vacation

If the dearth of posts hasn't tipped you off, I'm on vacation. No posts for you!

Expect more investing-related hilarity when I get back, in the last week of August

Too little, too late

ING Direct has been taken a beating of late. And whether it's been in these parts, elsewhere in the blogosphere or even in the mainstream media, they appear to be slowly responding.

According to an e-mail ING sent me recently, they're upping the interest rate on their high-interest savings account to 3.75% from the 3.5% its been stuck at for quite a while, staring September 1st.

My take? A resounding "meh."

This is quite simply too little, too late. They've narrowed the gap between the other players like Achieva, Altamira and PC Financial which have better posted rates and are just as easy to deal with, and ING have given themselves a bit more breathing rom on the big five banks who were starting to gain on them.

But they're still laggards. That Norse pitchman likes to paint the company as some sort of saving innovator, but I'll be keeping my money at PC Financial until ING wakes up and quits with the smoke and mirrors.

Want my money? Then gimme the best rate.

It really is that simple

The little REIT that could

Disclosure: I own Artis REIT

Turbulent markets are as good a time as any to look back on the choices you made in your past, and see how they've held up.

Around this time last year, eager to capitalize on Alberta's red-hot economy and eager to get my first exposure to the REIT space, I took a position in Westfield REIT (now called Artis REIT). The REIT focuses on office, commerical and industrial space in Western Canada, primarily in Alberta.

In the past year, it's been a great little performer for me, up nearly 23% from when I bought it. I know -- one-year returns aren't what long-term investing is all about, but still, considering I've been plowing the distributions back into the REIT as part of their DRIP, it feels good to look back on a call that appears to have panned out for me.

In February, I wrote this post talking about how I was planning on moving over to the REIT ETF (XRE on the TSX) for the long term, just to be a little more diversified. I noted that the ETF had actually outperformed Artis to that point.

Things change. I haven't been payign much attention to the REIT space of late. I sort of assumed it was holding up , if nto steadily increasing, just like Artis has been. But it hasn't. Look at these two stock charts. On the left is the 1-year for XRE. On the right, Artis.

The more-diversified ETF has been on a slide since the spring, while Artis seems to be holding steady.

What am I thinking? Well, I still like Artis in the short term (the "Alberta + real estate = good" story continues) so I have no plans to sell, but XRE seems to be taking an unfair beating. If I wanted to move into the ETF long-term (as I plan to) this correction seems to have given me an entry point. But what with increasing my stake in Biovail last week, I'm a little short of cash at the moment.

We'll see how this plays out. As usual, do your own homework. But I'm curious for what any of the other REIT investors out there are thinking right now.

Trading notes

Bought some stocks this week for the first time in a while. To me they're both value plays, but time will tell, I suppose, if they'll be good turnarounds or if I've fallen into a couple of value traps.

Friday's sell-off gave me an excellent opportunity to take a stake in a long-term holding I've been waiting for an entry point for a while now: Brookfield Asset Management. (BAM.A on the TSX) I love -- love-- the management of this company, and the fact that their strategy is to make money from managing other assets (hence the name.) I also like the new focus on infrastructure assets, which I think are going to be great cash generators in the coming years. The stock took a 7% haircut on Friday due to fears about subprime exposure. So I jumped in. But the stock is already back up above where it was before the market got rattled. I'm predicting this will be a long-term holding.

The other move was to double up my stake in Biovail. I outlined my reasons why I was tempted in this post last week. In short, everyone's scared by the pipeline of drugs drying up, but I think that's only temporary. The FDA mess will get sorted, and the new drug plans unveiled this morning were an unexpected surprise. In the mean time, I'm more than happy to sit on that fat yield of more than 8%. The sell-off in the stock this morning after underwhelming financial results gave me the opportunity to buy in. I don't think Biovail's going to be a base of my portfolio for years to come ( I know all too well how volatile it tends to be) but I dunno -- the market has shaved off more than a quarter of the market cap in about a month, and that seems like an over-reaction to me. With all that cash on hand, that dividend seems safe for a long while.

That's it for now.

As always, do your own homework before making any investment decisions.

That's it for now.

What drug are Biovail investors on?

(Disclosure: I own Biovail shares)

You know what company completely blows my mind? Biovail.

We've had a long, tortured relationship, Biovail and I. I took my initial position in the company in 2003. At the time, it was a nebulous growth play for me, and my thinking was along the lines of "boomers are getting old and old people need a lot of drugs, so drug companies are a good long-term investment. I should buy Canada's largest drug company."

