In this May 2, 2016, file photo, Berkshire Hathaway Chairman and CEO Warren Buffett is interviewed in Omaha.John Peterson/The Associated Press
Financial literacy is like diet books in that everyone at this point knows the rules more or less, but have trouble following them when it's most important. Morgan Housel presented an excellent example of this in a recent column,
"Take Warren Buffett's 2008 investments in several banks. Looks easy in hindsight – cheap! Good companies! But Buffett made his offers the same week PIMCO CEO Mohamed El-Erian told his wife to take out as much cash from the ATM as she could because the odds were so high that the banking system would collapse. You are kidding yourself if you think being greedy when others are fearful is as easy as saying it during a bull market."
There are two investment opportunities in the current market that, if they work, will also look obvious in hindsight. Bloomberg is reporting that Citigroup is shifting some trading operations from London to Frankfurt, following Standard Chartered Plc, Nomura Holdings Inc., Sumitomo Mitsui Financial Group Inc., Daiwa Securities Group Inc and Deutche Bank who are doing the same. So, I have no doubt there are investors buying Frankfurt office space to benefit from the trend.
Separately, Lloyd's of London published a report estimating that a global cyber attack "could result in damages of as much as $121.4-billion in an extreme event, comparable to economic losses caused by Hurricane Katrina." The Lloyd's report is only the latest warning about the importance of network security, and it's a near-certainty that spending on security software is set to explode higher.
Easy money for investors then, right? Not really. Brexit plans, the reason for the pilgrimage out of London, could be adapted to keep the banks in town and this would ruin the thesis for Frankfurt real estate. Amazon.com, a company with a habit of wiping out industries when it sees an advantage, could build network security software in-house and leave other software companies in the dust. Network security solutions could also be found emphasizing hardware (i.e. edge routers) rather than software.
My point here is encompassed in the title to Mr. Housel's piece, "Every Great Investment Hurts" – as much or more than refusing the double cheeseburger in favour of a salad. No matter how easy in looks in hindsight, successful investing is often very uncomfortable at the time.
-- Scott Barlow is The Globe's in-house market strategist
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Stocks to ponder
StorageVault Canada Inc. This is a security that was last featured in the Breakouts report in October, 2016. Since then the share price has more than doubled in value, rising from $1.21 to $2.60. Currently, the share price is trading sideways, and as a result does not appear on either the positive or negative breakouts lists. However, for long-term investors, the upward momentum in the share price should resume at some point as this company continues to deliver solid growth. Every analyst covering this company has a buy recommendation and the Street is forecasting a return of 22 per cent over the next year. Jennifer Dowty explains.
CT Real Estate Investment Trust. Several weeks ago, as speculation grew that the Bank of Canada was going to raise interest rates, interest sensitive securities, including this one, came under pressure. For investors seeking stable income (a yield of 4.9 per cent) combined with modest growth, the recent price weakness may represent an attractive buying opportunity. The consensus target price suggest a potential total return of 17 per cent over the next year. Jennifer Dowty explains.
Manulife Financial Corp. Its acquisition of John Hancock in 2004 hasn't done anything for the insurer's share price over the past decade. Will a breakup help? Investors are hopeful. Manulife shares rose nearly 2 per cent after a media report on Thursday suggested that the company is considering hiving off its U.S. operations, perhaps through an initial public offering or sale. Analysts, too, can see the upside to a U.S. spinoff. They estimate that Manulife's shares could be worth $28 or more – about 10 per cent above the current level – if the market starts to value the company as a sum of its parts. David Berman explains.
The Rundown
Tempted to invest in a U.S. tobacco stock? For Canadians, now's the time
If you've been wondering what to do with those hefty Canadian dollars rattling around your pockets, now could be an ideal time to invest in a U.S. tobacco stock. The loonie is trading at about 79 cents against the U.S. dollar, up about 6 cents since the start of May, following hawkish comments from the Bank of Canada and a quarter-percentage-point rate hike last week. That means you can now get more bang for your buck when shopping for U.S. stocks, and two stocks in particular look worthy of a closer look, given their big dividends, inspiring long-term performances, international diversification and competitive advantages. David Berman explains.
Mark Mobius on emerging markets: 'The picture has changed dramatically'
With a 40-year history of successfully investing in the world's developing economies, Mark Mobius has been called the "king," the "father," the "dean" and even the "Pied Piper" of emerging markets. Recently, Mr. Mobius has been stepping back from day-to-day fund management and, last March, his name was removed from Franklin Templeton Investments' slate of emerging-markets strategies, including the flagship fund he led for 26 years. While still maintaining an advisory role at Templeton as an executive chairman, Mr. Mobius spoke with The Globe and Mail about what investing in developing economies represents to today's investors and whether the recent rebound in emerging-markets stocks can last. Tim Shufelt interviews Mr. Mobius.
Gordon Pape: An ideal emerging-market fund for income investors
Gordon Pape outlines his top pick for those investors looking for an income stream from developing markets.
How to turn your TFSA into a tax-free income-making machine in retirement
TFSAs are still new enough that using them for generating tax-free retirement income is a fresh concept. Just fill your tax-free savings account with dividend stocks, real estate investment trusts, preferred shares and such, and then pay yourself tax-free income using the combined income and share price appreciation. For simplicity and efficiency, it's a breakthrough strategy. Rob Carrick explains.
Why GIC rates may soon head lower even in the wake of the BoC rate hike
The Bank of Canada's first increase in its benchmark lending rate in seven years has either directly or indirectly fed increases in borrowing costs for mortgages, lines of credit and loans in the past week or so. But the story for savers can be summed up in a word – crickets. Rob Carrick explains why GIC rates may even soon head lower.
Here's why deposit savings rates aren't budging after the Bank of Canada rate hike
The Bank of Canada's first rate hike in roughly seven years wasn't enough to push the interest large banks pay on deposits higher, and savers might be unwise to hold their breath awaiting better returns. James Bradshaw explains.
Bulls vs. bears: How to get the most out of opposing market predictions
The debate rages on. Is the market going higher, or is it highly overvalued? The reasoning is compelling on both sides. The bulls point to the fact that the global economy is solid. Europe is bouncing back and the U.S. continues to grow. As a result, corporate profits, the ultimate driver of stock prices, will be good. Their view is that interest rates won't go up significantly because inflation is low, and consumers and governments can't afford higher rates. And importantly, the bulls see nothing on the horizon that will trigger a sell-off. On the other side are the value investors who feel just as strongly that a down market is looming. They acknowledge the economic growth, but point out that it will be chronically slow due to demographics (the Western world is getting old), debt (too much and too speculative) and a lack of productivity. And the political uncertainty in Washington and Europe won't help. Tom Bradley explains.
Others
Tuesday's Insider Report: Companies insiders are buying and selling
Monday's Insider Report: Companies insiders are buying and selling
Contrarian alert: CFO buys as Paramount Resources stumbles on news
The week's most oversold and overbought stocks on the TSX
The Globe's stars and dogs for last week
Number Crunchers
These quality U.S. small-cap stocks may have slipped under your radar
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What's up in the days ahead
Buying solid companies whose shares have been hurt by short-term factors can be a profitable investing strategy. With that in mind, John Heinzl will provide an update on Brookfield Renewable Partners LP. Also later this week, David Berman will put together a convincing investment case for shares of Jean Coutu Group.
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Compiled by Gillian Livingston