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It’s important for me to disclose my stock purchases in the interests of transparency but the last thing I want is for readers to lose money by following me into investments that don’t suit their risk tolerances or investment profile. So, in noting a new small position in open source software company Red Hat Inc., I’ll also warn that the stock is expensive in price-to-earnings terms and carries significant risk.

The bull case for Red Hat is based primarily on the proliferation of cloud computing and, to a lesser extent, the beginning of telecom spending on 5G wireless service. Corporate IT departments will continue to gravitate towards cloud computing, and software packages like Red Hat’s Openstack, for the simple reason that running software on the cloud is a lot cheaper than buying software and the hardware to run it on.

For those interested in learning more about cloud computing, the Red Hat corporate site provides an introduction. In late 2017, technology website ZDNet also wrote a quick corporate history for Red Hat in "From Linux to cloud, why Red Hat matters for every enterprise.”

Red Hat’s recently released fourth quarter earnings were highlighted by a 23-per-cent year-over-year increase in revenue that was boosted by telecom companies buying Network Function Virtualization software in anticipation of 5G spending, according to industry news source Light Reading. Morgan Stanley research believes that we’re a couple of years away from the big ramp up in 5G spending, but that it will require US$225-billion in telecom company investment.

I added a five-per-cent Red Hat position to my portfolio last Wednesday at about US$143 per share. The price is significantly higher since then, but now sports a disquietingly high trailing price-to-earnings ratio of 71 times. The price to forward 12 month earnings estimates ratio is currently 45 times, according to Bloomberg.

Elsewhere in the technology space, Morgan Stanley published an 104-page report on the next generation of technology growth which included their top stock picks in the sector. Red Hat, unfortunately, was not among them but the analysts believe that a data-driven future will see outsized gains for NVIDIA Corp., Cisco Systems Inc., Alphabet Inc., and Dassault Systemes SA.

-- Scott Barlow, Globe and Mail market strategist

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The Rundown

TD moves to discourage clients from investing in pot stocks

Toronto-Dominion Bank has taken unusual steps to discourage some clients from investing in the marijuana sector. The bank is limiting the ways in which its advisers discuss the industry with clients, banning staff from recommending almost all marijuana firms and exchange-traded funds (ETFs), according to a recent internal e-mail viewed by The Globe and Mail. TD is also prohibiting portfolio managers from proactively adding most cannabis shares to certain client investment accounts – unless clients specifically instruct their adviser to do so. Clare O’Hara and Christina Pellegrini report. (for subscribers)

Canadian capital outflows suggest a troubling outlook for the TSX

Canadian stocks keep finding new ways to disappoint. With a domestic economy running at near capacity, corporate profits strong and even the crude-oil market showing some resilience, the domestic stock market is still among the worst performers in the developed world this year. Without energy prices to blame for this latest bout of lousy equity returns, one new culprit may be that foreign portfolio investment is finding more favourable destinations beyond Canada’s borders. Tim Shufelt reports. (for subscribers)

This fund manager has made 17% annual returns this decade. Here’s what she’s buying

Portfolio manager Qing Ji was born and raised in China and, knowing her birth country, doesn’t expect the trade war with the United States to end quickly or easily. “I think the trade war will be quite messy and last long, because China is very strong,” says Ms. Ji, who works from the Vancouver office of Montreal-based Global Alpha Capital Management, an independent firm with about $1.5-billion in assets under management. Despite the market volatility caused by U.S. President Donald Trump’s latest trade war, Ms. Ji hasn’t changed how she invests her International Small Cap Fund. Brenda Bouw reports on her latest portfolio moves. (for subscribers)

Don’t balk: This is how much even a young person should be saving each paycheque for retirement

Investors spend endless hours pondering things they can’t control, such as stock prices and the economy. They spend far less time thinking about the one thing they can control – the amount of money they save. Maybe we should reverse our priorities. In any ranking of sexy topics, saving money ranks just ahead of lint removal or periodontal health. But when it comes to determining our eventual wealth, savings is the key input that underpins everything else. Ian McGugan has a suggestion on how much all of us should be saving.

