Return on Investment: Best Personal Finance Advice

Picture of flames with the title ‘You Are Being Burned’ on it.

Return on Investment:  Best Personal Finance Advice

Hi friend! Well, I’m at it again – bashing the banks, which continue to rip you off. I should know. They did it to me too – and still do. So, where to put your money? That’s what this blog post is all about.

I’m not your average milquetoast blogger.

I call it as I see it.

So, don’t click away too soon, because the truth about return on investment is just around the corner.

If you’re in a hurry, go to The Story right now.

Still Humming

Here are the eight reasons for optimism:

  1. $INDU Dow Jones Industrial Average INDX:  Many economists consider the DJIA to be a strong indicator of the overall strength of the U.S. economy – not just the investments market – due to the diversity of stocks in the index.  The Dow has been steadily trekking up.
  2. JNK SPDR Barclays High Yield Bond ETF NYSE:  This ETF is trending higher, signaling a return of appetite for risk on the part of the average investor.
  3. The VIX, the ‘fear index,’ is at all-time lows – a situation where there is a sentiment towards risk-on investing/trading.
  4. Interest rates are below normal (where else is money going to find a home?).
  5. Earnings growth is strong.
  6. Investors are piling into stocks, faced with a dearth of options with decent returns.
  7. The yield curve isn’t flat or inverted.
  8. Historically, bull markets conclude when, after a period of sustained growth, central banks raise interest rates due to inflation. We’re not there yet.  (Info via Landon Thomas Jr., as reported in The Globe and Mail, 1 Dec 2017)
  9. U.S. GDP will jump 0.8 percent in 2018, thanks to the new tax legislation.

For more reasons to be optimistic, go to these nine sections:

  1. A Raging Bull
  2. Great Main St. Indicator
  3. Another Window on Economy
  4. How to Predict the End
  5. Mkt. Indicators Gold Std.
  6. The Role of Psychology
  7. The January Effect
  8. Yield Curve Jitters
  9. Market Forecast for 2018

So, let’s see what the market has to say about all this.

The following calculation compares the market’s current price to a multi-day trailing average.

A ratio higher than one indicates that the market wants to rally higher.

The theory suggests that the forecast is stronger the higher the ratio.

Take a look at Tuesday, January 9, 2018, for example.

The VOO Vanguard S&P 500 ETF on the NYSE stock exchange had a close of 252.30.

Its 200-day exponential moving average closed at 227.95.

The resulting ratio of 1.11 is suggestive of a modest bullish signal. 


* Expect Further Highs *

If you are wondering where the market will be this time next year, give this idea some consideration.

Not what you might call a stock market outlook next 5 years, but it’s a good start.

The only caveat is that the calculation does not predict market turns.

(Info via Nir Kaissar, Dec. 28/16, The Globe and Mail)

December 18, 2017, the Dow had its 70th record close of the year.

Table of Contents:

Still Humming
The Story
Better Than Banks
Writing on the Wall
Warren Buffett’s Bet Redux
The Popularity of ETFs
The Role of Psychology
Free Cash Flow
How to Monitor Buybacks
A Raging Bull
Market Forecast for 2018
Market Protection
Great Main St. Indicator
The January Effect
RSI Trading Indicator
Small Cap ETF
Boy, Do I Love Vanguard!
Emerging Markets Strategy
BOO on Low-Volatility ETFs
China Meets Tech ETF
China Rising
Japan Rising
Diversify Via ETF or Fund
Another Window on Economy
Commercial REIT in Black
Canadian REITS
The Loonie and WTI
Rates and the Loonie
Rates and the Banks
Yield Curve Jitters
How to Predict the End
Did you know?
Two-Minute Portfolio (2MP)
Low-P/E High-Return Strat.
Window Dressing
The December Effect
Avoid December for Funds
The Best Dividend Product
Searching for Value
Beware Car Companies
Mkt. Indicators Gold Std.
The Ultimate Hedge
Laddered GICs
Analyst Stock Picks Suck
Canadian Stocks Eh?
Share Buy-Backs Exposed
Buy Japanese Stocks
All About Preferred Shares
What to Look for in Stocks
High Valuations Be Damned
Advice for Newbie Investor
Single-Stock Wealth Machine
A Regular Forecast Beater
Microsoft Embraces Medicine
A Most Innovative Company
A Free Cash Flow Stunner
Better Than Intel
An Old-Tech Stodgy Company
Internet of Things Giant
Best U.S. Bank in 2017
America’s Top Bank
A Growth Machine
Might Just Be a Great Pick
Consistent Returner of Cash
Solid as a Rock
A Buffett Bet
Dividend & Strong Earnings
Venerable Pharma Company
A ‘Monster’ Stock
A Fortune 500 Company
Most Valued Cloud Company
The Creator of Photoshop
Stunning Earnings Surprise
Legal Notice
Earnings Calendar
Mutual Fund MER Lookup
Inspiration and Quotes

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The Story

Picture of a frustrated man with his head bowed in his hands.

Benj Gallander, co-editor of Contra the Heard Investment Letter, has a friend who, for more than 25 years, was a vice-president at one of the major banks.

At his peak, he had more than 300 people working for him.

He told Mr. Gallander that a primary goal set for him was to get an investor to subscribe to investments that would embellish the bank’s bottom line.

If executed properly, that would result in higher bonuses and salaries for his people.

Translation:  This was NOT always in the best interests of an investor and his/her return on investment.

Get this… higher returns for the bank would mean lower return on investment for an investor.

You got that right.

So, the next time your friendly banker flashes a big wide grin at you, just remember whose side of the fence he/she is on.

Hint – not yours.

In closing, Mr. Gallander says that one of the most effective things he’s done that has made him a better investor is “reading, reading, and more reading.”

(Info via Genj Gallander and Ben Stadelmann, as reported in The Globe and Mail, 16 Nov 2017)

For a better place to park you hard-earned money than at your bank, and earn a far better return on investment, check out these three blog posts:

Better Than Banks

As a result of new tech connectivity, the level of efficiency in the markets has increased to the point where it is becoming nearly impossible to consistently outperform passive benchmarks – especially where there is little or no volatility.

ETFs are doing very well in this high-tech environment that is introducing ever-increasing efficiencies into the marketplace.

They are now a force to be reckoned with, and are giving the high-fee mutual fund industry (read, banks too!) a run for their money.

All of a sudden, an investor can own the whole market at a substantial discount to an actively-managed fund that is struggling to deliver alpha due to higher fees and greatly enhanced market efficiencies – and achieve a more equitable return on investment to boot.

The fund industry is trying to respond in kind by lowering their fees.

But, it is increasingly becoming a race to the bottom for funds having to compete with ETFs that charge as little as 10 basis points.

Not only that, but they are fighting for their very survival against banks and insurance companies, which have the clout (scale and size) to be a low-cost and profitable maker of ETFs.

And then there’s these new-fangled robo-advisers, which are offering automated asset allocation solutions and ETF selection for a fraction of the cost.

To complicate matters even further, they too are being disrupted by ETFs that are offering tactical rebalancing strategies within a single ETF.

Even companies and ETFs are utilizing artificial intelligence to rebalance holdings and weightings are getting in on the act.

CGNX Cognex Corp. Nasdaq is a company that develops vision systems to help computers see.

And then there’s an ETF for robotics, which should play a big part in the economy:

ROBO Global Robotics and Automation Index ETF Nasdaq

(Info via Martin Pelletier, as reported in the Financial Post, 14 Nov 2017)

So, you see, your local bank may not be the place where you want to invest your hard-earned money, if you are trying to maximize your return on investment.

After all, for the most part, they are nice people, but obviously biased.

For the record, I own VOO Vanguard S&P 500 ETF NYSE, and plan to add to my position over time.

I covered it here:

Writing on the Wall

Market efficiency has improved as a result of more equal access to information and a greater number of participants.

Accordingly, It has become increasingly difficult for the high-fee, active mutual fund managers to beat the passive benchmarks.

Mutual fund managers have capitulated, and have begun launching their own line-up of ETFs.

The independent portfolio investment firms with their large sub-adviser relationships and boutique managers with specialty offerings for an investor are under fire.

Unless they can start slashing their fees, they could all soon find themselves being replaced by ETFs that are currently providing similar mandates at only 0.5 to one percent with no performance fee, and delivering a higher return on investment.

(Info via Martin Pelletier, as reported in the Financial Post, 21 Nov 2017)

Even the banks and their prim and proper portfolio managers/wealth advisers can’t run and hide.

The pressure is on for them to reduce their MERs, and get rid of the trailer fees.

It’s about time.

I must relate an experience I had with one of my own bank’s so-called professional portfolio investment advisers.

