# A good problem to have, but a problem



## canadian_investor (Jul 4, 2011)

i am in a dilemna on what to invest in next.
most of my stock picks have done well over recent times.
in some cases i have more than 30% unrealized profits, not including dividends.

only a couple of positions are underwater but they are getting better since the Dec rally.

my problem is, what to invest in next.
i need to allocate my 2012 TFSA, 2011 rrsp, and still have quite a bit of cash left over from last year.

for the last couple of years i have been adding money into my existing positions.
these have done well now. some examples are BCE, Enbrige, inter pipeline, a couple of REIT, some US utility stocks, Canadian banks.
i don't want to add any more money into these and keep averaging up.

but any stock whose fundamentals I like has had large run ups recently.
most are at their 52 week highs and some are at 3 year highs.

i am still in accumulation stage so I don't see any reason to sell my positions because it will make my situation worse.

what is undervalued right now?
what are you all people doing? i am sure others are in similar situations after the rally since dec.
any ideas on undervalued but sound companies?

btw i don't invest in venture mining or junior o&g but i am willing to analyze small cap companies in other sectors that have reasonable volume.

thanks in advance


----------



## stephenheath (Apr 3, 2009)

I hear you... I've been having problems finding good deals as well... the thing that I've found has helped me a lot is reading through the "What are you Buying?" thread... all kinds of suggestions that are great springboards for doing my own research.


----------



## uptoolate (Oct 9, 2011)

I don't know where you should go with the money but if you have 'extra' cash and you are an RRSP person then you would come out ahead by funding your 2012 RRSP contribution now as well. I know that we all know that we should do it this way but losing the 14 months of tax free growth by making last year's contribution on Feb 28 2012 instead of Jan 2011 is silly if one can afford to make the contribution up front. Even if it can't be made as a lump sum, going with a DCA approach still beats the late lump sum approach for which some even wind up taking a loan to fill!

As to the where, I have no idea and that is why I am just usually a potato.


----------



## Jungle (Feb 17, 2010)

+ 1 when there are no screaming deals on stocks, dca potato.


----------



## canadian_investor (Jul 4, 2011)

i know about the couch potato investing.
but i am sorry I have gone over to the dark side quite some time ago.
too late to turn back.

had i been fully invested i would have taken some profits in a situation like this.
but i want to stay fully invested in the equity portion of my asset allocation.
i have already hedged my equity positions in other ways.

between the 2011 rrsp, the 2012 tfsa and the upcoming 2012 rrsp after march, my cash allocation is way out of whack.

i need either a deep market correction within the next 2 months or i need you intelligent people to offer me ideas about undervalued companies (small, mid or large cap).

in broad terms i suppose natural gas is the most neglected sector right now.
and perhaps retail.
any ideas there?


----------



## larry81 (Nov 22, 2010)

Do you have the balls to buy an asset at 20y low ?

http://www.google.com/finance?q=NYSEARCA:GAZ


----------



## uptoolate (Oct 9, 2011)

Fair enough CI. I think that the darkside people hang out over in the 'Individual Stocks/Equities' area or here in 'Investing' on the 'What are you buying/selling?' threads.  

Good luck! I hope that you leave us potatoes in the dust!


----------



## uptoolate (Oct 9, 2011)

larry81 said:


> Do you have the balls to buy an asset at 20y low ?
> 
> http://www.google.com/finance?q=NYSEARCA:GAZ


Wow! I might if I knew that someone was going to step in and ban all that frickin' fracking!


----------



## Four Pillars (Apr 5, 2009)

canadian_investor said:


> ihad i been fully invested i would have taken some profits in a situation like this.
> but i want to stay fully invested in the equity portion of my asset allocation.
> i have already hedged my equity positions in other ways.


I don't understand your investing style. If you are an active investor, shouldn't there be periods where you are out of the market?

Ie why would you want to be invested if you think it's over-valued?


----------



## larry81 (Nov 22, 2010)

IMHO the best investing strategy is

Core: Couch potato
Side: Bottom fishing/market timing specific stock/sector

The less you know about the market, the better it is. Only overly confident kids or lousy portfolio manager would use 2x/3x ETF...

