Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Canadian cannabis stocks see a second wave of madness
What a week for Tilray Inc. On Wednesday, the Canadian cannabis company’s shares swung so wildly, trading was halted five times. It was “perhaps the craziest session ever for a Canadian company of any stripe,” writes David Milstead. “At its peak market cap Wednesday of $36-billion, Tilray was more valuable than all but 17 Canadian companies.”
Cannabis shares are soaring upward, just as they were before the January correction. “This time around, it is arguably even harder to convince investors that valuations are frothy,” write David Berman and Tim Kiladze. “Because so much money has already been made, both before and after the correction, any naysayers are more likely to be thought of as haters – no matter how logical their arguments are. Yet, the reality is that even industry insiders who want the sector to succeed are skeptical of what’s happening now.”
So is this a pot-com boom that will eventually go bust? Yes, writes Barrie McKenna: “This is not an investment story. It is a mad gold rush, and it will not end well for many investors.”
Available now: Cannabis Professional, the authoritative e-mail newsletter tailored specifically for professionals in the rapidly evolving cannabis industry. Subscribe now.
Rosenberg on markets: Less bull than meets the eye
The front end of the Treasury curve has shot up dramatically in the past year as markets have reappraised their view of the Powell Fed, and that’s worrisome, writes David Rosenberg. “The yield curve has flattened dramatically, and that is all you need to forecast slower growth ahead, which is a challenge for equity valuations still discounting double-digit earnings gains, or double the trend in nominal gross domestic product.”
Rosenberg writes that beneath the veneer of U.S. growth, it has been a difficult year for emerging markets, commodities, resource-based currencies and the cryptocurrency space. He predicts a slowdown, with important cyclical inflation risks that are not priced in likely to force the central bank into raising rates further.
Manulife Financial offers a bonus to leave a retirement product that was once a sensation
It’s not often a major financial institution offers to pay clients to ditch its products, but that’s exactly what Manulife Financial Corp. is doing for certain buyers of its IncomePlus guaranteed retirement income product. Clients can move without penalties into the company’s GIF Series 75 segregated funds with some money thrown in as a sweetener. There are two takeaways for those who make the switch, writes Rob Carrick: “The first is a reset feature whereby the pool of money you have available to withdraw from in retirement is adjusted higher every three years to reflect increases in the market value of your account. The second takeaway is the loss of a 5-per-cent bonus paid every year an IncomePlus client doesn’t make a withdrawal.”
A simple stock-picking strategy that has trounced the market year after year
“It’s easy,” writes Norman Rothery, “to find simple stock-picking strategies that have outperformed the market for decades.” All you need to do is buy the big blue-chip stocks in the Dow Jones industrial average that have the lowest price-to-earnings (P/E) ratios each year.
Rothery used Bloomberg’s back-testing tool to see if this strategy, introduced by Benjamin Graham in 1973, still holds water, and found low-P/E stocks are still beating the market.
If you’re interested in trying this approach, the stocks in the DJIA with the lowest P/E ratios as of mid-September are in the chart below.
Why Fortis should be a core holding for dividend investors
For dividend investors seeking a boring but beautiful Canadian energy company, Fortis is an attractive pick, writes John Heinzl. The share price is well off its highs, and Fortis offers modest earnings and dividend growth with a relatively high degree of income safety. The company forecasts that its rate base will grow by about 5.4 per cent annually. It has delivered dividend increases for 44 consecutive years. “What’s more, 97 per cent of Fortis’s earnings are from regulated distribution and transmission assets, which throw off stable and predictable cash flows that increase over time,” Heinzl writes.
What investors need to know for the week ahead
Economic data coming this week include: Canada’s wholesale trade for July on Monday; on Tuesday, U.S. S&P Case-Shiller Home Price Index for July and U.S. Conference Board Consumer Confidence Index for September; on Wednesday, U.S. new home sales for August and U.S. FOMC financial projections; on Thursday, Canada’s Survey of Employment, Payrolls and Hours for July, Euro zone consumer and economic confidence, U.S. real GDP for Q2 and U.S. goods trade deficit; on Friday, Ottawa’s budget balance for July, Canada’s real GDP for July and industrial product price index and raw materials price index for August, U.S. personal spending and personal income for August. Companies reporting earnings this week include: Carnival PLC; Cintas Corp.; DHX Media Ltd.; IHS Markit Ltd.; Nike Inc., AGF Management Ltd., Accenture PLC; BlackLine GPS Inc.; ConAgra Foods Inc.; McCormick & Company Inc.; Uranium Participation Corp.; Vecima Networks Inc.