At the time, I was locked into mutual funds at the bank (am still am, due to the tax consequences of collapsing them), and he wanted me to move some of my money over to him, so that he could manage it for me – at a fee, of course.

He took me to lunch and, as soon as I brought up my interest in ETFs/index funds, the lunch came to an abrupt halt.

I haven’t heard from him since, even though he promised to send me some information to me on his fee structure.

Nice lunch though.

Sure glad I ordered up.

Turns out he was more interested in collecting his fees than my return on investment.

Further, my bank offers a relatively low fee index fund, but doesn’t advertise it or push it, even though it would result in a better return on investment.

An investor has to do all the digging to find out about it underneath all the fine print.



Because it doesn’t make any money for the bank.

Instead, they foist their higher-MER portfolio investment products on the unsuspecting investor, all the while smiling with their shiny white teeth (not always so white).

Their sales reps that are immediately visible to you, as you enter the bank, are obviously trained to push the ‘rich’ stuff.

And, I suspect that, if you ask them about the ‘cheaper’ stuff, it will be a very short discussion, because they don’t know anything about it – or at least play dumb on the matter.

It took me a while to snap to attention, and that is why I am spreading the good word according to low-fee ETFs/index funds that maximize return on investment for an investor.

Even hedge fund manager Joel Greenblatt is encouraging people to buy low-cost index funds.

The letters aarrghh – a sign of frustration.

Read more here:

Warren Buffett’s Bet Redux

After predicting that the S&P 500 would provide a better return on investment than a basket of hedge funds over a 10-year period, Warren Buffett won his bet.

The reasons Buffett won have everything to do with the total fees paid when investing.

It’s a no-brainer to find an ETF that mimics a major equity index for a fee of 0.1 percent (10 basis points), or less.

At the other end of the spectrum, hedge funds tend to charge much higher total fees, thereby diluting return on investment for an investor.

They are a combination of an average fee of 1.5 percent to two percent per annum on the assets under management and 20 percent to 50 percent (in some rare cases) of the trading profits.

Furthermore, market volatility has reached all-time lows.

Many of the world’s bond and stock markets have been achieving strong results – the exception being resource-laden stock markets like Canada’s over the past few years.

(Info via Arthur Salzer, as reported in the Financial Post magazine, December 2017)

For more on Warren Buffett’s bet, consult this blog post:

The Popularity of ETFs

ETFs are easy to buy and sell.

They trade on stock exchanges throughout the trading day.

They’re cheap.

Their management expense ratios (MERs) are a fraction of what most actively managed mutual funds charge, thereby enhancing the return on investment for an investor.

To boot, they are completely passive and transparent, given they tend to track indexes, or follow well-defined investing methodologies.

Yes, there are hundreds of ETFs to pick and choose from.

But, the most popular equity funds tend to provide diversified exposure to major Canadian indexes, such as the S&P/TSX 60 index, and important sectors, such as energy and financials.

(Info via David Berman, as reported in The Globe and Mail, 15 Dec 2017)

My favourite Canadian pick:  XIU.TO iShares S&P/TSX 60 Index TSE

My favourite U.S. pick:  VOO Vanguard S&P 500 ETF NYSE

You will find more on VOO here:

The Role of Psychology

Stock market valuations have historically not been an accurate reflection of future economic prospects – this according to Jeremy Grantham, the widely-followed co-founder of money manager GMC LLC.

He asserts that the valuations have merely demonstrated whether current indicators are making an investor feel comfortable.

Three factors – stable economic growth (even its it’s low growth), low inflation, and high corporate profit margins – in large measure account for how much an investor has been willing to pony up for stocks over the past several decades.

Mr. Grantham points out that these factors simply don’t cut it in terms of valuing shares.

Take profit margins, for example.

They tend to revert to the long-term mean.

Accordingly, high profit margins right now don’t really mean much in terms of the future prospects for stocks.

But, logic be damned.

An investor simply likes stable growth and high margins – even if they’re just modest.

After all, an investor is only concerned about return on investment.

Inflation is abhorred.

So, an investor is getting exactly what is desired.

As a result, don’t look for today’s markets to suddenly turn turtle.

To clue into when they might head south, keep an eye out for junk bonds and yield curves.

For more on yield curves, go to Yield Curve Jitters.

I covered those two considerations in this blog post:

(Info via Ian McGugan, as reported in The Globe and Mail, 14 Nov 2017)


Shorting a stock is when an investor borrows shares and immediately sells them, hoping to scoop them up later at a lower price, return them to the lender, and pocket the difference.

This can potentially provide a reasonable return on investment.

(Info via Larry MacDonald, as reported in The Globe and Mail, 20 Nov 2017)

Free Cash Flow

Free cash flow is a measure of a company’s cash flow from operating activities, net of capital expenditures.

Companies that generate a lot of free cash flow have the flexibility and liquidity to be able to buy back shares, reduce debt, pay dividends, or reinvest back into future growth – all things that ultimately add value for an investor, and help with return on investment.

(Info via Ian Tam, as reported in The Globe and Mail, 16 Nov 2017)

An example of such a company is Telus (T.TO).

I covered it in this blog post:

How to Monitor Buybacks

PKW PowerShares BuyBack Achievers Portfolio Nasdaq:

Shares of companies that have bought back more than the average amount of their outstanding shares in the past year are lagging the overall market by the widest margin in a decade.

This is reflected in the above ETF, which holds U.S. companies that have repurchased at least five percent of their shares in the past year.

Now that rates have started to edge up a bit, fewer companies are repurchasing their shares.

(Info via Stephen Gandel, as reported in The Globe and Mail, 21 Nov 2017)

A Raging Bull

Brian Belski, BMO chief portfolio investment strategist, is at it again.

He calls for the S&P 500 to push 3,000 by the end of 2018.

He expects earnings growth to accelerate into double-digit territory for 2018.

His forecast doesn’t take into consideration any potential benefit from the cuts to corporate tax rates in the U.S.

Looking at the new tax legislation, a reduction of ~20 percent would lift S&P 500 earnings by $10 a share, according to Mr. Belski.

(Info via Stephen Gandel, as reported in The Globe and Mail/Bloomberg, 21 Nov 2017)

Mr. Belski sees the S&P/TSX Composite Index hitting 17,600 by the end of 2018 – about 10 percent higher than where we are now.

(Info via Kristine Owram, as reported in The Globe and Mail, 22 Nov 2017)

An investor listens when he speaks, always having an eye out for return on investment implications.

His call in 2016 for 2017’s year-end target for the S&P/TSX composite index tracked right on target, as per his prediction, closing the year out at 16,209.13 (his forecast was for 16,000).

And, for 2016, his year-end target for the S&P/TSX for that year was met almost to the penny.

Not too shabby.

(Info via Jennifer Dowty, as reported in The Globe and Mail, 27 Nov 2017)

The markets are a great place to be for an investor looking to maximize return on investment.

Market Forecast for 2018

Peter Imhof, AGF vice-president and portfolio manager, foresees the markets being strong in the early part of 2018.

That said, he expects a pullback at some point, especially in the U.S.

He doesn’t see the pullback being as severe in Canada, given the fact that valuations there are so much cheaper, and because of the way the market is constructed – a lot of energy and financials.

The price of oil has been quite strong over the past few months, and financials are strong.

Energy stocks need to catch up.

(Info via Brenda Bouw, as reported in The Globe and Mail, 20 Dec 2017)

Market Protection

David Rosenberg, chief economist and chief strategist at Gluskin Sheff + Associates, recommends a portfolio investment that can withstand economic shock – high-quality bonds and the stocks of companies with strong balance sheets and a history of resilient profits.

This will go a long way to protecting the return on investment of an investor.

(Info via David Berman, as reported in The Globe and Mail, 23 Dec 2017)

Great Main St. Indicator

Consumer confidence is a Great Main Street indicator.

It tends to peak within a year of a recession.

According to David Rosenberg, “It basically tells you that there is no pent-up demand.”

As at this writing (23 Dec 2017), U.S. consumer confidence is at the highest level since the dot-com craze in the 1990s.

(Info via David Rosenberg, chief economist and chief strategist at Gluskin Sheff + Associates, as reported by David Berman in The Globe and Mail, 23 Dec 2017)

The January Effect

Small cap stocks can rally in the New Year, after year-end tax-loss selling is over, and fund managers look for riskier stocks with a higher return on investment to help boost performance.

The ‘January Effect’ sees stocks rallying at the beginning of the year.

This phenomenon is attributed to stocks becoming oversold in December due to tax-loss selling and ‘window dressing’ by portfolio investment managers.

Window dressing is the practice of selling losing stocks, and buying winning stocks just prior to the end of the year, at which time a fund’s holdings are reported.

