Looking for someone to blame for the not-so-stellar performance of your investment portfolio? Try checking the mirror.
Decisions about money aren’t always rational, even when we think we’re acting logically. Common tendencies that make us our own worst enemies when investing include: selling winning investments too soon or holding onto losers for too long, loading up on too-similar assets or failing to assess the future implications of today’s decisions.
Researchers have found dozens of unconscious biases that can drive people to make money decisions they later regret. These behavioural economics concepts include things like “anchoring” – when a specific and perhaps arbitrary number you have in mind sways your decision-making, such as selling Apple just because the company’s stock hit a round number, like $200 a share. Or, the “endowment effect” can cause you to overvalue something simply because you own it, leading you to cling to a stock that’s tanking.
To read the common human errors in investing, with strategies to overcome them, click on this link.
-- Anna-Louise Jackson, The Associated Press
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Stocks to ponder
Bank of Nova Scotia (BNS-T). You might be tempted to invest in Bank of Nova Scotia because of its big dividend yield, low valuation or large emerging-markets footprint. But here’s a better reason: The stock is a dud. The share price has slumped 13.5 per cent so far in 2018, making it the worst-performing stock among Canada’s five biggest banks. It has underperformed its peers by 7.2 percentage points (not including dividends). And the stock has trailed the year’s best performer, Toronto-Dominion Bank, by 11.3 percentage points. So why warm to a cold bank? The answer lies in a simple stock-picking strategy: Since lagging banks have an impressive track record of catching up with their big-bank peers relatively quickly, investors can score market-beating gains by scooping them up. David Berman reports (for subscribers).
Summit Industrial Income Real Estate Investment Trust (SMU-UN-T). This security appears on the positive breakouts list (stocks with positive price momentum) with its unit price rising 29 per cent year-to-date, in addition to a 15 per cent gain last year. In addition to price appreciation, it provides investors with an attractive yield of 5.4 per cent and paid its unitholders a special distribution earlier this year. This month, six analysts revised their target prices – all higher. Brampton, Ont.-based Summit holds a portfolio of 92 properties across the country.
The Rundown
This year is shaping up to be one of the worst ever, by this measure
Absent an epic December rebound, 2018 will go down as the year in which nearly everything declined. A synchronized global slump has dragged down stocks, bonds, gold and crude oil, inflicting year-to-date losses on an unprecedented proportion of assets around the world. Of the dozens of asset classes across various kinds of securities and commodities in developed and emerging markets, 90 per cent of them are down on the year in U.S.-dollar terms, according to Deutsche Bank. In more than a century of market data, never has a calendar year seen so many assets post negative returns. Tim Shufelt reports (for subscribers).
It’s a great time to buy REITs. Here are 3 solid options that yield more than 6%
Real estate investment trusts deserve a place in every well-balanced portfolio. REITs offer above-average yields, provide the potential for capital growth and – unlike a direct investment in a rental property – they don’t require you to get your hands dirty. All you do is put up your capital and the REIT’s management takes care of the rest – collecting rent, leasing vacant space, doing repairs and acquiring new properties. Now is a good time to shop for REITs because, with the recent rise in interest rates, many REIT unit prices are well off their highs. That means their yields, which move in the opposite direction to the unit price, have risen. So you get more cash flow for every dollar you invest. John Heinzl takes a look at three REITs to invest in. (for subscribers).
Why Alberta’s latest oil-price plunge is unprecedented
For months, much of the focus on Alberta’s oil-price woes has centred on Western Canadian Select. That’s understandable because heavy oil accounts for about half of Canada’s crude production, and WCS is the heavy-oil benchmark. Earlier this month, it plunged to a record low of less than US$14 a barrel, and currently sits around US$19. But what about the other half of production? The situation is likewise grim. Two lighter oil benchmarks, used in pricing about 40 per cent of Canada’s crude production, have dropped precipitously over the past three months to less than US$30 a barrel. Those benchmarks – Edmonton Mixed Sweet and Synthetic Crude – now sell at steep discounts to U.S. crude, a sign that no corner of Alberta’s oil industry is untouched by pricing challenges. Matt Lundy reports.
