All posts by Pat McKeough

Use these successful Investment Strategies for your portfolio success

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Are you trying to succeed with investments? Our Successful Investor approach teaches these 3 key rules we teach to subscribers.

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Successful investors try to arrange their portfolios so that they more-or-less automatically tap into the profit and long-term growth that inevitably comes with well-established companies.

And now is a particularly good time to follow our Successful Investor investment approach. Our system of the most successful investment strategies has three key rules:

Rule #1: Invest mainly in well-established, profitable, dividend-paying stocks.

Our first rule in the most successful investment strategies will help you stay out of high-risk, low-quality investments. These investments are always available, in good and bad markets. They come with hidden risks due to conflicts of interest and other negatives. Every year, they lead many inexperienced investors to substantial losses.

Recent standout losers include bitcoin and other cryptocurrencies; a disappointing crop of new issues (IPOs), which tend to come to market when it’s a good time for the new-issue company or its insiders to sell, but not a good time for you to buy; and slapped-together promotional stocks that hit the market thanks to the SPAC phenomenon, which offers a short cut to IPO status.

Rule #2: Spread your money out across most if not all of the five main economic sectors.

This is our key to successful diversification. The widely disparaged resource sector turned out to have some major winners last year, in Canadian oil and gas stocks. Nutrien Ltd., our top fertilizer recommendation, shot up in early 2022 as the Russian invaded Ukraine, which put a big dent in world grain supplies.

On the other hand, if you had disregarded resource stocks with the intention of doubling down on tech stocks, you might have wound up with excessive holdings in tech stocks just as they entered a plunge.

Rule # 3: Downplay or avoid stocks in the broker/media limelight.

We’ve recommended a handful of tech stocks and other broker/media favourites in the past few years, but we always advised against concentrating on them.

Rather than zero in on broker/media favourites, we prefer to apply our first and second rules. If you build a balanced, diversified portfolio of high-quality stocks, it’s hard to go too far wrong, even in a challenging year like 2022 that we’ve recently experienced.

Understanding successful investments

A successful investment is one that provides long-term gains for its investors. Profitability will mean different things to many investors. One key to making a successful investment is you need to disregard or at least downplay investment marketing messages. Continue Reading…

Retirement investments to avoid? Here are our thoughts on this critical subject

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Retirement investments to avoid include everything from bonds down to stock options. Here’s why.

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Our best retirement planning advice is to invest early and often — and don’t forget to use our three-part Successful Investor philosophy.

But if you’re heading into retirement and are short of money, you should move your investing in the direction of safer, more conservative investments. That’s a far better option than taking one last gamble on retirement investments to avoid like the ones we look at below.

Investing in bonds will hurt your retirement finances

As some investors near retirement, their advisors recommend switching to bonds and other fixed-income investments instead of holding stocks.

To some extent, this is an understandable retirement investing strategy, since bonds can provide steady income and a guarantee to repay their principal at maturity.

Unfortunately, we don’t think using bonds for retirement is the best strategy for Successful Investors. Bond prices and interest rates are inversely linked. When interest rates go up, bond prices go down, when interest rates go down, bond prices go up — and with inflation still high, there is pressure for interest rates to keep increasing.

We continue to recommend that you invest only a small part of your Successful Investor portfolio — if any — in bonds and fixed-income investments.

Investing in annuities can fall into the category of retirement investments to avoid

Here are 3 key drawbacks you should keep in mind when deciding whether annuities are a good choice for your retirement investment options:

  • It may be hard to get out if you change your mind: Unlike stocks, it can be difficult or impossible to sell an annuity if you decide it no longer meets your needs. Moreover, you will likely get a low price for your annuity because the date of your death is uncertain.
  • Link to interest rates makes today a poor time to buy annuities: The rate of return you receive on an annuity is linked to interest rates at the time you buy it. That makes periods of still relatively low interest rates an especially poor time for buying annuities. However, if you want to buy annuities, you could buy one annuity a year for the next five years. That way, your returns will increase if interest rates rise, as we expect.
  • Tax treatment: When you own an annuity, the income payments you receive are made up of interest and a return of your principal. The return of your principal is tax free, but the interest portion of the payment is taxed as ordinary income.

