Investments

One of the keys to long term successful investing is to have a diversified portfolio among many stocks and sectors because not all portfolio holdings can be contributors to positive performance day in and day out. This month, that diversification has helped the Padlock portfolios to stay ahead of the market while two of our bell-weather holdings have had a difficult couple of weeks. Apple and Google, which have been very strong contributors to the positive performance this year, have both declined recently but those declines, rather than being a cause for concern, have created the opportunity for them to once again lead the portfolios for the balance of the year. Starting Thursday, October 18th, Google shocked investors by having their earnings released four hours ahead of schedule and having them widely miss expectations. Apple then released their earnings the following Thursday and also disappointed investors by falling slightly short of the...

When I appeared on Headline with Howard Green on September 12th and was asked if it was time to take profits in Apple, I jokingly responded that “it is never the time to take profits in Apple”.  There will obviously be a time to take profits in Apple and at some point to sell the entire position BUT that time is NOT NOW. From its intraday high of $705.07 on September 21st, the stock has fallen 9.5% to close yesterday at $638.17.  Reasons for the decline range from the disappointment of selling “only” 5.0 million iPhone 5’s the first weekend to the premise that stock prices cannot grow to the trees and Apple is already the most valuable stock in the world.  Yes, there was an issue with the new Maps application on the iPhone and also reports of labour unrest in China but to extrapolate that Apple’s best days are...

Just a brief note today with a couple of housekeeping details. First of all, tomorrow (October 3rd), I will be appearing on Market Call at 1:30pm. This half hour show is hosted by Michael Hainsworth and is re-broadcast at 8:00pm. The video will be posted in the Library section of this website. The performance charts to the end of the third quarter for the three Padlock Composite Portfolios - Balanced, Growth and Small Cap Growth - have been posted in the Performance section of this website. With the standard caveat that past performance is not indicative of future performance, I have been very pleased with the results this year, particularly when according to a recent JP Morgan report that only 10% of US equity mutual fund managers had exceeded the S&P 500 Index (their benchmark) by 2.5% or more. If you have any questions about the charts, give me a call. I...

Last week, I attended the Peters & Co. Fall 2012 Oil & Gas Conference in Toronto at the Toronto Ritz Hotel. It was an interesting setting since that week the hotel was also serving as the official hotel of the Toronto International Film Festival (TIFF). With a throng of paparazzi lining up outside the hotel, the only star sightings for me were not the Hollywood stars at TIFF but rather a few oil & gas stars from Calgary. There were several themes that were in evidence throughout the conference. The key themes were, as detailed in the Peters & Co. research summary: 1) North American Natural Gas Outlook - All the Right Things are Finally Occurring; Will Supply Ever Respond 2) Canadian Oil Differentials will Remain Volatile Throughout 2013 3) Maintenance Capital Requirements in the Oil Sands have been Vastly Underestimated 4) Propane Prices Crash - Does Liquids Rich Drilling Still Make Sense 5) With More...

Late last week, I was interviewed by Proactiveinvestors. Proactiveinvestors is a leading multi-media news organisation, investor portal and events management business with offices in New York, Sydney, Toronto, Frankfurt and London. They provide content to many of the world’s largest news amalgamators, financial websites, and news tracking services, and also provide commentary to dozens of other leading specialist investor focused websites. Here is the link to the article that was posted on their website this morning. If you have any trouble opening the link, let me know and I can send you the article in a different format. Talk to you soon. To receive The Lato Letter by email from now on, please click here....

Following my appearance on Market Call Tonight, the following are summaries of the three “Top Picks” from last night’s show.  If you missed the show, check the Library section of this website for the links to the show. Agrium, $95.53 With crop prices being driven higher due to the North American drought, second half demand in international markets should allow Agrium to build on its excellent first half results.  In a rare move, the company twice increased its guidance prior to releasing its second quarter earnings on August 3rd and still surpassed the consensus estimate of $5.20 with earnings of $5.47 for the quarter.  These earnings were an increase of 19% compared to last year and position the company to meet or surpass the current consensus estimate for the year of $10.23 per share. Agrium is extremely well diversified by operating in both the production, wholesale and retail segments of the market, by...

Just a brief note today to alert you to my appearance on Market Call Tonight at 6pm on Monday night (Aug 13th) and a follow up on this quarter’s earnings reports which are just about completed. Overall, it was another better than expected set of results for the companies comprising the S&P 500 Index. Of the 430 S&P 500 companies that have reported, 43% reported in excess of 10% earnings growth and 65% of this group have exceeded consensus estimates.  The group of stocks that was listed in earlier issues has done even better in terms of exceeding estimates. Here are the up-to-date results with only TD Bank left to report this month: Date Company Estimate Actual July 17 Goldman Sachs $1.18 $1.78 July 19 Shoppers Drug Mart $0.70 $0.71 Google $10.04 $10.12 July 24 Dupont $1.47 $1.48 Paccar $0.82 $0.83 Rogers Comm. $0.86 $0.91 Apple $10.36 $9.32 July 25 Pepsi $1.09 $1.12 Caterpillar $2.28 $2.54 July 26 United Technologies $1.41 $1.62 Aug 3 Agrium $5.20 $5.47 Aug 9 Cdn Natural Resources $0.50 $0.55 Manulife Financial -$0.45 -$0.18   Early next week, the next issue of The Lato Letter will discuss my Top Picks from Monday’s show.  Enjoy the show and I will be...

Well, we are about half way through the current earnings reporting season and not surprisingly, results as a whole are better than expected.  Consensus estimates have decreased consistently over the year and particularly in the last few weeks. The chart below is from the noted economist, Ed Yardeni’s blog and it shows the continued lowering of estimates for the S&P 500 throughout the year. The second quarter estimates have flattened out over the last couple of weeks as companies have reported their better than expected earnings, but third and fourth quarter estimates have continued to decline.  For 2012, the current consensus estimate for the S&P 500 is $104.11 which implies a current price/earnings (p/e) multiple of 12.8X which is below average.  For 2013, analysts are currently expecting growth of 12% to bring the earnings to $116.41 or a p/e multiple of 11.5X; a very low multiple in the current interest rate environment. The...

As we head into the real start of the second quarter earnings season this week, I thought the following headline and opening paragraph from Friday’s report from JP Morgan’s strategist, Thomas Lee, summed things up pretty well. Expectations have been lowered significantly over the past quarter which could lead to a pleasant surprise as the worst fears are not realized. 2Q12 S&P 500 EPS: Poor Visibility + Pre-announce = NERVES 2Q tracking to $26. $105 EPS on track...

It is never easy to say that you are wrong, but there comes a time when reality must be faced and a mistake must be acknowledged.  I acknowledged that mistake earlier today by selling my clients’ positions in Research In Motion (RIM). With perfect hindsight, RIM was the “value trap” of all value traps.  Its decline began while earnings were still growing, albeit at a slower rate, but the Price/Earnings (P/E) multiple remained compelling.  Starting last April, RIM began a series of negative announcements including the release of an incomplete tablet (the Playbook), earnings misses, senior executive departures, the replacement of the co-CEOs, layoffs and then finally last week a very significant quarterly loss and more importantly the further delay of their new BB10 phone and operating platform. As the stock reacted negatively to each of these announcements, I maintained the position on the belief that the bad news was factored into...

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