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Investment Ideas Finance needs more 'willing losers,’ blockbuster earnings season going to waste, and miners boosted by Cameco’s shutdown

The ease with which the finance industry made profits in the 1960s and 1970s is scarcely imaginable now.

A recent post by U.S. investing blog A Wealth of Common Sense tries to explain: “Ninety per cent of trading was done by individuals... They were nice people...who bought or sold once every year or two, usually in odd lots because that’s how much money they had. And about half the time it was AT&T. And they bought because they’d been given a raise or a bonus or an inheritance and they sold because they were sending kids off to college buying a home or some other sensible purpose... Were they hard to beat? No way! They were easy to beat. And the secret to successful active investing is to have what’s called willing losers.”

The investment industry was successful in significant degree to the extent that its customers didn't know what they were doing. Thanks to indexing and freely available knowledge — (the brokerages used to be the only place to get price to earnings ratios and the like, and getting them required a phone call) — portfolio managers are suffering from a shortage of “willing losers.”

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According to the blog post, willing losers still exist in the market even if in smaller numbers. The examples cited are day traders, those carrying large credit card balances, house flippers, and investors who do not invest in themselves by researching markets and behavioural psychology.

It's impossible to quantify, but I suspect that a lot of investors who use the market as entertainment also border on willing losers. The attraction is obvious; the adrenaline-fueled highs of a big market win on a speculative investment can be addictive, and it definitely feels like something worth pursuing and even temporarily suffering for.

For mortals not named Soros, Druckenmiller or or Driehaus however, the overwhelming majority of credible research (and Warren Buffett) indicate that slow, steady and boring is the most productive investment strategy.

-- Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Capital Power Corp. (CPX-T), a stock John Heinzl owns both personally and in his model Yield Hog Dividend Growth Portfolio, hiked its payout by 7 per cent on Monday. This was the fifth consecutive annual increase for the company, which is now paying $1.79 on an annualized basis. That’s a yield of about 6.8 per cent. Mr. Heinzl believes the dividend is well covered and expects it will keep growing (for subscribers).

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MAV Beauty Brands Inc. (MAV-T) is a newly listed personal care company that sells hair care and personal care products through its three main product lines: Marc Anthony True Professional, Renpure and Cake Beauty. In 2017, the company’s top 10 retail partners represented about two-thirds of the company’s sales. As Jennifer Dowty writes, management is targeting aggressive and accelerating growth for the company in the years ahead with a revenue compound annual growth rate ranging between 24 and 28 per cent over the next three years. The consensus target price is calling for a potential 31-per-cent gain in the share price over the next year (for subscribers).

IPL Plastics Inc. (IPLP-T) is another newly listed security with a track record of achieving solid revenue growth, writes Jennifer Dowty. The consensus target price implies the share price may appreciate 18 per cent over the next 12 months. IPLP is a packaging company servicing markets such as the consumer, food, and agriculture segments. Customers include Kraft-Heinz, Danone, Pepsico, Danone, Smucker’s, Parmalat and Mondelez (for subscribers)

The Rundown

Why good earnings aren’t being rewarded

The blockbuster second-quarter earnings season is being wasted on an uneasy market, writes Tim Shufelt. Despite soaring U.S. corporate profits, many companies beating analysts' estimates aren’t being rewarded. Those that miss are also being heavily punished. Mr. Shufelt looks at the forces likely contributing to the market’s cool reception to strong corporate performance (for subscribers).

Cameco’s continued McArthur River shutdown helps juniors

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Cameco Corp.’s recently announced move to continue the shutdown of McArthur River, the world’s largest uranium plant, was seen as a bullish signal by some analysts, who raised expectations for uranium prices and for Cameco stock, writes David Milstead. The company’s shares soared close to their 52-week high, but have since have given back all their gains — and more. Meantime, junior uranium companies are maintaining double-digit increases since the news last week. “At least in the short term, everyone has benefited from Cameco’s shutdown except Cameco itself,” Mr. Milstead writes (for subscribers).

BCE second-quarter earnings below expectations

BCE Inc.‘s financial results fell short of expectations in the second quarter, despite reporting strong wireless, internet and television subscriber growth. Results were dragged down by lower advertising revenue at its media business. Canada’s largest communications company said Thursday that profit for the three months ended June 30 fell by 7.2 per cent to $755-million. On an adjusted basis, it earned 86 cents per common share, which missed the average analyst forecast of 88 cents. Christine Dobby reports.

Top Links (for subscribers)

The most important chart for mining investors

Best and worst stocks to own for the trade war

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Others (for subscribers)

John Heinzl’s model dividend growth portfolio as of July 31, 2018

Thursday’s analyst upgrades and downgrades

Thursday’s Insider Report: Companies insiders are buying and selling

Wednesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: Companies insiders are buying and selling

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Others (for everyone)

Apple hits $1-trillion stock market valuation

Tesla climbs as bulls cheer with ‘inflection point’ in sight

Starbucks bets on Alibaba delivery partnership to revive Chinese business

Investors have been showering cash on chip ETF amid Nasdaq rout

Greenlight’s bet against Tesla crashes fund’s 2nd-quarter returns

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Number Crunchers (for subscribers)

Fifteen undervalued Canadian stocks where risk of decline is minimized

Ask Globe Investor

Question: Can you recommend a website where I can compare payout ratios for various companies?

Answer: I recommend that you not rely on a third-party website to research payout ratios. That’s because payout ratios are measured in many different ways, and it can be difficult to interpret what the numbers mean or even know if they are accurate – particularly when they are compiled using an automated process. If you are interested in a particular company’s payout ratio, your best bet is to read the company’s earnings releases, conference call transcripts and investor presentations. That way you’ll be getting the information directly from the company, along with commentary that will help you understand how the ratio is measured and what it means for the sustainability and potential growth of the dividend.

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

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Compiled by Brenda Bouw

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