The real money is made buying out of favour assets when others are saying 'its the end of the world' (except when it come to TSE:YLO, lol)


----------



## hboy43 (May 10, 2009)

canadian_investor said:


> what is undervalued right now?
> what are you all people doing? i am sure others are in similar situations after the rally since dec.
> any ideas on undervalued but sound companies?


One of the advantages of leverage is that I always have a guaranteed 3% return investment, that is paying down debt. This is what I have been doing the last few months. I think the last thing I bought was 100 MX at about US$23 because I had US$ from dividends sitting around doing nothing.

Like you, some holdings have been going gangbusters lately. Others have been around the same level for years: JNJ, EMP.A, ADW, IGM, CAE. Maybe some of the aforementioned would suit.

I have recently bought ECA. I am perfectly happy to hold something for years and years and then see it become a one or two bagger in 6 months. The problem is, I never know when the 6 month period of massive gains will occur, so I watch stuff do nothing for a long time. We can't have forever natural gas at 1/5 the cost of oil on an energy content basis, or have natural gas in Asia trade at whatever it is these days $7, $9, I don't know, and have it at $2.50 in NA. Sooner or later a pipeline will be built, or enough coal plants will convert to gas, or Methanex will restart or move enough methanol plants or whatever to tip the supply/demand balance.

Another company I have been mentioning around here for years is Norbord (NBD). I am on the record here somewhere saying I wished I owned 10,000 shares (actually 100,000, pre 10:1 consolidation). Any time I mention it, someone else here pipes up with a "this company sucks". It has not made me any money yet, but at my current holdings of 7400 shares, my ACB ($11.65) is about half of what it was 3 or 4 years ago. Bought recently in the $9s and again in the $8s for an average of $8.90/share. I was going to add another $10,000 at mid $6s, but never got there. This is a company that will dribble along, perhaps for years losing $0.25 here, maybe break even there, until one day the Americans will start building houses again. Then it will make $1/QUARTER and be a $50 stock. In just the past 2 months or so it has gone from middle $7s to about $11 recently on just the tiniest bit of good news in the US housing sector. In the mean time, they are sticking to their knitting, driving down costs and reinvesting in plant. With the recent advance it is my largest position at about 7% of my holdings.

hboy43


----------



## Spudd (Oct 11, 2011)

I like GLW (Corning) for large caps. 

On the Canadian small-cap side, I made a list recently on my blog following principles laid out by the American Association of Individual Investors. This list has 10 stocks that met the criteria of being value picks. I don't make any claims that they're good, but they met the screen criteria.


----------



## canadian_investor (Jul 4, 2011)

Four Pillars said:


> I don't understand your investing style. If you are an active investor, shouldn't there be periods where you are out of the market?


no no you are mixing up stock picking with active investing.
it is most possible to be a stock picker and yet be a passive investor, just as it is possible to be an ETF picker and be an active trader.

to answer second question yes there are periods of time to be outside equites but imo this is not particularly so right now.



> Ie why would you want to be invested if you think it's over-valued?


but not everything is over valued no?
there are (must be) things that are undervaled.
i am asking for opinions and suggestions of what those might be.
most of the stocks that i have focused my energies on have run up a lot and are approaching full valuation or close to it.

so i am looking for what next.

thanks in advance


----------



## Daniel A. (Mar 20, 2011)

Look up Canexus Corporation they are a solid play paying better than 7% yield.
I've held them for years, the major advantage they have in the market is power cost in Manitoba and BC.


----------



## canadianbanks (Jun 5, 2009)

canadian_investor said:


> in broad terms i suppose natural gas is the most neglected sector right now.
> and perhaps retail.


I have been looking at nat gas for some time now, but I think there'll be another 6-12 months before the price starts to rally. Even after this happens there'll be a lag of at least a few months until nat gas producers start moving up meaningfully.


----------



## humble_pie (Jun 7, 2009)

uranium is another possibiliity.

the HEU agreement expires in 2013 & cigar lake not forecast to come into normal production until 2017.

there could be a shortfall in global production in the middle of this decade & some are calling for uranium oxide @ .65.


