the past year that will help me become a better investor?
One of the most under performing asset classes so far this year has been German equities. As of this writing, German stocks were down over 20 percent year-to-date. Everyone complains about the weakness in the Dow Jones indexes, but the German markets have been in a serious downfall. This despite some of the most well-known and dominant global companies like Daimler Benz and Seimens. The German economy is the enginge of Europe and the opportunity to get exposure to that market at a 20 percent discount was appealing to me. I decided the best way to get the exposure was to passively own a basket of German stocks and that led me to evaluate some German equity ETF’s. In this podcast episode, I walk through my analysis of several German equity ETF’s.
Oil prices have been nose diving in the past few months and along with it oil stocks. I thought it would be a good opportunity to do some due diligence on some oil stocks to see if there were some opportunities to buy low. Instead, I decided to have a look at some ETF’s to see what if that may be a better road. In this episode I share my analysis and review of several energy ETF’s.
There was a fair bit of hand wringing going into October, a month where there have been historically some iconic stock market meltdowns. The market was starting to show some signs of fatigue. At one point the S&P 500 index crossed below its 200 day moving average which hasn’t happened in literally years. Interest rates keep tracking up. The Mad King continued to elevate the trade trash talking and investors were getting nervous and stock prices in the early part were trending downward, but nothing crazy that motivated me to look into buying. Sue enough on October 23, the market had a fit. Suddenly words like “crisis” and “turmoil” were being thrown around, when historically they weren’t even scratches. It’s times like this where having my investing playbook is critical as it gives me an anchor to check in and review my investing ideology and how should be executing. It makes me review my Wish List to see if there are any stocks I’ve liked are now more affordable. The last thing I should be doing is panicking and reacting. It’s these stress points where we need to be put all the upfront hard work and making thought-out decisions.
In this episode I walk through the various decisions I made during the month. With quite a few stocks that I owned had fallen in value enough that I thought it was worth jumping in and buying some more shares to lower my average cost down. There were also a couple of stocks/ETF’s that I had on wish list that had become a lot cheaper and thought it would be good to start building a position.
Bought more shares in Las Vegas Sands (Ticker: LVS)
Bought more shares in Activision Blizzard (Ticker: ATVI)
Bought more shares in iShares US Financials (Ticker: XLF)
Bought more shares in Nutrien (Ticket: NTR)
Bought more shares in Winpak (Ticker: WPK)
New Position: Bought shares in iShares Germany ETF (Ticker: EWG)
New Position: Bought shares in Electronic Arts (Ticker: EA)
With Emerging Market stocks taking a hit, I thought it would be a good time to explore building up a position in the sector. In this episode I evaluate several ETF's to determine which would be an appropriate one to add to my portfolio.
It’s a golden age for investors. Never at any point in history has it been this cheap to get into investing. Management fees and trading commissions have been falling over the past 20 years, thanks mostly to technology which have improved speed and efficiencies of transactions. In the last year or so, the competition over lower fees has been quite intense with ETF companies like Vanguard and Blackrock going back and forth lowering fees to almost zero. This has trickled down into traditional investment products like mutual funds which have lowered their fees, albeit less aggressively. Well the race to the bottom in fees has reached a new level.
Free. As in nothing. Nada. Rien.
It’s a great time to be an investor. Eliminating a focus on fees can allow more due diligence on the investment itself, however I’ve been wondering if these products and service offerings are really free and is free in the grand scheme of things a good thing for investors? In this episode I dive into the the illusion of free that the investment industry has been pushing on us.
Amazon has been one of the “It” stocks for the last decade. It has had an epic run. If we were to look at Amazon from a 1st level thinking perspective, the conventional thinking behind buying Amazon is that they are disrupting retail. Any space Amazon enters, be it grocery, streaming, pharmaceutical drugs, diapers is met with fear and doom by the existing players. 1st level thinking would tell us that in the future we will shop at Amazon only. I would consider Amazon to be a Fear of Missing Out or FOMO stock. Many have missed the moves up and feel compelled to jump aboard so they won’t miss out. In this episode I try to take a look at Amazon from a 2nd level thinking perspective.
I’ve owned Las Vegas Sands in the past and it has been good to me. I’ve also sold it prematurely because of some questionable financial reporting treatments that didn’t sit sell with me. With the stock down near 14 percent this year and at a 52-week low, I thought it may be worth revisiting it to see if anything with the company has changed. As from my position in MGM, many of the fundamentals with LVS are quite similar. The question is how are they performing. In this episode, I apply my 8 Questions framework and see if indeed an opportunity is at hand. This decision was also a very difficult one because there is also some politics at play here.
With summer done, I was thinking I may be due to make a few investment decisions, but it was quiet month with one selling decision which I wasn’t counting on making anytime soon along with one decision to buy more shares and one new stock I added to my portfolios. At the same time, I was faced with a decision that challenged some of my personal values and given the times we’re in, I don’t think I’m the only one that may be facing similar decisions. In this episode I walk through my most recent investment decisions from September.
Investment Decisions Made:
In Part 1, I shared some thoughts on a recent report by the Ontario Securities Commission (OSC) outlining the challenges the financial services industry is having in getting Millennials to invest. The OSC report had a great opportunity to address those investing pain points, but like so many financial literacy initiatives, the messaging is not clear, consistent, and understandable. The report identifies solutions, yet they are separate and not integrated and use a lot of industry jargon that people just won’t connect with. They emphasize processes over results. What is the outcome we want Millennials to achieve with investing?
In this episode, I’d like to share from my experience as Investment Coach and as someone who works with people to develop their investing competencies, some ideas that I found have better motivated people and not just Millenials into become more engaged with investing. They address the pain points people have with expressed about investing which include; being scared of investing, feeling overwhelmed by the process, feeling paralyzed when trying to make a decision, and not knowing how to start and take that first step. These are my takes and perspectives. They are by no means the most definitive and all encompassing.