Looking for ways to deal with market volatility? These ETFs may be the solution

Stock markets are looking riskier than they have in years. The escalating trade war between the U.S. and China has spooked investors, and rightly so. The temptation is to pare back your equity holdings. But after nine years of steady profits in this bull market, a lot of people are reluctant to do that, especially with bonds under pressure because of rising interest rates. An alternative is to reduce the amount of equity risk in your portfolio by focusing more on low-beta stocks and the funds that invest in them. Gordon Pape takes a look at ETFs that fit the bill. (for subscribers)

A balanced portfolio with just one fund? It can be done

ETF-loving investors who want balance in their portfolios typically cobble together various funds to achieve the right mix of asset classes, sectors and geographic exposures. That would have been relatively easy a decade ago, when the number of exchange-traded funds totalled less than 100 in Canada and only about 1,600 worldwide. Balanced ETFs may be a better choice for investors, says one financial planner. These relatively new products tend to offer greater diversification, with a mix of domestic and international stocks and bonds across a range of sectors. Marjo Johne reports.

‘Barbell’ strategy can pump up your portfolio

Lifting weights is generally good for your fitness regime. But could a barbell strategy also help you manage your equity portfolio? The barbell investing approach calls for buying the three top-performing sectors and three bottom-performing sectors from the previous year, according to data from the New York-based investment research firm CFRA. Joel Schlesinger reports.

Looking for an ETF-beating mutual fund? Why dividends matter

Your best chance of owning an ETF-beating mutual fund is in the Canadian dividend and income category. A scorecard comparing actively managed mutual funds against their benchmark stock indexes shows a marked pattern of underperformance for mutual funds, except among Canadian dividend funds. Almost 58 per cent of dividend and income equity funds beat the S&P/TSX Dividend Aristocrats Index in 2017, by far the best showing of any fund category. Rob Carrick reports (for subscribers).

Baby boomers are last to the ETF party – what gives?

Kira Vermond examines why baby boomers, those aged 52-70, are playing catch-up when it comes to investing in ETFs. According to a recent survey from BlackRock Inc., which polled investors in the United States, only 27 per cent of boomers invested in ETFs compared with 42 per cent of millennials aged 21 to 35.

Top Links (for subscribers)

These 15 stocks will dominate the next era of technology

Others (for subscribers)

‘The bull market is over,’ David Rosenberg declares. (And if it isn’t, buy the bigger dips)

Monday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

The Globe’s stars and dogs for last week

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

Others (for everyone)

Canadian ETFs: March’s launches and terminations

Don’t be so downbeat on the loonie, top currency forecasters say

High stakes, high expectations as earnings season heats up

Lithium glut fears seen tempered by optimism over rising demand

Panic! Don’t panic! Navigating the trade talk proves dicey

Panicking investors ask if U.S. ire dooms all Russian stocks

Trading giant keeps faith in copper despite rising trade tension

Canopy tops BCE, Manulife as marijuana stock trading ramps up

Investor immunity to cryptocurrency ‘disease’ is growing, says Barclays

‘The bull is limping’ and tech stocks are now a sell, RBC says

Number Cruncher (for subscribers)

Fifteen Canadian stocks that are potential value traps

Ask Globe Investor

Question: Can you recommend a website where I can look up historical dividend payments for a company?

Answer: The best place to start is the investor-relations section of the company’s website. Many companies provide historical dividend data going back several years or even decades, and by going directly to the source, you can be assured that the information is accurate. is another good source of dividend data. Enter the stock symbol in the “fund/stock” box, then click on “performance” and “dividends and splits,” and you’ll get a five-year chart of the company’s annual dividend payments. This is a quick way to determine if the company’s dividend has been growing (one of the key things I look for in a stock).

Below the five-year chart, you’ll find detailed information on each of the company’s quarterly (or monthly) dividend payments − including the declaration, ex-dividend, record and payment dates − over the past five years. (Tip: You have to click on the year to display the information).

--John Heinzl

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

Ian McGugan will give us some reasons to think twice before investing in the tech sector. Meanwhile, John Heinzl looks at the sizzling returns of InterRent REIT - despite a very modest yield.

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

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Compiled by Gillian Livingston

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