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.
The blindingly simple tweak your retirement investments need to survive pandemics – and all other disasters
Life changed in the pandemic, but investing for retirement has not, Rob Carrick writes. Provided some thought was put into it, the same mix of stocks and bonds you had before COVID-19 still makes sense. But if you’re unhappy with how your retirement portfolio held up in the pandemic, then Then look to a foundational bit of retirement planning that reveals its value only when stocks are being crushed.
Some financial planners call it the cash wedge, others the bucket approach. The basic concept is to have enough cash or safe, liquid investments in your registered retirement income fund to cover at least three years’ worth of living expenses. That way, you’ll never have to sell any of your investments at a low point in order to pay for living expenses or to make the minimum annual RRIF withdrawal.
More from Rob Carrick: How to exploit down markets by building a balanced ETF portfolio at no cost
Gordon Pape: My High-Yield Portfolio continues to hit targets, but COVID-19 has prompted a shakeup
In March 2012, we launched a High-Yield Portfolio for readers of my Income Investor newsletter looking for above-average cash flow and who could handle a higher level of risk, Gordon Pape writes. The portfolio is down a little over 4 per cent since the previous review in September, amid COVID-19 lockdowns and falling interest rates. Despite the recent loss, we are showing a total return of 82.4 per cent since inception, which translates into an average annual gain of 7.61 per cent. That’s within our target range. Here are a list of the investments, a look at how they’ve performed, and what the portfolio is selling and buying – including BCE, Algonquin Power and North West Co.
Compared to bonds, dividend-paying stocks are what you want in your back pocket
The pandemic has weighed heavily on dividend-paying stocks, sending many yields to remarkable heights, David Berman writes. As a result, investors can buy a selection of blue-chip Canadian stocks yielding 5 per cent or more right now, a tempting payout next to low-yielding government bonds.
The dividend-payers look particularly striking next to low yields on government bonds. The yield on the 10-year government of Canada bond, for example, has retreated below 0.54 per cent from about 1.6 per cent at the start of the year. The catch: Wide spreads can suggest the market is worried about the financial prospects of these companies, which is why stock prices have been dropping. Even so, the current bout of economic uncertainty won’t last forever, and hefty dividends may already be compensating for risks.
A ‘deep value’ stock pick from my students
Once again, with the 2019-20 school year at its end (and despite the challenges of the past few months), my Ivey value investing students submitted their final stock picks and analysis, which are a very important element of my value investing classes, professor George Athanassakos writes. . It was much easier for them to find truly undervalued stocks this year, given the market’s selloff since February. A ‘deep value’ stock that students worked on got my attention: Fonar Corp. It designs, manufactures and sells magnetic resonance imaging, or MRI, scanners. The stock was identified as a possibly undervalued stock with a price-to-earnings (P/E) ratio of 4.5 times, a price-to-book (P/B) of 0.68 and a market cap of US$85.4-million at the end of March, the time of the student report. Read more about Fonar here.
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The Globe’s investors’ guide to help you navigate pandemic-roiled markets
What has mystified many investors is the potency of the stock market rally despite the continuing economic disaster, Tim Shufelt writes. Canadian stocks are just 17 per cent off their record high set in February, which amounts to more of a run-of-the-mill correction than a historic crash. The U.S. S&P 500 Index, meanwhile, is in positive territory over the past year. And the tech-heavy Nasdaq Composite Index is up by 4 per cent year-to-date. Here are a couple of good reasons for a wide disconnect between stock markets and the real economy.
Read more: Where to look for stock market bargains
What investors need to know for the week ahead
In the week ahead, U.S. markets will be closed Monday for the Memorial Day holiday. Plus Canada’s big banks start releasing second-quarter results, with Bank of Nova Scotia and National Bank of Canada reporting on Tuesday, Bank of Montreal and Royal Bank of Canada on Wednesday and Canadian Imperial Bank of Commerce and Toronto-Dominion Bank on Thursday. Other companies posting results include Costco, Canopy Growth, Dell, HP, Aritzia and Indigo.
Economic data on tap include: U.S. new home sales for April (Tuesday); Canada’s current account deficit, plus U.S. real GDP and corporate profits for the first quarter as well as U.S. durable goods orders for April (Thursday); Canada’s real GDP for the first quarter and for March, Canada’s industrial products index and raw materials price index for April, and U.S. personal spending and income for April (Friday).
Looking for more money ideas and opinions?
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