Jon Wheeler
Jon Wheeler
Occupation
Operations supervisor
Portfolio
Includes shares in more than two-dozen dividend-paying companies.
The investor
Jon Wheeler started investing in 2009, during the bear market. He was right that "stocks wouldn't go down forever" and sold for a "tidy profit" a year or so later. But "looking back, it would have been way better to have held them longer" given their subsequent gains.
How he invests
Mr. Wheeler prefers companies with high returns on equity. Such companies "generally carry some sort of meaningful competitive advantage and have staying power." He also looks for "a long history of rewarding shareholders."
His favourite stocks include the big five Canadian banks. Being oligopolistic in nature, their returns on equity are consistently high – from 14 per cent to 22 per cent. Dividends are raised regularly and currently yield between 3.7 per cent and 4.6 per cent.
They have been among the best stocks to own since 1998, he adds. A $10,000 investment is now worth from $60,000 to $105,000, depending on the bank. With long-term interest rates now beginning to trend upward, lending margins and profitability should remain supportive.
What about the risk of escalating house prices? Mr. Wheeler sees differences in the Canadian and U.S. housing markets that suggest Canadian banks will emerge relatively unscathed. This goes beyond government-insured mortgages and tight restrictions on lending.
For example, the percentage of equity that Americans had in their homes before the bust of 2009 was 40 per cent; currently, Canada's level is 75 per cent. The U.S. crash was also preceded by an uptrend in delinquent mortgages to 2 per cent; in Canada, it is stable and under 0.5 per cent.
And while some smaller financial firms may be at risk, the big five banks are conservatively managed within a stringent regulatory framework. For example, as a cushion against shocks, Royal Bank of Canada now operates with a "Common Equity Tier 1 ratio" of 11 per cent (core equity divided by risk-weighted assets), well above the regulatory requirement of 6 per cent.
Best move
It was when he stopped listening to hot tips, and took his "investment future into his hands."
Worst move
His "worst investment move was selling Amazon in 2010 [up tenfold since then]."
Advice
He believes "the single greatest edge an investor can have is a long-term orientation." A short-term focus results in too many trades, which increases costs and judgment errors. Better to buy and hold companies with enduring competitive advantages.
Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com