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The Financial Times  published an interesting report noting that regions of the United States with higher immigrant populations enjoyed stronger economic growth. For someone like me, who supports immigration within limits determined by experts like Carleton University economics professor Frances Woolley, this trend is welcome and directly applicable to Canada.

The positive correlation between immigration and growth, however, does not on its own mean that more immigration magically translates into economic acceleration  – more questions need to be asked. The key determination follows the proverbial 'which came first, the chicken or the egg' dilemma. Did immigration cause the economic boost? Or were immigrants attracted by the stronger regional growth that already existed for other reasons?

I don't know the answer to this, nor would it affect my pro-immigration stance either way. But it is important. A government policymaker who gets it wrong, might find that success in attracting new foreign residents just ends up with more people financially struggling while waiting around for economic activity to pick up. (Although, I doubt this. Data shows that immigrants are far more likely to start new businesses, and provide economic benefits.)

These thoughts are less about the specific issue of immigration policy than the importance of critical thinking when examining the economy or markets. Investors emphasizing socially responsible management teams, for instance, are right to be thrilled about research showing stronger performance for companies with more diverse boards of directors.

But, there is a 'chicken or egg' question here also. When did the board become diverse? Ideally, diversity was apparent throughout the company's history, making different perspectives part of the corporate foundation. It's also possible though that the board was distinctly pale and testosterone-laden during the fast-growth period when it earned the bulk of its market share. In this case, the move to diversity is laudable, but the commitment and benefits to investors may be lacking.

Experience has made me suspicious of all narratives where finance is concerned – they are sanitized of inconvenient facts by their very nature. 'This stock is a great story' is among the most dangerous things your broker can say to you. Narratives can be particularly destructive when they conform to our prior beliefs – we tend to swallow them whole.

Keep asking questions.

--Scott Barlow

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Stocks to ponder

Dream Global Real Estate Investment Trust.
We last highlighted this trust in April, 2016. Since then, the unit price has appreciated 23 per cent, in addition to offering investors a high yield. The REIT has an attractive positioning in the strengthening German economy. In addition, the REIT offers investors stable distributions, currently yielding 7.7 per cent, writes Jennifer Dowty.

Knight Therapeutics Inc. This stock is in a holding pattern as investors await news of acquisitions or strategic partnerships, writes Jennifer Dowty. Right now, it has traded down to the lower end of its trading band and is three cents away from appearing on the negative breakouts list. However, the downside risk may be contained given that the company has a significant amount of cash on its balance sheet. Patient investors may be rewarded.

Hydro One Ltd. Partnering up with governments can be risky. You never know what politicians are going to do, writes Gordon Pape. One example this month was when the Ontario government sold off another chunk of Hydro One for $2.8-billion. But the underwriting syndicate had a hard time selling all the shares, causing the stock price to fall. Here's his advice about the stock.

Innergex Renewable Energy Inc. This stock has been consolidating, or trading relatively sideways, digesting its large price move in 2016, writes Jennifer Dowty. Positive price momentum may resume in the second half of the year as its earnings growth accelerates. In addition, management is committed to growing its dividend with the stock offering investors an attractive and secure dividend, currently yielding 4.5 per cent.


The Rundown

The case for not biting on Home Capital's 3.1% GIC

Life is stressful enough without worrying whether your investments are safe, writes Rob Carrick. So if you're a conservative GIC investor, take a pass on the excellent interest rates that Home Capital is using to attract money through its Home Trust, Home Bank and Oaken Financial operations. At midweek, Oaken offered 2.6 per cent on a one-year guaranteed investment certificate and 3.1 per cent on a five-year term. A five-year bond issued by the federal government yields about 1 per cent these days, while banks are posting five-year GICs in the area of 1.5 per cent. Here are the reasons why these GICs aren't the best investment for conservative investors.

Three investment themes that sound right, but aren't

News headlines are often driven by popular wisdom and this can be dangerous for investors without the time to verify the narrative, writes Scott Barlow. Here are three headline-driven investment myths in the current environment.


Why you should be wary of investment complacency

Once again we are witnessing a time when investor expectations are on the rise. High growth in certain tech stocks in particular and the upward momentum of the market since the U.S. election are creating a situation in which some investors are throwing caution to the wind in the hopes of capturing some quick wins, writes Allan Small. The VIX is at the lowest level in more than 20 years, and this is worrisome.

The dangers of rear-view mirror investing: Some historical perspective

From the beginning of the twentieth century, decade after decade, the American economy has been expanding non-stop, writes Larry Sarbit. It is arguably the greatest period of wealth creation, with the greatest advancements in science, medicine – every field of endeavour – in history. Conversely, the stock market has a very different history; long periods of stagnation followed by markets moving in a straight up trajectory. How is it possible that the economy and the market could be so different? Let's take a quick trip through this history which may give us some clues.

In defence of mutual fund fees – sort of

Improved financial literacy is waking people up to the fact that mutual funds are a comparatively expensive way to invest, writes Rob Carrick. But anti-mutual fund sentiment is starting to go too far. On my Twitter feed last week, someone asked me why I am not "screaming from the rooftops" that mutual funds are a "sucker bet." Many funds are just that. I can't argue. But there are too many good fund products out there to make such generalizations accurate. You can be sensible, successful investor using mutual funds, just as you can be with exchange-traded funds and individual stocks.

Others


Friday's Insider Report: 15 companies insiders are buying and selling


The week's most oversold and overbought stocks on the TSX




Number Crunchers

How Canada's biggest 20 stocks by market cap stack up on key metrics


Twenty-two U.S. large caps showing good short-term earnings growth


These 10 stocks look like bargains in a hot U.S. market




Ask Globe Investor

Question: 
I am wondering whether you have had a chance to look at Stingray Digital Group (RAY.A-T) recently, as it has had a significant pullback in the past month or so from its high of over $9. It dropped to $7.31, the other day and a buying opportunity may be upon us (it has, in fact, rebounded back up to almost $8 since then). Stingray's music packages seem to be almost everywhere you look these days and the company frequently announces new contracts obtained. Its future looks bright, it would appear on the surface at least.


Answer:  Stingray, which is based in Montreal, provides streaming music service in 156 countries, reaching an estimated 400 million households. In Canada, it offers over 200 channels that feature Canadian artists in all genres and all eras.

It's an attractive business and the company is profitable, reporting earnings per share of 33 cents for the first nine months of fiscal 2017 (to Dec. 31). It even pays a small dividend of 4.5 cents per quarter.

Unfortunately, the company is not showing much growth, which is what investors are looking for these days in the technology sector. Sales for the first nine months were up 16.7 per cent year over year. That may seem impressive but in the high tech world it makes Stingray look like a laggard. Net income for the period fell 42.6 per cent to $6.1-million.

Those aren't the kind of numbers that would get me excited and the price-to-earnings ratio of 43 looks excessive. You can take a flyer on this if you wish but I think there are more attractive high tech opportunities out there.

-- Gordon Pape

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What's up in the days ahead

Are you saving and investing enough for retirement? Ian McGugan this weekend will separate the fact from fiction when it comes to the money you'll need for happy times in your golden years. Meanwhile, look for David Berman's latest advice on the smaller Canadian banks - and whether they should be bought now for your portfolio - in Monday's Globe Investor.


Click here to see the Globe Investor earnings and economic news calendar.



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Compiled by Gillian Livingston

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