----------



## Eder (Feb 16, 2011)

Some decent ideas can come from searching out very low volume companies with stellar 10year records of profits, growth and dividend payouts. Don,t pay too much and dont try swing trade them. Ymmv


----------



## canadian_investor (Jul 4, 2011)

*@Spudd* - thanks for that list.
I will research those. i know of some of them like Gvc.
the second list (smaller cap) has some very low volume listings which worries me.
i try to stay away from low volume.

*@humble pie* what do you recommend for uranium exposure?
UUU CCO URA or something else?

*Daniel A.*, thanks I will research canexus as well


----------



## humble_pie (Jun 7, 2009)

i couldn't recommend anything, but only mention what i hold.

in cambior as it happens i added to my collection of CCJ USD call spreads this morning. These include long term leaps options as the long leg, so the strategies have 2 years to run.

the leverage appeals to me. Another important reason - at least for me - for by-passing the stock & taking the option route instead is that cco/ccj is a low-dividend payor. It is not worth tying up capital in the common stock itself if one is going to end up with such a low dividend, imho.

in UUU i have shares + short july 3.50 calls. There is nothing that can be done about these at the present moment, ie not enough decay has set in yet in the july options. If setting up today i would sell a higher strike, but these options were sold a while ago.


----------



## Mall Guy (Sep 14, 2011)

canadian_investor said:


> i need either a deep market correction within the next 2 months or i need you intelligent people to offer me ideas about undervalued companies (small, mid or large cap).


Broadly speaking, not a good time to be adding yield producing asset (i.e. REITs specifically) as the Cominar/Canmarc and Whiterock/Dundee M&A activity, coupled with the RRSP deadline is likely to result in a lot of cash looking for a new home (as we are seeing in the REIT universe at the moment). You might have to park the cash for now, and nibble at existing positions on a pullback. 

For myself, this years bonus is going straight to the mortgage until I see a buying opportunity (re-monetized through LOC).


----------



## Jesse (Jan 21, 2012)

Interesting take on uranium.

http://seekingalpha.com/article/351671-get-ready-for-the-coming-sale-in-uranium-stocks?source=yahoo


----------



## hboy43 (May 10, 2009)

hboy43 said:


> I have recently bought ECA. I am perfectly happy to hold something for years and years and then see it become a one or two bagger in 6 months. The problem is, I never know when the 6 month period of massive gains will occur, so I watch stuff do nothing for a long time. We can't have forever natural gas at 1/5 the cost of oil on an energy content basis, or have natural gas in Asia trade at whatever it is these days $7, $9, I don't know, and have it at $2.50 in NA. Sooner or later a pipeline will be built, or enough coal plants will convert to gas, or Methanex will restart or move enough methanol plants or whatever to tip the supply/demand balance.
> 
> Another company I have been mentioning around here for years is Norbord (NBD). I am on the record here somewhere saying I wished I owned 10,000 shares (actually 100,000, pre 10:1 consolidation). Any time I mention it, someone else here pipes up with a "this company sucks". It has not made me any money yet, but at my current holdings of 7400 shares, my ACB ($11.65) is about half of what it was 3 or 4 years ago. Bought recently in the $9s and again in the $8s for an average of $8.90/share. I was going to add another $10,000 at mid $6s, but never got there. This is a company that will dribble along, perhaps for years losing $0.25 here, maybe break even there, until one day the Americans will start building houses again. Then it will make $1/QUARTER and be a $50 stock. In just the past 2 months or so it has gone from middle $7s to about $11 recently on just the tiniest bit of good news in the US housing sector. In the mean time, they are sticking to their knitting, driving down costs and reinvesting in plant. With the recent advance it is my largest position at about 7% of my holdings.
> 
> hboy43


I feel it is time for comment on my words back 8 months ago. Or maybe I am just gloating!

But seriously, this is how long term investing works. It takes a LONG TIME to get lucky over night. This is why I am an investor with under 200 trades in 30 years, and not doing 5 trades/day. I have been in Norbord for (7-8?) years with buys as high as $100 range prior to 2008. Most of my buys are individually losers, but when you add more money at lower prices, magic happens. My NBD is up $86,000 since year end 2011 close price of $8.10. My lifetime gain is around $50,000. I sold 1000 shares a few weeks ago at $17.45 because it seemed the most sensible way to pay for my boat, and at > 9% of the portfolio, it was time for a trim. Unfortunately I also left $2,500 on the table. Such is the nature of investing, one just can't buy at the low and sell at the high, one can only buy lowish and sell highish.