For more on this, go to Window Dressing.

Stocks most affected by the January effect are likely to be those that were trending down during the month of December – therefore making them ideal candidates for tax-loss selling and/or window dressing.

In theory, the January effect should affect all stocks.

However, portfolio investment managers more than likely hold mid- and large-cap stocks than their small-cap counterparts.

Stocks that have swooned strongly will probably show up as oversold by RSI.

See the section below on RSI to know how to deal with such a condition.

Recognia Strategy Builder (see link below) can be used to find Canadian stocks that may be positioned to fall into the January paradigm.

Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions.

Recognia’s Strategy Builder is a powerful investment research product suite that provides actionable investing and trading ideas based on fundamental and technical research that covers commodities, ETFs, forex, indexes, options, and stocks.

It is designed to define and evaluate well-suited portfolio investment strategies for selecting investment candidates that will potentially provide an acceptable return on investment for an investor.

(Info via Peter Ashton, as reported in The Globe and Mail, 22 Dec 2017)

RSI Trading Indicator

RSI (relative strength index) is a technical analysis oscillator that is used to determine if a stock (or other asset class) is oversold.

When RSI crosses above 30, that indicates that the stock is moving out of oversold status, and represents a bullish signal.

(Info via Peter Ashton, as reported in The Globe and Mail, 22 Dec 2017)


Warren Buffett believes that, if an investor has a deep understanding of his/her investments, which entails having a clear appreciation for return on investment, broad diversification is not essential.

(Info via Larry MacDonald, as reported in The Globe and Mail, 27 Dec 2017)

Owning small cap equities can help diversify a portfolio investment, because there are times when they outperform.

Versus multinationals, smaller firms usually have a domestic focus.

As such, they can show strength during times of robust economic growth.

Small Cap ETF

IJR iShares Core S&P Small-Cap ETF NYSE:

This ETF is an ideal way to get exposure to U.S. small-cap stocks, because it has a low fee (0.07 percent), and tracks an index that screens for higher-quality companies – this according to Daniel Straus, ETF analyst at National Bank Financial Inc., Toronto.

Eff. 29 Dec 2017, this ETF closed at 76.81 on volume of 2.4M.

(Info on small caps above via Shirley Won, as reported in The Globe and Mail, 14 Nov 2017)

Boy, Do I Love Vanguard!

Vanguard is one of the world’s largest money managers – the other two being Blackrock and Statestreet.

Vanguard Mid-Cap Value (VOE):

  1. Holds nearly 210 stocks (consumer discretionary 19% of portfolio, financials 22%);
  2. Ranks among the top 16% of its category for five- and 10-year performance;
  3. Has outpaced its peer group by nearly three percentage points;
  4. Four-star fund according to Morningstar;
  5. Annual expense ratio of 0.07%, versus the category average of 0.41%;

Vanguard S&P 500 (VOO):

  1. Cheap way to mimic the venerable S&P 500 index;
  2. Annual expense ratio 0.04%;
  3. Fifth-largest ETF;
  4. Has gained 17.2%, as at this writing (towards the end of 2017);
  5. Impressive five-year annualized return of 15.8%, compared with 14.2% for the average large-cap blend fund.

For the record, I own VOO, and will buy more. 

This is my all-time favourite Vanguard ETF – if not my favourite of ALL ETFs.

It continues to provide a great return on investment for me.

Vanguard Small-Cap Value (VBR):

  1. Ranks among top 25% of its peer group for three-, five-, and 10-year total returns;
  2. Invests in more than 840 stocks;
  3. Major sector weightings: financials (19% of assets), industrials (18%);
  4. As at November, 2017, the fund was up 6.7%, versus 4.0% for its category;
  5. Expense ratio 82% below category average;

Vanguard Total Bond Market (BND):

  1. Invests in nearly 8,250 securities, including corporate, foreign, government, and mortgage-backed bonds;
  2. Yields 2.5%;
  3. Has gained 3.3% as at November, 2017;
  4. 4% 10-year annualized return;
  5. Expense ratio 0.05%;

With the Federal Reserve’s rate hike in December 13, 2017, an investor is reminded that bond prices typically move in the opposite direction of rates.

But, the fund offers dependable income and a way to preserve wealth and return on investment.

(Info via Richard Moroney, editor of Dow Theory Forecasts, as reported in a article)

And then there are these Vanguard ETFs that offer to provide a respectable return on investment:

VB Vanguard Small-Cap ETF NYSE:

Per Denise Davids, ETF and mutual fund analyst at Industrial Alliance Securities Inc., Toronto…

  1. Tracks more than 1,400 companies;
  2. Exposure to U.S. smaller-company stocks;
  3. Mimics the CSRP U.S. Small Cap Index;
  4. Includes firms such as Chemours Co., Diamond Energy Inc., and Teleflex Inc.
  5. 0.06 percent MER.

The cash flow and earnings of smaller firms tend to be less stable than their larger peers.

Small-cap stocks are more sensitive to unexpected market shocks.

A decline in earnings growth or slower-than-expected economic expansion could potentially hurt the fund, and impact return on investment.

This ETF is susceptible to volatility.

(Info via Shirley Won, as reported in The Globe and Mail, 14 Nov 2017)

VEU Vanguard FTSE All-World ex-US NYSE

VSS Vanguard FTSE All-World ex-US Small-Cap ETF NYSE:

Per Daniel Straus, ETF analyst at National Bank Financial Inc., Toronto…

  1. Tracks more than 3,500 small-cap stocks outside the U.S.;
  2. Is 13 percent invested in Canadian companies, such as Gildan Activewear Inc., H&R REIT, and Keyera Corp.;
  3. 0.13 percent MER.

 (Info via Shirley Won, as reported in The Globe and Mail, 14 Nov 2017)

VT Vanguard Total World Stock ETF NYSE

VTI Vanguard Total Stock Market ETF NYSE

VXUS Vanguard Total International Stock ETF Nasdaq


As at 13 Dec 2017, the REIT benchmark Vanguard REIT ETF (VNQ) yielded 4.7%, nearly three times the S&P 500 average.

(Info via Brett Owens, Contrarian Outlook, as reported by, 13 Dec 2017)


In terms of diversification outside Canadian markets, the biggest position should be the U.S. to get the most out of return on investment.

Exposure to emerging markets, be they China or other Far East markets, should be considered by an investor, but caution is necessary when considering Europe – the reason being that, even though Europe is almost always cheaper than the U.S., valuation is not necessarily a precursor to forward performance.  

(According to Brian Belski, chief investment strategist at BMO Nesbitt Burns, as reported by Jennifer Dowty in The Globe and Mail, 27 Nov 2017)

See China Rising and Japan Rising for portfolio investment ideas that could just be the ticket to jumpstart your return on investment strategy.

Emerging Markets Strategy

An easy way to ensure that you have emerging markets in your portfolio is to simply buy an ETF that invests in the entire global market and not just in the stocks of developed countries.

(Info via Rob Carrick, as reported in The Globe and Mail, 23 Dec 2017)

See the VT and VXUS ETFs in the above section that purport to generate a suitable return on investment appropriate for the average investor.

BOO on Low-Volatility ETFs

Do not buy these ETFs with the expectation of outperforming for the next five years.

They are strong in a cautious or weak investing environment.

In a more bullish market, they can be laggards and a drag on return on investment.

(Info via Rob Carrick, as reported in The Globe and Mail, 24 Nov 2017)

China Meets Tech ETF

CQQQ Guggenheim China Technology ETF NYSE:

November 22/17, this ETF took in a record US$40-million – the largest daily inflow, since it started trading in 2009.

It tracks two of the year’s hottest trends – emerging markets and tech.

Thanks to its double focus, this was the best-performing, non-leveraged equity ETF in the U.S., with an increase of 87 percent in 2017.

Talk about a healthy return on investment!

According to Josh Lukeman, head of delta one trading for the Americas at Credit Suisse Group AG, the typical investor is obviously tuned into the Internet and tech in China.

With its laser-like focus on the country’s tech sector, the ETF outperformed larger China ETFs in 2017.

It is heavily weighted in companies like Baidu Inc. and Tencent Holdings Ltd.

But, according to Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research, its more obscure holdings give it an edge.

(Info via Gordon Pape/Bloomberg News, as reported in The Globe and Mail, 28 Nov 2017)

China’s rapidly growing tech sector has been one place highlighted by analysts as a potential growth area (great for return on investment) – relatively cheap at least as compared with 2017’s run-up in U.S. tech giants.

(Info via John Reese, as reported in The Globe and Mail, 27 Dec 2017)

China Rising

FXI iShares China Large-Cap ETF NYSE:

Best-performing ETF of the markets outside the U.S. in 2017, but Japan is on the rise – see below.

