Now that shares of Nvidia Corp. (NVDA) are well off their highs and the stock has split 10-for-one, do you think this is a good time to get in?
I wouldn’t make a straight-up bet on Nvidia NVDA-Q at this point. The artificial intelligence story that propelled the chip maker’s stock to a gain of more than 200 per cent over the past year is now familiar to everyone, from billion-dollar hedge funds to retail investors with a few hundred bucks to spend. When a narrative takes hold of the public imagination, it’s often a sign that the rally may be getting long in the tooth.
That’s not to say Nvidia is a bad company. As the largest producer of AI chips, it likely has many years of strong revenue and earnings growth ahead of it. But that future growth may already be priced into the stock, which trades at about 47 times estimated earnings for the year ending in January, 2025.
Rather than invest in individual technology stocks, which can be extremely volatile – as evidenced by Nvidia’s recent pullback of nearly 13 per cent – it may be more prudent to get your tech exposure through a diversified index exchange-traded fund. That way, if a disappointing earnings report or some other piece of bad news sends the shares tumbling, your portfolio won’t take a direct hit. Granted, you won’t get the full benefit if Nvidia’s stock soars in price, but controlling your risk is the name of the game here.
The BMO S&P 500 Index ETF (ZSP), iShares Core S&P 500 Index ETF (XUS) and Vanguard S&P 500 Index ETF (VFV) are three worthy examples. Each ETF charges a management expense ratio of just 0.09 per cent and has a weighting of roughly 30 per cent in technology stocks, with the top three constituents – Microsoft Corp. (MSFT), Apple Inc. (AAPL) and Nvidia – collectively accounting for about 20 per cent of each ETF’s total assets. Plus, these ETFs give you exposure to financials, health care, communications, industrials, energy and other sectors that increase your diversification.
I have some cash that I want to park in a high-interest savings account with my discount broker, BMO InvestorLine. I see that there are three different Canadian dollar HISA options, with the fund codes BMT104, BMT109 and BMT114, but I don’t know what the difference is. Can you explain?
All three HISAs pay the same interest rate, which is currently 4.5 per cent. The only difference is that BMT104 is issued by Bank of Montreal, BMT109 by Bank of Montreal Mortgage Corp. and BMT114 by BMO Trust Co. The advantage of having three choices is that, if you have more than $100,000 to deposit, you can spread your money across two or more HISAs so that each account remains under the $100,000 limit for coverage by the Canada Deposit Insurance Corp. That way all of your money will be insured in the extremely unlikely event that Bank of Montreal becomes insolvent.
While looking at insider trading data on The Globe and Mail website for Baytex Energy Corp. (BTE), I noticed that some individuals bought the shares at a lower price than was listed on the stock exchange for that day. For example, on May 14 Baytex chair Mark Bly acquired 15,000 shares at $3.42 each and chief executive officer Eric Greager purchased 370 shares at virtually the same price. Yet the stock price ranged from a low of $4.62 to a high of $4.75 on the Toronto Stock Exchange that day. I am curious how that is possible. Did they exercise some rights?
I don’t blame you for being confused. I was, too, until I went to sedi.ca (the System for Electronic Disclosure by Insiders), which is Canada’s official source for insider trading transactions.
When I found the two transactions you mentioned – it took some trial and error as sedi.ca’s interface is not a model of user-friendliness – I noticed that both purchases were priced in U.S. dollars. This was not specified in The Globe’s insider trading data.
Adjusted for the Canada-U.S. exchange rate on May 14, the price of US$3.42 that Mr. Bly and Mr. Greager paid for their Baytex shares worked out to about $4.65 in Canadian currency, which is within the stock’s trading range on the TSX that day. So this was simply a case of the transaction not being reported in the proper currency on The Globe’s website.
I recently read a story in The Globe and Mail about “promising small-cap stocks.” One of the stocks mentioned was Chorus Aviation Inc. (CHR), whose dividend yield was listed at 1.8 per cent. However, when I went to my discount broker’s website, no dividend was listed for Chorus. Can you help?
I always advise readers to exercise caution with financial data on third-party websites, as the numbers aren’t always reliable. It’s better to go directly to the source.
On Chorus Aviation’s website, click on the “Investors” tab, then scroll down to “Dividend History.” You’ll see a note that Chorus suspended its monthly dividend of four cents a share following its March, 2020, payment, citing “uncertainty related to the duration and impact of the COVID-19 pandemic.” The company has not paid a dividend since, so your discount broker is correct.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
John Heinzl