I bought just after Biovail's stock had tanked from about $70 down to about $30 after some fishy accounting and a famous truck crash. As it turns out, I was trying to catch a falling knife and the stock still had a ways to fall. After bottoming out around $16, it's hovered in the high 20s for the last little while before this recent stock panic has it back at $20.

I've come close to selling numerous times, but Biovail has morphed itself from a growth play into a legitimate income-generating security that value investors tend to love. With an annual dividend of $1.74, Biovail is currently yielding close to 9%. That's insane to me. We're talking income-trust territory here, people.

Biovail's been in freefall since the middle of July when the FDA rejected one of their applications, but to me the fundamentals of the stock don't justify the beating it's taking. I can only assume it's due to fears that the company will now slash their dividend, but as the company suggested in a press release recently, I don't see that happening: their outlooks weren't counting on revenue from that drug any time soon, and the company is sitting on more than $450-million in cash and no long-term debt as it stands now. What's the worry?

My back of the napkin calculations based on the company's most recent quarter show that the company is sitting on about $5.30 in cash or cash equivalents for every share. By way of comparison, every share pays out $1.74 per year in dividends.

Am I missing something here? To me, this is a company that's yielding close to 9% at the moment, sitting on enough cash to cover its dividend for the next two years and then some. And we haven't even considered any additional revenue to be made from the company's underlying drug business. Even if the stock flatlines, that's a decent return. Never mind any capital gains to be had.

What can I say -- I'm tempted. I'm in the process of moving some money aronud at the moment, and when it's all ready in my investment account, I'm seriously considering upping my Biovail stake. I'll have to do some more research, but haven't seen anything thus far that woudldjustify the hammering the stock has taken for the last two weeks. If there's a contrarian view, I'd love to hear it in the comments.

As always, do your own research before buying anything.

The bear [market] necessities

Need a little context for the stock market carnage we've been living through for the last little while?

The money I set aside every month from every paycheque hasn't even come close to offsetting the losses I've undergone in my portfolio. It's gotten so bad that my net worth actually dropped this month for the first time since I started keeping track of it. My non-registered account has taken such a beating that it's on the cusp of going below the threshold value where I don't have to pay any administrative fees. I might have to put some cash into it just to keep it over...

When Finance Minister Jim Flaherty dropped his nuclear bomb on trusts back in October, conventional wisdom had it that income-hungry investors would flock to dividend equities, but would have a hard time getting the yields they were used to. That appears to be changing as there are now plenty of TSX companies yielding more than 5% after the recent sell-off (RUS and ROC to name but two off the top of my head.) Most astonishingly of all? Biovail is now yielding more than 8%. (Full disclosure -- I own Biovail)

So what does it all mean? From where I sit it's looking like bad companies are getting knocked back to where they belong, and good companies are on sale. The one sector I currently don't have any exposure to and am champing at the bit to get into is emerging markets, but I'm still not prepared to jump in at these prices. Definitely on the watch list, though. Two stocks I am contemplating getting into are increasing my stake in BMO, and taking a position in Brookfield. I really like what they're doing in infrastructure and the company's management overall.

What about you? What's in your shopping cart at the moment? You're not being a bad little investor and heading for the hills, are you? Are you afraid of a little old bear?

Strange but true -- bankers can help you

Had an interesting conversation with a finance-minded friend of mine this past weekend.

Like most Canadians, I have a natural distaste for Canadian banks. Don't get me wrong -- as an owner, I love them for the profit-making machines they are. But as a consumer and citizen, it doesn't take very many TV ads trying to trick yuppies into buying a house they can't afford, or conning Boomers by showing how happy the grandkids would be if they'd only take the plunge and finally get that palatial Muskoka cottage to bring my blood to a slow simmer.

Combine my natural aversion to them with the fact that online banking is so prevalent these days, and the result is what it is -- I don't think I've actually stepped up to a teller at a bank branch in a couple of years.

That might be costing me money, my friend informed me over a pint last weekend. "Go down and meet with a banker," he suggested, because they can actually do some good things for you. He said his decision to meet with a banker a few years ago was one of the best decisions he's ever made. Once he opened up about all his debts, all his assets, and discussed what his financial goals were -- everything from home ownership to estate planning, the banker formulated some semblance of a long-term plan, and actually helped it along somewhat by cutting out expenses and maximizing returns in places along the way.