Japan Rising

EWJ iShares MSCI Japan ETF NYSE and
DXJ Wisdom Tree Japan Hedged Equity Fund NYSE

“About three months ago, Japan broke out of what had been a well-defined 25-year secular bear market.”

(Info via David Rosenberg, as reported by David Berman in The Globe and Mail, 9 Dec 2017)

The above ETFs for China and Japan should be on your radar screen for possible return on investment opportunities.

Diversify Via ETF or Fund

ETFs and mutual funds offer diversification, in that an investor is protected from losing most or all of his/her money on one bad stock pick, thereby safeguarding return on investment.

The reverse is true too… such diversification can work against an investor, in the event one or more of the stocks in the ETF or fund take off, and the rest do not.

(Info via Rob Carrick, as reported in The Globe and Mail, 23 Dec 2017)   

All About Real Estate… (IYR, VNQ, PLD, CAR/UN.TO):

Another Window on Economy

IYR iShares U.S. Real Estate ETF NYSE and

Real estate is now back in vogue, and a good place to be looking for return on investment possibilities.

Witness the trajectory of the above two ETFs – steadily up as of late.

As a matter of fact, the real estate sector was the best performer in the S&P 500 index over the month of November, 2017 – outpacing the broader market.

Week ending 24 Nov 2017, the fund saw the largest inflow in almost a year.

(Info via Sarah Ponczek, as reported in The Globe and Mail/Bloomberg News, 28 Nov 2017)

If you want to gauge the health of the economy/stock market, beyond what the real estate landscape looks like, just keep an eye on JNK SPDR Barclays High Yield Bond ETF NYSE.

It will give you a clue as to investors’ appetite for risk.

If it is advancing, that means that there is a risk-on bias.

I reported on that ETF in this blog post:

And, be sure to pay attention to what the VOO ETF is telling you – covered here:

See the Still Humming section at the beginning of this blog post for more details.

Commercial REIT in Black

PLD Prologis Inc. NYSE:

Prologis has been returning consistent capital value and reliable dividend yields to investors.

The company has undertaken several acquisitions and strategic partnerships to boost its presence in high-demand geographies.

These strategic initiatives, along with its enhanced guidance going forward, probably accounts for the rally in PLD’s share price, which caused a spike in the company’s price-to-FFO multiple.

(Info via Jennifer Matthews, 19 Jun 2017, 3:34 pm EST, as reported at

Number of Ratings:  20

Number on the Buy Side:  11

Average Target Price:  67.63 (closed at 64.51, 29 Dec 2017)

(Info via

Earnings Announcement for PLD:  23 Jan 2018

According to Zacks Investment Research, based on nine analysts’ forecasts, the consensus EPS forecast for the quarter is $0.67.

The reported EPS for the same quarter last year was $0.63.

For the past four quarters, earnings per share have either exceeded or met expectations.

(Info via

Canadian REITS

Canadian investors love their REITS and the return on investment they offer – this due to the fact that they have generous payouts, as dictated by the tax requirement that they must distribute the bulk of their income to their unit holders.

The payout ratio indicates the percentage of earnings paid out as distributions or dividends.

One REIT worthy of note is CAR/UN.TO – Canadian Apartment Properties Real Estate Investment Trust.

The REIT has told its unit holders that it is continuing to post strong results, maintaining a 20-year track record of strong growth and solid operating performance.

It has a payout ratio of just under 70 percent – a healthy return on investment, I might add.

The units returned more than 20 percent in 2017, and hit a 52-week high.

Eight of the twelve analysts covering this REIT have a buy rating, according to Bloomberg data.

(Info via David Milstead, as reported in The Globe and Mail, 21 Nov 2017)

The Loonie and WTI

The Canadian dollar is the most correlated currency to WTI (West Texas Intermediate).

The trajectory of oil for the next few years will be flat.

Accordingly, the longer-term trajectory of the Canadian dollar will also be flat during that time.

(According to Brian Belski, chief portfolio investment strategist at BMO Nesbitt Burns, as reported by Jennifer Dowty in The Globe and Mail, 27 Nov 2017)

Rates and the Loonie

Short-term bond yields rise in concert with central bank policy rates.

The primary determinant of the Canadian dollar’s value versus the greenback in recent years has been the relative yields on Canadian and U.S. bonds.

Merrill Lynch foreign exchange strategist Ben Randol thinks the Federal Reserve will be more aggressive in raising interest rates than the Bank of Canada.

He claims that this will push U.S. two-year bond yields higher in relation to Canadian bonds.

Accordingly, the loonie will fall.

(Info via Scott Barlow, as reported in The Globe and Mail, 10 Dec 2017)

The U.S. Federal Reserve has been hiking rates, most recently 13 Dec 2017, as the economy continues to show strength.

Higher U.S. rates, just when the Bank of Canada may be holding its key rate steady amid concerns about economic uncertainty and the housing market, could drive the loonie down to 73 cents (U.S.) in 2018.

Accordingly, David Rosenberg, chief economist and chief strategist at Gluskin Sheff + Associates, suggests investing in Canadian companies that generate significant revenue in U.S. dollars – industrial exporters, life-insurance companies, and oil producers – thereby providing a better return on investment.

(Info via David Berman, as reported in The Globe and Mail, 23 Dec 2017)

Rates and the Banks

Skybridge Capital senior investment portfolio manager Troy Gayeski says that the future looks bright for the credit quality of regional banks.

As corporate lending rises, their balance sheets have ample room to grow.

A hike in interest rates could culminate in higher cash flows.

They are also positioned to take advantage of merger activity in the industry and the U.S. tax bill, which lowers the levy on corporations.

The industry may also benefit from potential changes to the Dodd-Frank financial regulations in the U.S.

To capitalize on the opportunity, Skybridge has ramped up its wager on community and regional bank trust preferred CDOs.

They are collateralized-debt obligations with both equity and subordinated debt-like features.

(Info via Hema Parmar, as reported in The Globe and Mail, 26 Dec 2017)

Regional banks could just be the ticket, if you are looking to boost your return on investment.

Yield Curve Jitters

According to Ned David Research, an investor should not switch to defensive sectors when the yield curve flattens, contrary to the popular belief.

The research firm looked at times when the spread between the 10-year Treasury yield and the six-month bill flattened to less than 100 basis points.

See Definitions section for info on basis points.

According to analysts, including Pat Tschosik, that has happened six times, during which the cyclical energy and technology stocks have been the best performers among industry groups.

Per Ned Davis, consumer discretionary is one notable exception.

During times when the curve flattened to below 100 basis points, the cyclical sector was one of the worst performers.

According to the analysts, defensive stocks do become a better choice once the yield curve inverts.

Over the past four periods between the inversion of the curve and the end of a recession, the S&P 500 Consumer Staples indexes have outperformed the benchmark by a median of 41 and 33 percent.

So, where to from here?

Flip a coin.

Ned Davis Research indicates that historically the period between the curve flattening below 100 basis points and going negative took as little as 30 days or as long as 33 months.

According to Lacy Hunt, the chief economist at Hoisington Investment Management, the yield curve could invert by the end of this year (2018), as long as the Fed keeps shrinking its balance sheet.

(Info via Herbert Lash, as reported in The Globe and Mail/Bloomberg News, 18 Nov 2017)

A flat-to-inverted yield curve is considered to be a portent of a U.S. recession, and could give investors a bad case of heartburn.

But, according to Mr. Matthew Hornbach, global head of interest rate strategy at Morgan Stanley, such worries are ill-founded, given the fact that the S&P 500 index peaked well after the previous two instances in which the yield curve completely flattened.

(Info via Luke Kawa, as reported in The Globe and Mail/Bloomberg News, 28 Nov 2017)

For more on yield curve (premium), please go to the Definitions section, and also check out this blog post:

High valuations in and of themselves rarely cause markets to crash.

It usually comes in the form of a catalyst – something big enough to pull down the broad economy – that causes investors to run for the hills.

That catalyst could be a melt-down in housing prices, sharply rising interest rates, the outbreak of war, or something entirely different.

Stocks in developed countries are usually resilient, and bounce back post-recession with no long-lasting after-effects.

So, what are the immediate prospects for a recession in Canada or the U.S.?

Possibly by the end of this year (2018), but with no certainty at this point, of course.

An inversion of the yield curve is the most touted warning sign of an impending downturn.

Translation:  Short-term interest rates ramp up higher than longer-term rates.

This is called backwardation.

See Definitions section for more details.

This represents a reversal of the usual pattern in which it costs more to borrow money for longer periods of time than shorter ones.