I don't know the actual numbers, but my win-loss ratio or the number of trades that make money vs the ones that lose money is probably quite poor, at a guess no better than 60%. But remember, I hold for years, so one would expect a number better than chance just due to inflation and the expanding economy. So readers, knowing nothing else about me, you would conclude that I am a lousy investor with a 60% number. Hell I have gone for the ride to zero at least 6 times.

Yet, I have a growing pool of money somehow. The difference is those 10 or 20% of trades I make when the world is ending and the prices are REALLY LOW and often my ACB is way under water. Something allows me to buy NBD at $5, and $6 when my ACB at the time was over $20 (at a guess, give or take). I can keep my eye on the ball (NBD at $5 or $6) and not get distracted by the fact that I have lost money thus far
in this particular company. The opportunity those days was to buy NBD really cheap, the losses on my existing holdings was a sunk cost. The opportunity those days was available completely independently from the fact that I had no shares, shares with a ACB above, or ACB below the price that day.

I can't state this strongly enough. Any decision you make as to the value of stock X is quite independent from the fact you already do or don't own stock X, with an ACB above or below today's price. It either is or is not a reasonable buy or sell at the current price, and your existing holdings have no bearing on this fact. The only bearing your holdings have is if it is a good thing for you to buy or sell given your investment weightings, asset allocations and other personal factors.

Let's look at the buys at $9 and $8 range a year ago or so. One might ask, "Isn't that dumb, why didn't you just buy more at $5 back in 2008, you are paying almost double now". In 2008 (2009?), I likely felt the weighting was enough given the risk profile, or I might not have had the available cash or felt like expanding the margin loan. So while I concluded that the price to buy at was favourable in 2008, my participation at the time was limited to whatever quantity I bought. A year ago, I had some money or was willing to leverage and the weighting in the portfolio was deemed not too high. Sure, I paid more, but stuff happened in the intervening years: Norbord somewhat fixed their debt situation, made capital improvements, closed some plants, competitors closed plants, housing starts are up, pricing popped a bit, in short the risk came off somewhat. I paid more, but I got more in terms of reduced risk.

Now contrast NBD with ECA also mentioned in the original comment. Natural gas pricing is in the dumpster now just like OSB pricing was in 2008 (and still is frankly). ECA share price was down substantially, though not to the same percentage extent as NBD back in 2008 because ECA has financial strength and size. I had no pure natural gas holdings and saw an opportunity, so I bought 1000 shares, then 1100, then another 900, all roughly equal dollar tranches. Now I sit back and wait. Will I have to wait 7 or 8 years like NBD? Who knows. I can't control when I'll make money on ECA, or even if I will make money on ECA. All I can do is note interesting facts (energy content vs oil, and relative cost per unit energy, $3/unit in NA, >$10/unit non NA, MX which uses natural gas as a feed stock is moving a plant to USA, closing coal fired electricity plants and opening gas fired, talk of shipping gas offshore ...) and decide my chances at $20 are pretty good long term. 

It is also interesting what I don't do, which is spend more than about 15 minutes reading annual reports etc. As long as the risk of bankruptcy is low, I don't much care. Don't let the precise quantitative short term stuff that doesn't matter get in the way of the soft fuzzy imprecise long term stuff that does matter. My analysis of NBD back in 2008 was little more than:

Are they going bankrupt any time soon? Not likely, majority shareholder by way of BAM is propping them up.
What is their plant like? Highest efficiency in the industry.
What is wrong exactly? Low price and demand of their product due to low housing starts.
Will Americans ever again build housing? Likely

Conclusion: Buy, sit back and see how the world unfolds.

Anyhow, this is how my brain works (or arguably doesn't, maybe being able to buy low means my brain is in fact "broken", it just happens to help with investing. Maybe I am an investing idiot savant). Take from this what you will.

Boat arrives by truck tomorrow. I'll likely go back to being scarce around here. Best to all.