He's now in the market for a house, and he says he's getting mortgage offers well below the posted rates and has fees waived for all sorts of services.

The idea, I think, is that if you grant someone access to every level of yoru financial life, they can occasionally surprise you by coming up with plans and options to make it all happen.

Given how bankers make their money (hint: rhymes with bees) I'm somewhat skeptical of his claims, but I must admit I'm intrigued. I'm curious -- for all we hear that bankers are just in it for the money, does anybody out there have any truly good stories to tell about how bankers have really helped them?

Pay yourself first -- no, really

Buy low, sell high. Diversify your assets. Invest globally.

Of all the investing maxims, the one that's always made a lot of sense to me was "pay yourself first" and this month has been an excellent example of why it works.

What with moving, paying for a vacation and the prevalence of those all-too-appealing pints on a patio with friends this time of year, my expenses have been out of whack of late.

In general, I suppose that's OK to do from time to time. I mean, what's the point of having a rainy-day fund, if you won't open it up when it starts to drizzle? But it's not a habit you want to get into.

As it stands, about a quarter of my paycheque gets automatically diverted into my emergency savings fund on payday. It does what its supposed to do in that its automatic -- I literally forget I'm doing it. I was reminded of why that's important today when I was wondering how exactly I was going to manage to pay all my bills AND put some aside this month. I was trying to find the money to put into savings when it occurred to me that it's already been done for me.

Granted, I still don't have very much breathing space in the ol' budget this month. But when you put money aside for yourself before you even consider how to divvy up the rest, it's amazing how fast those contributions can add up.

A little knowledge is a dangerous thing

It happens to all of us, I suspect.

Anyone who demonstrates even a passing interest in investing and finance is no doubt inundated by queries and requests from those around them who have no such inclination but are nonetheless looking for easy answers to difficult questions.

If it's not "should I lock in my mortgage now, or are rates going to be lower later?" it's "tell me what stock is going to go up so I can buy it" (my personal favourite...)

The people close to me have no idea I have an investing blog -- they just know I take a weird amount of interest in the business section, and have an annoying habit of yelling at them when they use a white-label ATM to take $20 out on a Saturday night. But I definitely get my fair share of questions like that.

I really want to help out my friends and family in any way I can, but the thing is, I really can't win in these situations. I'd never tell anyone to buy any given stock -- the most I'd ever do is tell them what stocks I've recently bought, and explain my reasons for doing so. But that doesn't stop them from asking. Fortunately for me, I ususally can't even get past "Well, what stock you should buy and how much you should buy of it depends on a lot of things, including your risk tolerance, your investment timeline, and blah blah blah..." before they regret ever asking the question.

I'd like nothing more than to give them the answer that will solve their problems, but I don't even have those answers for myself, so I find it really hard to give them to others. I mean, I've bought stocks that did what I thought they'd do and went up. But I've also bought some losers. I'd love to tell my sister exactly what to do when she calls to say "I'm meeting with my banker tomorrow and I need to know if I should lock in my mortgage or stick with the variable rate" but that really is a no-win proposition for me. Best case scenario, I gain nothing, while the downside is my advice costs her tens of thousands of dollars.

I'm kind of torn on the issue. I hate being put on the spot, but at the same time, I'm glad they ask and are thinking about these issues, because one of the biggest challenges my generation faces is its complete apathy toward things like service charges and interest rates because they think they don't really affect their lives.

I'm loath to tell them what to do, but I also don't want to discourage them from thinking and finding the answer for themselves. I just haven't quite figured out the right answer to give that conveys that sentiment.

I suppose it's no different from a lot of professions -- I'm sure lawyers and doctors get hit up for free advice all the time. But it seems to me that when these questions come up, you really are damned if you do, damned if you don't.

Tech support

Forgive the non sequitur, but technical help from any HTML idiot savants I happen to have as readers out there is greatly appreciated on this one.

According to Statcounter my site's hits have fallen off a cliff this week (0 registered on Tuesday, and 1 on Wednesday, and 0 on Thursday) but I know that's not the case because I've had posts and even comments on those days.

In short, I think the same number of people are coming here daily as they always have (usually in a range of between 20-50 unique hits per weekday) but my statcounter isn't registering them for some reason -- thus defeating the purpose of having a statcounter.

I'm on the new blogger template, as I have been for awhile, but something definitely appears to have gone awry this week. Any theories? Do I need to reinstall counter code or re-ping something?

Any bloggers who blog on blogger (how meta!) out there, I'd appreciate some theories.