The main cause of yield curves inverting is central banks driving up short-terms rates to tame a red-hot economy.

As a result, inversions have usually preceded recessions, especially in the U.S.

On the other hand, a flattening of the curve has no significance.

As at this writing, the yield curve is still not inverted.

The yield curve is still sloping upwards, even if only marginally, and still signalling growth ahead.

So, pas de sweat… sleep well.

Beyond the good news on the yield curve front, employment trends are cause for optimism, what with the jobless rates in Canada and the U.S. heading steadily downward – suggestive of continued economic momentum.

The time to get your knickers in a knot is when unemployment heads north.

The absolute level of unemployment peaks only after recessions are well entrenched.

A strong move higher in the unemployment rate often occurs months before the downturn starts.

According to William Dudley, president of the Federal Reserve Bank of New York, “Looking at the post-war period, whenever the unemployment rate has increased by more than 0.3 to 0.4 percentage points, the economy has always ended up in a full-blown recession.”

Another thing to take into consideration is retail sales.

Broad measures of consumer spending, as in food-service and retail sales, have flattened before recent recessions.

At present, retail sales in both Canada and the U.S. are still climbing steadily.

All of this adds up to a one big vote of confidence in the health of the stock market, and bodes well for continued strong return on investment for your every day investor.

(Info via Ian McGugan, as reported in The Globe and Mail, 11 Dec 2017)

How to Predict the End

Traditionally, bull markets come to and end when, after a sustained period of growth, inflation forces central banks to raise interest rates.

(Info via Landon Thomas Jr., as reported in The Globe and Mail, 1 Dec 2017)

Did you know?

  • It took 40 years to sell one billion personal computers.
  • It took 20 years to reach nearly seven billion cell phone users.
  • And it took five years to reach one billion tablet users.

Two-Minute Portfolio (2MP)

Here, an investor invests in the two largest dividend-paying stocks in each industry sector of the stock market.

This strategy has outperformed the S&P/TSX composite total return index over the long haul, but a U.S. variant tested a few years ago failed.

(Info via Rob Carrick, as reported in The Globe and Mail, 30 Nov 2017)

Low-P/E High-Return Strat.

For TSX-listed stocks with market capitalizations of $50-million to $200-million (Canadian), based on back-testing:

Twenty stocks with the lowest price-to-earnings ratios were targeted each year.

Those with the lowest returns over the prior year were discarded, and the 10 remaining stocks with the best return over the prior year were purchased and held for 12 months.

Then, the whole process was repeated (rinse and repeat).

From the start of 2000 to the end of 2016, this simple approach generated average compound returns of 21 percent (without trading frictions).

Not too shabby of a return on investment!

In comparison, over the same period, the S&P/TSX composite index gained an average of 6.1 percent.

(Info via Norman Rothery, as reported in The Globe and Mail 11 Dec 2017)

Window Dressing

Often institutions and money managers want to finish a year where they can show off companies that have been winners, so they buy the shares of such enterprises.

Such ‘Window Dressing’ serves to elevate share prices, and ramps up return on investment.

(Info via Benj Gallander and Ben Stadelmann, co-editors of Contra the Heard Investment Letter, as reported in The Globe and Mail, 30 Nov 2017)

The December Effect

December has been the best month for stocks in the S&P 500 for the three decades from 1987 through 2017.

Over that 30-year period, there were 24 December advances and just six declines.

Excluding dividends, the average December return was 1.85 percent – about three times as high as the average return of 0.62 percent for all months.

Talk about a juicy return on investment!

With 16 gains, 14 losses, and an average return of negative 1.01 percent, the worst month was August.

(Results obtained from the monthly market returns calculator at

Canadian stocks have done even better in December.

Over the past 30 years, the S&P/TSX composite index has posted an average December return of 2.02 percent over the past 30 years.

It was up 0.2 percent, as at 9 Dec 2017.

Not a bad return on investment, I must say.

So, why the outperformance for the month of December?

  1. Holiday cheer could possibly instigate stock buying;
  2. The so-called ‘Santa Claus rally’ might just be a self-fulfilling prophecy. An investor simply buys stocks in December on the assumption that stocks will move higher into Christmas; 
  3. It could be the year-end bonuses handed out on Bay Street and Wall Street. The theory has it that some of that money ends up in stocks, moving them higher;
  4. It could relate to the phenomenon of tax-loss selling. As the story goes, an investor typically dumps losers in October and November to use the losses for tax purposes.  This results in a market surge in December;
  5. Year-end ‘window dressing’ by fund managers could be yet another reason.  At the end of the quarter, they load the boat with winning stocks at the end of a quarter to embellish the performance of their portfolios, resulting in a favourable return on investment.

For more info, go to Window Dressing.

(Info via John Heinzl, as reported in The Globe and Mail, 9 Dec 2017)

Avoid December for Funds

An investor shouldn’t purchase ETFs and mutual funds in December, the very reason being the taxable year-end capital gains that many ETFs and mutual funds make.

Year-end capital gains distributions are not typically reinvested back into the fund, as opposed to being paid out in cash.

But, the net effect to an investor is still the same – the reinvested distributions are still taxable (represents a hit on return on investment).

According to Dan Hallett, vice-president with High-View Financial Group, it’s “generally a good idea to avoid late-year purchases of equity funds or other funds that have had a very strong run.”

The question is, how to avoid the year-end tax hit?

One way is to carry out the ETF and mutual fund purchases in January to get a better return on investment.

However, if an investor has a need for speed, and still wishes to do the transactions in December, this should be done inside a registered retirement savings plan or tax-free savings account to avoid tax consequences.

It should be noted that not all funds are the same.

According to Mr. Hallett, “An investor in truly passive index funds usually don’t have to worry about year-end purchases and subsequent return on investment, since capital gains distributions aren’t paid every year and, when they are, the amounts are small.”

Think VOO Vanguard S&P 500 ETF NYSE covered here:

For Canadians, give XIU.TO iShares S&P/TSX 60 Index ETF TSE a try.   

Contrarily, actively-managed funds, or those that use a mechanical strategy to buy sell stocks, may be more likely to trigger capital gains, and negatively impact return on investment.

(Info via John Heinzl, as reported in The Globe and Mail, 2 Dec 2017)

The Best Dividend Product

The best dividend product and the best performance in terms of companies that pay dividends are those that grow their dividends over time.

Historically and typically, REITs and utilities, especially, can’t provide the type of dividend growth that the banks, health care companies, industrial companies, insurance companies, and even the consumer companies in Canada can.

Dividend growth outperforms simplistic high yield, and provides for a better return on investment.

Outperforming companies are those that provide a consistency of earnings growth.

They are also companies that have a competitive advantage in relation to others.

What’s important is the consistency of dividends, earnings, and overall growth.

(All of this according to Brian Belski, chief portfolio investment strategist at BMO Nesbitt Burns, as reported by Jennifer Dowty in The Globe and Mail, 27 Nov 2017)

Bank shares pay dividends yielding about four percent.

Some investor types live on dividend income.

They reinvest the dividends through dividend reinvestment plans.

That enables them to increase the value of their portfolio investment without trying to time the markets, and thereby improve their return on investment.

Such an approach works well during bear markets.

At those times, an investor is too scared to buy stocks, even though they are on the cheap.

Dividend reinvestment plans keep buying for an investor.

Given that prices are low during market weakness, those plans scoop up more shares for each dollar invested.

The banking industry in Canada is solid and heavily regulated.

If the banks go down, there is no safe place to hide for an investor.

(Info via Larry MacDonald, as reported in The Globe and Mail, 27 Dec 2017)

The U.S. corporate tax cuts represented an early Christmas present for Canadian banks.

Toronto-Dominion Bank has a network of more than 1,200 branches, which stretch the length of the U.S. coast.

Its EPS is projected to rise by 2.3 percent.

Of the four major Canadian banks that are positioned to benefit the most, TD reaps the largest share of its total profit from U.S. operations, at 29 percent.

(Info via James Bradshaw, as reported in The Globe and Mail, 23 Dec 2017)

For the record, I own TD shares.

Searching for Value

IVE iShares S&P 500 Value ETF NYSE:

The simplest strategy for an investor to get broad U.S. exposure is to invest in a value-oriented ETF, such as the one above.

This affords an investor a wide selection of unloved stocks trading at low multiples of their book value, earnings, and revenue.

To hunt for value in developing nations, consider ETFs that encapsulate those areas like these two:

FNDE Schwab Fundamental Emerging Markets Large Company Index ETF

TLTE FlexShares Morningstar Emerging Markets Factor Tilt Index Fund

The traditional way an investor looks for value and associated return on investment is by looking for companies that are trading a low multiples of their book value, earnings, and sales.