Cheers

hboy43


----------



## blin10 (Jun 27, 2011)

^^^ there's two sides to the story, while you came out ahead you took some crazy risk... with NBD, it went from 100+ to less then 5$, that's a huge bankruptcy risk area (you might say no way they could of went bankrupt but so did others with lehman brothers) but luck was on your side... investing long term in a rock solid company is way different then investing in an below average company and holding it for 5-10 years without getting paid to wait and hope if it'll make you money... you could of easily put money into something more stable back in 09 and you would probably make more money (while getting paid to hold shares) versus taking huge risk with a high chance of sinking your portfolio


----------



## Lephturn (Aug 31, 2009)

larry81 said:


> Do you have the balls to buy an asset at 20y low ?
> 
> http://www.google.com/finance?q=NYSEARCA:GAZ


Since this thread has been necromanced - I noticed this post. Gah - I hope nobody bought GAZ.

It's an ETN built on rolling futures contracts with all of the term structure, roll risk, and conterparty risk that entails. I hope everyone stayed away. Even iPath realized the issues:


> On May 18, 2012 Barclays Bank PLC published an investor guidance notification regarding the recent persistent and material premium in the trading price of the GAZ ETNs in relation to their intraday indicative value. Due to likely continued fluctuations in this premium, Barclays Bank PLC believes that the GAZ ETNs will not track the price of the underlying natural gas futures index in a consistent manner and therefore are currently not suitable for most investors (view press release).


Many of these things will continue to trend down over time regardless of the underlying. The best part is - the risk is practically unlimited! As these products degrade in value over time they just keep reverse splitting them forever. /shudder. Trading vehicle only - do not hold this!


----------



## hboy43 (May 10, 2009)

blin10 said:


> ^^^ there's two sides to the story, while you came out ahead you took some crazy risk... with NBD, it went from 100+ to less then 5$, that's a huge bankruptcy risk area (you might say no way they could of went bankrupt but so did others with lehman brothers) but luck was on your side... investing long term in a rock solid company is way different then investing in an below average company and holding it for 5-10 years without getting paid to wait and hope if it'll make you money... you could of easily put money into something more stable back in 09 and you would probably make more money (while getting paid to hold shares) versus taking huge risk with a high chance of sinking your portfolio


I don't think I took any crazy risks. I bought NBD in approximately 1% of net worth tranches and as a percentage of net worth it was in the 5% range. I think my risk taking parameters are well inside of what people do around here. In the last 2 years I have also purchased BBD.B, ECA, MX, POW, RY, RUS, SU, SNC. NBD is not my only horse.

I invite you to go back and read the history of Norbord during the last 5 years. If all you know is that the share price went from $100 -> $5, and based upon that knowledge assign "crazy risky" to it then ... you don't know much. In fact, you miss the entire point of my piece which is "Too bad, so sad I have lost a pile of money so far, but what a screaming opportunity this company is today, I should buy more".

So many people here follow so many companies, and jump in and out, allegedly making money. Here is a situation where by just paying attention to my existing holdings over a period of years, I spotted an opportunity and said so publicly, many times. I never counseled anyone to bet the farm. I never over sold it. I just laid out the case in a few hundred words from time to time. Such a simple story. Easy to understand. Not flashy. Not sexy. Nothing to brag about in the short term. It was a situation of serious investing for the serious long term. People have such a hard time investing for the long term. Now of late, I had an opportunity to close the loop "Look, it took me 7 or 8 years to make my involvement in a particular company pay off".

I did put money into companies more stable in 09 and they did not make me more money - say BMO at ~$25. I certainly do the "paid to wait thing", the gross aggregate annual dividend here is 3.2%. Actually NBD is the only company I own that does not pay a dividend, and it used to back when I first bought it.

No, if you think what I do is excessively risky, then I think you do not understand the situation. Ask questions and I will clarify.

As to the matter of luck, it is absolutely lucky that NBD has been on fire this year. Still, you have to admit that my process of relying on luck (if that is indeed my investment process) sure is inefficient when it takes years to be lucky. I'd be better off playing options, no? I am also serially lucky in all the other companies that I have bought more shares at substantially lower prices than other earlier buys: Nova Chemicals, GE, Methanex, Power, Russel Metals etc. At what point do I transition from being lucky to making my own luck?