Retirement investments to (especially) avoid include penny stocks, junior mines, and stock options

Penny stocks: Penny stocks are cheap and that’s why many novice investors think they make great investments when they don’t have a lot of money. Here’s some insight: it’s much easier to launch a seductive penny stock promotion than it is to create a successful, lasting business. Most penny stocks are over-hyped. Penny stocks tend to be speculative, and are engaged in such things as finding mineral deposits that can be mined at a profit, commercializing an unproven technology or launching new software. They are unproven companies that have very little chance of becoming a sustainable business. You’ll also have to be on the watch for unscrupulous stock promoters who will over-inflate earnings and talk up a stock for their own best interests. If you’re headed to retirement, stay away from penny stocks.

Junior mining stocks: One rule of thumb for mining stocks is that you have to look at 1,000 “anomalies” to find one “prospect,” and that fewer than one “prospect” in a thousand turns into a mine. In other words, finding a mineable deposit is a million-to-one shot. Continue Reading…

Healthcare stocks promise maximum gains with least amount of risk

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Adding the Best Healthcare Sector Stocks to your Portfolio can Lead to Profits over Time, Especially when the Company Offers a Broad Set of Essential Services or Products.

 

Healthcare investments are stocks, mutual funds or ETFs involved in the healthcare industry.  Healthcare sector stocks involve a variety of industries, including hospitals, health insurance providers, medical devices and technologies, and pharmaceuticals.

If you are adding a healthcare investment such as a drug stock to your portfolio, you may want to consider a drug company that has been paying dividends, or one with a diverse portfolio.

Understanding the offerings within healthcare sector stocks

Drug stocks have a special appeal for many investors looking for healthcare investments. They assume that as the baby-boom generation goes through late middle age and beyond, demand for drugs will skyrocket. That’s undoubtedly true.

However, pharmaceutical companies are more speculative than many investors in healthcare investments realize.

Drug companies often invest tens if not hundreds of millions of dollars to create, test and secure regulatory approval for a single new drug. Even then, it may not manage to recover its investment before its patent expires.

Even when pharmaceutical industry research succeeds and creates new products worthy of healthcare investments, drug companies have to live with the constant threat of competition from breakthrough products that work better and/or are cheaper. But sometimes, drug company research fails to produce the hoped-for results. This failure may only become apparent with unsatisfactory results from the lengthy, costly drug trials required to gain regulatory approval.

Meantime, we continue to see attractive investment opportunities among the top medical device manufacturers. That includes Steris plc. It’s a market leader in the growing number of product categories in which it operates. That brightens the outlook for its investors.

Steris plc, symbol STE on New York, is an attractive buy for investors seeking long-term gains in healthcare sector stocks

Steris sells equipment and other products and services used in hospitals and laboratories.

These include anti-microbial and routine skin care products; biohazardous waste management systems; cleaning/decontamination systems; contract sterilization; environmental decontamination products; and food safety products.

Other products and services include high temperature sterile processing systems; low temperature sterile processing systems; microbial reduction services; patient positioning and transport systems; pure water systems; surgical lights; and surgical tables.

The company has approximately 13,000 employees worldwide and serves customers in over 100 countries. Steris moved its corporate domicile to Ireland in 2019 to benefit from that country’s lower tax rates. However, it’s headquartered in the U.S. Continue Reading…

Best stocks for new investors seeking profits share these qualities

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Finding top stocks for new investors is easier when you know what to look for. Discover the types of stocks to invest in and some investments to avoid.

We caution investors to maintain a healthy sense of skepticism at all times. It’s especially crucial for investment newcomers to observe this rule.

Here are some recommendations on the types of stocks for new investors to focus on: and ones to avoid.

Focus on investment quality  

The best investment plans or systems use a variation of the value investing approach. That is, they revolve around choosing high-quality investments and diversifying your holdings.

Safer investing also means taking a careful and methodical approach to investing that does not jeopardize your savings or your investment goals. There will always be some inherent risk when investing, so making safer investing decisions lets you minimize that risk.

The safest way in our view for Successful Investors to invest money is to place a lot of importance on investment quality.