It’s expecially inviting to consider companies that meet traditional value metrics, like price-to-book value, and also earn applause from analysts.

In terms of selecting which market to participate in, the cyclically adjusted price-to-earnings (CAPE) ratio, championed by Nobel economcis laureat Robert Shiller, rises to the occasion.

It takes into consideration how current share prices stack up when compared with average corporate earnings over the past decade.

This metric attempts to smooth out the ups and downs of the business cycle to show how a stock market compares with the baseline earnings power of the underlying companies.

In other words, it tries to measure the degree of relative cheapness by comparing the total value of a country’s stocks in relation to the long-run earnings power of its public companies.

(Info via Ian McGugan, as reported in The Globe and Mail, 2 Dec 2017)

Beware Car Companies

Car companies often trade at low multiples.

Low valutations are to be expected, when you take into consideration the auto sector’s cyclical nature, high debt levels, miserable history of creating value, and the potential disruptions that lie ahead from electric vehicles and self-driving technology.

Not so great if an investor is focussed on return on investment.

(Info via Ian McGugan, as reported in The Globe and Mail, 2 Dec 2017)

Mkt. Indicators Gold Std.

$INDU Dow Jones Industrial Average INDX:

Many consider the DJIA the gold standard of market indicators.

It consists of some of the largest and most well-known companies in the U.S., making it a truly diverse index.

As such,many economists view the DJIA as a strong indicator of the overall health of the U.S. economy – not just the investments realm.

The S&P 500 index is market-weighted.

Conversely, the Dow Jones Industrial Average is a price-weighted index.

Accordingly, the DJIA is calculated theoretically by adding up the prices of one share of each component stock, and dividing the result by thirty.

However, due to years of adjustments for mergers, stock splits, and the like, the current divisor now equals a fraction of one percent.

Arguably, since it is not influenced by the number of shares of each company has outstanding, the price-weighted method presents a more balanced view of the direction of the overall market.

(Info via Investopedia)

Commencing September 1, 2017, after the close, the Dow Jones Industrial Average comprises the 30 major companies at this link:

The Ultimate Hedge

Bonds are the best hedge against a stock market swoon.

Guaranteed Investment Certificates do the job too, but just keep in mind that they are not readily liquid.

(Info via Rob Carrick, as reported in The Globe and Mail, 15 Dec 2017)

It has been said that REITs provide a better inflation hedge than bonds.

See Commercial REIT Above Water and Canadian REITS for investing ideas.

Both bonds and REITs should help cushion any blows to an investor’s return on investment during a market meltdown.

Laddered GICs

Perhaps as much as 25 percent of an investor’s investment portfolio should be devoted to a GIC ladder.

This entails investing equal amounts in GICs maturing in one, two, three, four, and five years.

Subsequently, each year one-fifth of the investment portfolio holdings will mature, and can be rolled over into a five-year term at the then-prevailing rates.

Such a strategy guarantees that an investor benefits from any increase in GIC yields at a time when rates are rising, as they are now, thereby protecting his/her return on investment.

Although this is not a risk-free approach, it’s a good compromise between the two extremes of an all-equity and an all-GIC investment portfolio.

(Info via Gordon Pape, as reported in The Globe and Mail, 28 Dec 2017)

Stock news and return on investment details

Analyst Stock Picks Suck

A rotating portfolio of the best-rated stocks failed to beat the S&P/TSX composite index over the past 10 years.

It would be appear that even the top analyst stock picks by consensus perform no better over the long term than the average stock in the index.

(Info via Tim Shufelt, as reported in The Globe and Mail, 13 Dec 2017)  

Accordingly, investing in XIU.TO iShares S&P/TSX 60 Index ETF TSE would provde a better return on investment.

Canadian Stocks Eh?

Assuming the Bank of Canada will be sanctioning a weaker Canadian dollar, an investor seeking to maximize return on investment should focus on buying Canadian companies that have a significant footprint in the U.S. that generates a very high U.S. dollar revenue stream on a consistent basis.  (David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates)

(Info via David Berman, as reported in The Globe and Mail, 9 Dec 2017)

Share Buy-Backs Exposed

History shows that management teams don’t always buy back shares for totally honourable, profit-maximizing reasons.  (Kim Shannon, president and co-chief portfolio investment officer at Sionna Investment Managers, a Morningstar fund-manager-of-the-year award winner with 30 years of experience)

(Info via David Berman, as reported in The Globe and Mail, 9 Dec 2017)

Buy Japanese Stocks

“Japanese stocks have broken out of a bear market.”  (David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates)

Refer back to the Japan Rising section for further details.

(Info via David Berman, as reported in The Globe and Mail, 9 Dec 2017)

Mr. Rosenberg eyes investing opportunities in economies outside the U.S. that are not yet in the final stages of expansion, and that represent a better return on investment.

He sees the European economy improving.

He also calls for Japan’s stock market to continue its rebound, especially in areas that focus on the domestic economy.

His argument goes that Japanese stocks are experiencing a sustainable bull market as a result of rising dividend payments, rising economic activity, record high-profit margins, and historically cheap stocks.

According to Mr. Rosenberg, “A 25-year secular downtrend in the Japanese stock market ended about three months ago (from December, 2017).  So, this is not just a cyclical story; it’s a secular story.”

Mark Grammer, portfolio manager who is focused on international equities at Gluskin Sheff, claims that rising profitability among Japanese companies isn’t being fully reflected by the stock market.

He goes on to say, “We think there is an opportunity for the earnings to continue to grow, but we also think there is a potential for multiple expansion.  When you have both earnings growth and multiple expansion, you get outsized returns (and a better return on investment).”

(Info via David Berman, as reported in the The Globe and Mail, 23 Dec 2017)

All About Preferred Shares

Preferred shares are similar to bonds and stocks.

As with bonds, they are generally issued and redeemed at a par price, which is usually $25.

They also pay regular cash distributions, based on their coupon rates (the yield at par).

Like stocks, they trade on exchanges.

Unique to reset preferred shares, their cash payouts are periodically adjusted as per a predetermined spread above the yield on the five-year Government of Canada bond.

The cool thing about preferred shares is that, even if yields rise modestly, they offer upside (think return on investment), thereby offsetting potential setbacks by other yield-generating investments in vogue, such as bonds and dividend stocks.

(Info via David Berman, as reported in The Globe and Mail, 14 Dec 2017)

From 2013 to early 2016, preferred shares fell, due to falling bond yields, and the fact that reset yield on preferred shares was going to be less – in some cases significantly less – than the existing coupon that an investor held.

Underwriters came up with minimum reset rates designed to solve the problem of a negative interest rate adjustment, thus correcting the market.

A lot of preferred shares now come out with the existing coupon as the minimum reset going forward.

For a retail investor, given the tax efficiency, it is a pretty attractive security.

Again, consider the return on investment implications.

New issues of preferred shares are on the wane, just when there is pent-up demand for them.

(Info via Chris Currie, portfolio investment manager at Goodwood Inc, as reported by David Berman in the Globe and Mail, 9 Dec 2017)

What to Look for in Stocks

A steadily rising dividend confirms that the underlying business is solid, and that the outlook going forward is positive.

Other considerations include

  1. Relatively predictable earnings;
  2. Increasing free cash flow;
  3. Low debt levels;
  4. An attractive valuation.

Such metrics go a long way in identifying companies that can thrive in any environment.

Examples of such companies:

Canadian Tire (CTC/A.TO)

Intact Financial Corp. (IFC.TO)

Telus Corp. (T.TO)

(Info via Renato Anzovino, manager of the Heward Canadian Dividend Growth Fund, as reported by John Heinzl in The Globe and Mail, 6 Dec 2017)

Independent research shows that companies that grow their dividends typically outperform the S&P/TSX Total Return Index over a 25-year cycle.

Similarly, dividend-paying companies have been shown to be significantly less volatile than other investment opportunities, and deliver a satisfactory return on investment to an investor.

(Info via

Three ‘hot’ stocks favoured by fundamentally-driven hedge funds:  Alibaba, Facebook, and Microsoft.

High Valuations Be Damned

Triple-digit price-to-earnings ratios aren’t necessarily all that bad.

It all boils down to growth, market positioning, and the underlying strength of the business.

If you care to look back at companies that had sky-high valuations in the past, not all turned out to be bad investments, and did manage to generate a respectable return on investment in the process.

Many went on to have big gains for extended periods of time.

(Info via Larry MacDonald, as reported in The Globe and Mail, 16 Dec 2017)

Advice for Newbie Investor

Don’t make investing/trading decisions without undertaking a lot of due diligence.

Do your homework.

From an investing perspective, focus on the book by John C. Bogle – The Little Book of Common Sense Investing.