Anyhow, thanks for taking the time to critique. No point in posting if nobody is reading it or interested.

hboy43


----------



## HaroldCrump (Jun 10, 2009)

hboy43 said:


> Anyhow, thanks for taking the time to critique. No point in posting if nobody is reading it or interested.


Speaking for myself only, I am very interested and have always read your posts with a great deal of interest.
You have demonstrated with clear and real examples what your approach is.
Yours is definetely a value oriented, long term approach.
I like it a lot, and have learnt from your posts over the years.


----------



## blin10 (Jun 27, 2011)

" I am also serially lucky in all the other companies that I have bought more shares at substantially lower prices than other earlier buys: Nova Chemicals, GE, Methanex, Power, Russel Metals etc. At what point do I transition from being lucky to making my own luck?" dude, you could of picked pretty much ANY stock in 08/09 and it would make money, has nothing to do with your super picking skills...




hboy43 said:


> I don't think I took any crazy risks. I bought NBD in approximately 1% of net worth tranches and as a percentage of net worth it was in the 5% range. I think my risk taking parameters are well inside of what people do around here. In the last 2 years I have also purchased BBD.B, ECA, MX, POW, RY, RUS, SU, SNC. NBD is not my only horse.
> 
> I invite you to go back and read the history of Norbord during the last 5 years. If all you know is that the share price went from $100 -> $5, and based upon that knowledge assign "crazy risky" to it then ... you don't know much. In fact, you miss the entire point of my piece which is "Too bad, so sad I have lost a pile of money so far, but what a screaming opportunity this company is today, I should buy more".
> 
> ...


----------



## hboy43 (May 10, 2009)

blin10 said:


> dude, you could of picked pretty much ANY stock in 08/09 and it would make money, has nothing to do with your super picking skills...


Your tone suggests a criticism, yet the actual statement really is my point in a sentence: Buy low when the opportunity comes along, like say 08/09. I do. How come so many can't?

I never claimed super picking skills, quite the opposite actually. (At best, could be worse) I claim little better than 50:50. I invite you to go back and read all of which I wrote.

Perhaps you could tell us what stocks you bought in 08/09 and still hold as another example of someone able to buy low when the opportunity presents itself. Some more anecdotal evidence from other folks of the value buying low when the opportunity arises is always welcome.

Cheers,

hboy43


----------



## Belguy (May 24, 2010)

Always keep some cash on hand to be ready for the inevitable market crashes and subsequent buying opportunities.

Buy low, hold, and sell high is the long term formula for success.

A variation on this is to buy stocks of solid companies with a history of paying increasing dividends over time when you're ready and then hold them forever. Time will be your greatest friend.

To further simplify things, just invest in a diversified portfolio of four or five of the lowest-fee, broadest-based ETF's and hold them forever.


----------



## Plugging Along (Jan 3, 2011)

^. I do try to keep cash on hand, but I find that since I am a buy and hold person, I keep running out of cash. I tend to to go all in when I feel it's a good buy.

Just curious how much cash do people keep on hand, and how do you replinish it.


----------



## avrex (Nov 14, 2010)

Plugging Along said:


> Just curious how much cash do people keep on hand, and how do you replinish it.


Here's the CASH - Your current portfolio percentage % thread. Have a look to see how much cash people typically have in their portfolio (and why).

.


----------



## Belguy (May 24, 2010)

There is no correct answer as to the appropriate cash allocation in a portfolio as it depends and many factors. I find that, as grow older and get deeper into my retirement, that I am looking for more security. Young whipper-snappers, who are just beginning their investment careers needn't be so conservative. However, even then, it is handy to have money set aside to invest when the right opportunities come along. I also like to have a cash component to my portfolio should unforeseen circumstances come along and to prevent having to sell some equities during down markets.


----------



## Belguy (May 24, 2010)

Here is an article just released by the G&M's Rob Carrick on the subject:

http://www.theglobeandmail.com/glob...s/when-cash-is-no-longer-king/article4896342/


----------