TSX rebound depends on a Canadian heavy crude recovery: portfolio managers
Investors see value in Toronto’s commodity-linked stock market and expect it to rebound in 2019 as the global economy continues to grow and on hopes for the price of Canadian heavy crude to recover, a Reuters poll shows. The median forecast of 28 portfolio managers and strategists polled was for a more than 9-per-cent increase in the S&P/TSX composite index from its Monday close to 16,425 by the end of 2019. For subscribers.
Poll: Wall Street grows cautious but still optimistic
Fears of a prolonged U.S.-China trade war and a potentially overzealous Federal Reserve have left Wall Street strategists less optimistic about stock market gains next year, but they still expect a decent increase, a Reuters poll found. The benchmark S&P 500 will finish 2019 at 2,975, up around 11 per cent from Tuesday’s close of 2,682.17, based on the median forecast of 46 strategists polled by Reuters in the last two weeks. It will end 2018 at 2,800, which would be a near 5-per-cent gain over last year, according to the poll median. But the 2019 forecast marks a drop from three months ago, when strategists polled by Reuters predicted the index would reach 3,100 by the end of 2019. (For subscribers).
Others (for subscribers)
Microsoft is worth as much as Apple. How did that happen?
After a difficult year, what’s ahead for emerging markets?
Microsoft’s stock market value pulls ahead of Apple’s
Thursday’s analyst upgrades and downgrades
Thursday’s Insider Report: Three insiders each trade millions of dollars in this stock
Wednesday’s analyst upgrades and downgrades
Wednesday’s Insider Report: Chairman invest nearly $500,000 in this stock
Oil investors still on edge, waiting on OPEC’s word
Cryptocurrencies to survive sell-off, says El-Erian
There’s a growing risk for world economy, markets if U.S. yields hold above 3%
Eighteen financial stocks that offer value, safety and stability
Ask Globe Investor
Question: What are the tax implications of Loblaw Cos. Ltd.’s spin-out of Choice Properties Real Estate Investment Trust?
Answer: As I discussed in a recent column, Loblaw minority shareholders received 0.135 of a George Weston Ltd. share in exchange for giving up their interest in Choice Properties REIT.
From a tax perspective, there are a couple of things you need to know.
First, the George Weston shares were received on a tax-free basis.
Second, Loblaw shareholders will need to calculate a new adjusted cost base (ACB) for their Loblaw shares. They will also need to determine an ACB for their new George Weston shares.
The math is fairly straightforward. In a press release, the company said the new ACB for Loblaw shares should be equivalent to 80.1 per cent of the investor’s old Loblaw ACB, with the remaining 19.9 per cent allocated to the new George Weston shares.
For example, say an investor bought 200 Loblaw shares at $50 each several years ago, for a total ACB of $10,000. Following the Choice spin-out, the 200 Loblaw shares would have a new ACB of $8,010 (80.1 per cent of $10,000) or $40.05 a Loblaw share.
The remaining $1,990 (19.9 per cent of $10,000) of the original ACB would be allocated to the 27 George Weston shares (0.135 times 200) received in the transaction. That works out to an ACB of $73.70 for each George Weston share.
Note that the investor’s total cost base of $10,000 hasn’t changed – it’s just been divided between the existing Loblaw shares and the new George Weston shares. When an investor ultimately sells all or part of her Loblaw or George Weston shares, she would use the new ACBs per share to determine her capital gain or loss.
Just to be clear: The ACBs per share calculated here apply only to this example. Investors must use the above formula to calculate the ACBs for their own situation.
It’s possible that your broker may have already done the calculations for you. If you’ve noticed that the “book value” or “cost basis” of your Loblaw shares has changed on your brokerage statement, that’s likely the reason. Still, it doesn’t hurt to check if your broker’s ACB is correct.
--John Heinzl
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What’s up in the days ahead
Rob Carrick looks at how to do index investing wrong.
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Compiled by Gillian Livingston