I covered it in these blog posts:

Learn the basic financials/fundamentals of each company you follow.

Read the earnings releases every quarter, and discover what’s behind the performance of each stock.

Treat investing/trading like a business, and return on investment will take care of itself.

Above all else, read, read, read – and then read some more.

Single-Stock Wealth Machine

(A ‘Must-Own’ Stock)

Alibaba Group Holding Co. Ltd. (NYSE: BABA):

“Buy One Stock, Take All the Marbles… a ‘buy one and you’re done’ money-maker… is becoming the global e-commerce killer.”

Here’s the scoop:

  1. Has integrated both augmented reality (AR) and virtual reality (VR) into the shopping ‘experience’ for consumers;
  2. Has pulled Big Data into the logistical equation in a way that pulls offline and online shopping into one function;
  3. Controlled more than 51 percent of China’s e-commerce market, as of the second quarter of 2017;
  4. Will still grow as the whole market grows, even if it loses market share;
  5. The biggest e-commerce player in China;
  6. Strategically positioned to take advantage of China’s explosive growth;
  7. Incredible future growth potential… oodles of cash headed its way.

Eye-Opening Fact:  Globally,two-thirds of ‘real GDP’ ($114 trillion) is attributable to China and emerging Asia, whereas the former ‘Big Three’ – western Europe, Japan, and North America – account for only 29% of what the world produces.

Per William Patalon III (attribution below), every single share of Alibaba that you buy today for $185 will be worth more than $2.1 million four-plus decades from now.

Now, that’s what I call a return on investment!

For more on Alibaba, see my last blog post:

(Info via William Patalon III, Money Monitoring, as reported at, 21 Nov 2017)

Goldman compiles a list of 50 stocks that most often appear among the top 10 holdings of fundamentally-driven hedge funds.

The top five on the ‘hedge fund VIP list’ included Alibaba, Alphabet (Google’s parent), Amazon, Facebook, and Microsoft.

(Info via Lu Wang, as reported in The Globe and Mail, 23 Nov 2017)

A Regular Forecast Beater

FB Facebook, Inc. Nasdaq:

Facebook has been aggressive in acquisitions, and has a great revenue model.

It’s one of the few growth stories out there that has positive earnings per share that have regularly beaten forecasts, and has driven a stellar return on investment.

(Info via Brenda Bouw, as reported in The Globe and Mail, 16 Nov 2017)

Goldman puts together a list of 50 stocks that show up most often among the top 10 holdings of fundamentally-driven hedge funds.

The ‘hedge fund VIP list’ lists Alibaba, Alphabet (Google’s parent), Amazon, Facebook, and Microsoft in the top five.

(Info via Lu Wang, as reported in The Globe and Mail, 23 Nov 2017)

Mark Mahaney is RBC Capital Markets’ lead Internet analyst and one of the top tech research analysts on Wall Street.

He calls Facebook ‘the cleanest story in tech.’

Microsoft Embraces Medicine

Microsoft Corp. (Nasdaq: MSFT) recently entered a hot new field – the emerging field of precision medicine – by cutting a new deal with the noted biotech services firm Azure.

According to Mordor Intelligence, precision medicine will be worth $59.2 billion by 2021.

Azure is the cloud computing platform that has helped move Microsoft into second place behind Amazon Web Services.

That unit posted 90% growth in its most recent quarter (September/2017).

It indicated in its 26 Oct 2017 quarterly report that its commercial cloud yearly run rate reached $20.4 billion in the quarter.

Microsoft has also announced a new pact with Parexel International Corp., a privately-held biotech research and consulting firm.

That firm helps biotech companies perform clinical trials, control and share data, and track and report patient outcomes.

Microsoft will be plugging Parexel’s bioinformatics technology into its Asure cloud platform, thereby hoping to help the healthcare industry’s precision medicine mission.

(Info via Michael A. Robinson, MoneyMorning, as reported at DailyTradeAlert, 20 Nov 2017)

Goldman puts out a list of 50 stocks that regularly appear among the top 10 holdings of fundamentally-driven hedge funds.

The ‘hedge fund VIP list’ includes Alibaba, Alphabet (Google’s parent), Amazon, Facebook, and Microsoft in the top five.

(Info via Lu Wang, as reported in The Globe and Mail, 23 Nov 2017)

A Most Innovative Company

Illumina Inc. (Nasdaq: ILMN): 

Ranked No. 18 on the Forbes World’s Most Innovative Companies 2017 list, because of its aggressive approach in ensuring industry leadership in genomics and precision medicine.

What’s to like about ILMN – another amazing return on investment generator?

  1. One of the fastest-growing medical firms of the last decade;
  2. Sales doubled in the past five years to $2.4 billion in 2016;
  3. Third-quarter sales rose 18 percent, and adjusted earnings grew a more impressive 34 percent;
  4. Stock rose 62.6 percent as at November, 2017, better than four times the S&P 500’s 15.5 percent gains;
  5. Will keep on beating the market by similar margins for the next decade or so, because we’re in the early stages of precision medicine’s revolution;
  6. Valued at $30.41 billion;
  7. More than $2 billion in cash on its balance sheet;
  8. According to, has beat or met earnings estimates for the four quarters Dec 2016-Sep 2017;
  9. Shows no signs of slowing down.

Areas of specialty:  agrigenomics, cancer research, DNA sequencing, genetic analysis (genomics), proteomics.

(Info via Michael A. Robinson, MoneyMorning, as reported at DailyTradeAlert, 20 Nov 2017)

A Free Cash Flow Stunner

TXN Texas Instruments, Inc. Nasdaq:

Texas Instruments, the chip maker, has committed to returning 100 percent of free cash flow through share buybacks and dividends – a plus for an investor’s return on investment.

The company targets free cash flow to be somewhere in the range of 20-30 percent of its revenue, according to Ms. Kera Van Valen, a portfolio investment manager at Epoch Investment Partners.

(Info via Herbert Lash, as reported in The Globe and Mail, 18 Nov 2017)

Better Than Intel

MU Micron Technology, Inc. Nasdaq:

Even though this chip maker’s stock ballooned in 2017, there may still be some room for it to grow, given the anticipated strong demand for memory chips.

It’s forward 12-month price-to-earnings ratio is attractive, less than half that of rival Intel Corp.

With a price-earnings-to-grow (PEG) ratio of 0.34 and long-term sales growth of 14.9 percent, it nicely tracks the investing style of famed Fidelity Magellan Fund manager Peter Lynch.

(Info via John Reese, as reported in The Globe and Mail, 15 Nov 2017)

Based in Boise, Idaho, Micron is one of the leading worldwide providers of semiconductor memory solutions.

The company’s quality memory solutions serve customers in a variety of industries, including:

  1. CAD/CAM;
  2. Computer and computer-peripheral manufacturing;
  3. Consumer electronics;
  4. Graphics display;
  5. Network and data processing;
  6. Office automation;
  7. Telecommunications.

Micron’s mission is to be the most efficient and innovative global provider of semiconductor memory solutions.


  1. Advanced Micro Devices
  2. Analog Devices
  3. Broadcom Limited
  4. Intel
  5. Maxim Integrated Products
  6. Microchip Technology
  8. Skyworks Solutions
  9. Texas Instruments
  10. Xilinx

(Info via

It produces many forms of semiconductor devices, including:

  1. Dynamic random-access memory;
  2. Flash memory;
  3. Solid-state drives.

Its consumer products are marketed under the brands Ballistix and Crucial.

Together with Intel, Micron created IM Flash Technologies, which produces NAND flash memory.

(Info via Wikipedia)

Number of Ratings:  34

Number on the Buy Side:  25

Average Target Price:  58.79 (closed at 44.12, 22 Dec 2017)

(Info via

Earnings Announcement for MU:  19 Dec 2017

According to Zacks Investment Research, Earnings Per Share came in at 2.14, versus the consensus EPS forecast for the quarter at $2.12, for a 13.68 percent surprise.

The reported EPS for the same quarter last year was $0.28.

For the past four quarters, earnings per share have either exceeded or met expectations.

(Info via

For the record, I bought Micron just before the earnings release, and sold my position when the market opened the next trading day, providing me with a nice return on investment in short order.

An Old-Tech Stodgy Company

Intel (INTC) Fact Check:

  1. Big player in chips for the PC and related markets;
  2. Leading provider of integrated circuits;
  3. Intel’s client computing group encompasses platforms for desktops, notebooks, tablets, and mobile communications products;
  4. Intel is remaking itself, pushing into higher-growth markets, like the company’s recent acquisition of Mobileye, a leader in autonomous driving technology.