We do our own stock market research for our newsletters and investment services, and we apply it from a portfolio manager’s perspective. That’s why we advise sticking to mostly well-established companies; they tend to hold on to more value when things go wrong and recover faster.

Zero in on dividend-paying investments

One tip we share often is to invest in companies that have been paying a dividend for 5 or more years. Dividends are typically cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and are paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly. Canadian citizens who own shares in Canadian stocks that pay dividends will also benefit from a tax break.

Building a diversified portfolio of top stocks for new investors

Always maintain a diversified stock portfolio: and avoid the temptation of trying to pick hot stocks or sectors.

Different investors may be more comfortable holding a larger or smaller number of investments in their portfolios. Here are some tips on diversifying your stock portfolio:

When it comes to a diversified stock portfolio, stocks in the Resources, and Manufacturing & Industry sectors in general expose you to above-average share price volatility.

  • Stocks in the Utilities and Canadian Finance sectors entail below-average volatility.
  • Consumer stocks fall in the middle, between volatile Resources and Manufacturing companies, and more stable Canadian Finance and Utilities companies.

Most investors should have investments in most, if not all, of these five sectors. The proper proportions for you depend on your temperament and circumstances.

Investments that should be avoided: Cryptocurrencies & IPOs

I still can’t think of anything that would make me optimistic on bitcoin or any cryptocurrency, even after the deep slump the whole sector has gone through recently. The best thing I can say about bitcoin is that it will probably remain volatile, rather than vaporizing like the worst crypto performers. Continue Reading…

Resource Stocks provide long-term gains and inflation hedging

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Including good stocks for long-term investment gains from the Resource section can be especially helpful in times of inflation. Learn more below.

For most investors, resource stocks should make up only a limited portion of their portfolios. That means that while we think you should maintain some exposure to resource stocks, you should still aim to balance your portfolio across most if not all of the five economic sectors.

If you want resource stocks in your diversified portfolio, then you need to know how to find good stocks in that sector for long-term investment gains.

Resource stocks, though volatile, tend to rise with inflation and can be good stocks for long-term investment gains

The resource sector is subject to wide and unpredictable swings in the prices it gets for its products. In the rising phase of the business cycle, when business is booming, resource demand expands faster than resource supply, so resource prices shoot up. This balloons profits at resource companies. When the economy slumps, resource prices fall, and this drags down resource profits and stock prices.

In addition to rising and falling with the business cycle, however, resource stocks have a history of rising along with long-term inflationary trends. This gives them a rare ability: they provide a hedge against inflation.

Back in the inflationary 1970s and 1980s, investors used to see this hedge-against-inflation ability as the main reason for buying resource stocks. But until recently, they rarely thought of it. That’s because inflation had waned for three decades.

Inflation peaked at a yearly rate around 13% in the early 1980s. It fell by two-thirds from that level by the middle of the decade. It went through a series of peaks and valleys, but had been working its way downward ever since.

However, after years of relative stability, inflation has come back to levels not seen in decades.

While the cost of just about everything has gone up, nobody can predict trends in inflation or interest rates with any consistency. And we disagree with investors who think we are on the verge of a huge outburst of never-ending price increases.

Even so, adding top Resource stocks to your portfolio lets prosper two ways: you can profit even without inflation — and these stocks will also provide an added boost in inflationary times.

It’s important to know your risk tolerance when investing in good stocks for long-term investment gains — including Resource stocks

There are several considerations that go into a successful growth investing strategy. Still, many investors overlook a number of important factors that can lower their risk.

In the end, there’s no such thing as risk-free investing. The tips below for lowering your growth investing strategy risk have long been part of the Successful Investor approach.

  • Balance your cyclical risk
  • Be skeptical of companies that mainly grow through acquisitions
  • Don’t overindulge in aggressive investments
  • Keep an eye out on a growth stock’s debt
  • Keep stock market trends in perspective
  • Look for growth stocks that have ownership of strong brand names and an impeccable reputation
  • The best long-term growth stocks should have the ability to profit from secular trends

Meantime, we continue to recommend that you cut your risk in the volatile resource sector by investing mainly in stocks of profitable, well-established mining companies with high-quality reserves. And as mentioned, resource stocks (and this includes oil and gas, of course) should make up only a limited portion of your portfolio. Continue Reading…