Given its yield, Chuck Carlson of DRIP Investor anticipates that Intel will hold up better during the next market dip than a lot of the more highly-valued tech names.

This gives these shares some defensive qualities for investors worried about the next market swoon, thereby preserving return on investment.

Yielding 2.7 percent, the stock offers a quality total-return play, according to Mr. Carlson.

(Info via Chuck Carlson, editor of DRIP Investor and dividend reinvestment expert, as reported in a article, 11/06/2017 5:00 am EST)

Internet of Things Giant

Cisco Systems (Nasdaq: CSCO):

  1. Major multi-national company with $170 billion market cap;
  2. Revenue exceeds $48 billion per year;
  3. ~73,000 employees;
  4. Dominant player in the technology field (a high-margin business); known for its networking equipment (routers and switches); ~half of the world’s Internet users use its product;
  5. Also active in ‘Internet of Things,’ commercial network storage, business telephones, video conferencing software and hardware, and video delivery;
  6. Occupies number one or number two spots in nearly every market it is involved in; 50% global market share of its primary market;
  7. Has accumulated >$70 billion in cash;
  8. Generates huge sums of money every quarter;
  9. Giving as much of that money as possible to its investors;
  10. Started paying a dividend in 2011, which has grown at a compound annual growth rate of 30 percent; has paid out more than $23.5 billion worth of dividends to shareholders; likely to continue increasing dividend payments (sure helps with return on investment);
  11. Repurchased $26.8 billion worth of shares over the last three years;
  12. Has consistently churned out free cash flow in excess of $10 billion every year since 2010;
  13. Continues to be aggressively involved in ‘The Internet of Things’ market – a major growth catalyst, in which it is well positioned to become a market leader.

(Info via Jimmy Butts, StreetAuthority, as reported at, 17 Nov 2017)

Best U.S. Bank in 2017

Bank of America Corp. (BAC):

A bank holding company and financial holding company providing financial products and services to businesses, institutional investors, and people.

Berkshire Hathaway (Warren Buffett) owns 679,000,000 shares.

The valuation is reasonable, with the bank’s valuation implying a price-to-book ratio at just over one.

The bank’s earnings and revenue are in line with a lot of major US banks.

After struggling during the financial crisis, the bank has improved operations across the board.

Yield is 1.83 percent.

BAC recently raised its dividend by 60%, boosting return on investment.

What with operations firing on all cylinders, it looks poised to continue growing its dividend big time for the foreseeable future.

(Info via Jason Fieber, Mr. Free at 33, 15 Nov 2017, as reported by

It’s a much better bank than it was in 2008, now that it has cut its cost structure, and rid itself of non-core businesses.

It has significant capital, and should trade at 1.5 times book value, which would put the share price at US$38.

It also pays a good dividend of 1.76 percent.

The Avenue Investment Management team thinks “they will continue to increase their dividend, and buy back stock.”

(Info via Diane Maley, as reported in The Globe and Mail, 24 Oct 2017)

America’s Top Bank

Morgan Stanley (NYSE: MS):

  1. On the right side of rising interest rates and improving net investment income;
  2. Tax reform could boost its earnings;
  3. Shifting to asset and wealth management away from high-risk trading in bonds and stocks, but did top Chairman and CEO James Gorman’s quarterly target for bond trading revenues in the most recent quarter;
  4. Had its best year (2017) since 2006… increases in assets under management, interest income earned within the wealth management division, and lending balance;
  5. Stock still relatively cheap c trades at 12.5 times estimates of forward earnings, below industry average of 18; 
  6. Price/earnings to growth (PEG) ratio is 0.98 – anything less than one considered excellent; 
  7. Rising dividend policy since the financial crisis of 2008 – a big plus for return on investment.

(Info via Mark Skousen Editor, Forecasts & Strategies, High-Income Alert, The 1600 Alert – an advisory service focused on political trends that impact the markets and individual stocks, as reported at, 11/09/2017 5:00 am EST)

A Growth Machine

Charles Schwab (SCHW):

Founded in 1971 by Charles R. Schwab, and based in San Francisco, this is a bank and brokerage company.

It is on the list of largest banks in the United States, and is one of the largest brokerage firms in the United States.

The company provides services for investor types/traders and institutions that are investing/trading online.

It provides an electronic trading platform for the purchase and sale of financial securities, including common stocks, exchange-traded funds, fixed-income investments, futures contracts, mutual funds, options, and preferred stocks.

It also provides cash management services, margin lending, and services through registered investment advisers.

Schwab operates in four main divisions:  banking, investing, trading, and wealth management.

As at December 31, 2016, the company had 10.155 million active client brokerage accounts, with $2.779 trillion in assets.

The company operates 335 branches in 46 states, as well as a branch in each of Puerto Rico and London.

(Info via Wikipedia)

Three Reasons to Like Charles Schwab Stock:

The company has an exceptional culture, strong growth, and huge revenue upside.

Over the five years up to 8 Mar 2016, the Charles Schwab Company had grown its total assets by over 93%.

Schwab’s growth stands well above the rest, with potential for strong asset and revenue growth.

This asset growth has been the result of Schwab’s excellent customer service record, smart marketing, and efficient strategy.

For fiscal quarter end Sep 2017:  Earnings Per Share 0.42, versus Consensus EPS Forecast 0.41, for a 2.44 percent surprise (Courtesy

Schwab strives to find the right people (the best and the brightest), who want to work there, and who are both qualified and capable of executing the customer-first strategy of ‘through clients’ eyes.’

(Info via Jay Jenkins, TMF JayHJenkins, XMFJayHJenkins, 8 Mar 2016, as reported by

Might Just Be a Great Pick

E*TRADE Financial Corporation (ETFC):

Headquartered in New York, E-Trade Financial Corporation (stylized as E*TRADE) is a financial services company.

It is an online discount stock brokerage firm for a self-directed investor.

An investor can buy and sell such securities as bonds, exchange-traded funds, mutual funds, options, and stocks via electronic trading platforms or by phone.

E-Trade Financial also provides banking services to the retail investor, such as savings products and sweep deposits (info on the latter in the Definitions section).

There have been healthy earnings surprises for the last four reporting periods, according to (all positive, none negative) – can’t hurt return on investment.

(Info via and Wikipedia)

Consistent Returner of Cash

MO Altria Group Inc. NYSE:

Altria Group Inc. has tremendous cash flows and strong pricing power.

The company is consistent in returning cash to shareholders through debt reduction, dividends, and share buybacks – sure is a good move for return on investment.

(Info via Herbert Lash, as reported in The Globe and Mail, 18 Nov 2017)

Solid as a Rock

Eli Lilly and Company (LLY):

A leader in big pharma…

  1. Products to treat diabetes, human growth hormone deficiency, osteoporosis, and testosterone deficiency;
  2. Neuroscience products, including brain imaging;
  3. Products to treat various forms of cancer and migraine headaches; 
  4. Does similar things for animals;
  5. Noted for its science and expertise;
  6. Pays a 2.5% dividend;
  7. Solid revenues (slow and steady);
  8. Profitable;
  9. Has moved from $20 in 2008 to its current level in a fairly straight line.

Now, that’s what I call momentum.

(Info via Todd Shaver, Founder and Editor-in-Chief of, as reported in a article, 11/13/2017, 5:00 am EST)

A Buffett Bet


UPS appears attractively valued, according to Ingrid Hendershot (attribution below).

Solid third quarter results, with revenue up on balanced shipment growth and yield expansion – year-to-date revenues also up.

Revenue increased in all major product categories and segments, as expanded customer demand spread across the company’s broad product portfolio.  

YTD November, 2017, UPS had generated $4.4 billion in operating cash flow.

Earlier in that year, UPS upped its pace of investment in its network to capitalize on “tremendous e-commerce and international growth opportunities.”

The record-breaking seasonal global delivery volume was approximately five percent above the previous year’s holiday peak shipping season volume.

During the busy holiday shipping season, UPS takes advantage of its global delivery network to process nearly double the regular daily volume of documents and packages.

YTD November, 2017, the firm’s investment strategies had been supported by its capital expenditures.

Year 2017, UPS’s dividend pay-out was up 6.4 percent from the previous year, providing a current dividend yield of nearly three percent.

As at November, 2017, the company had repurchased its own shares, reaffirming management’s commitment to return cash to shareowners over concern for their return on investment.

(Info via Ingrid Hendershot, founder and president of Hendershot Investments, Inc., as reported in a article, 11/13/2017, 5:00 am EST)

Dividend & Strong Earnings

PEP Pepsico, Inc. NYSE:

This global beverage and food company posts a 2.7 percent dividend.

Venerable Pharma Company

Abbott Laboratories (NYSE: ABT):

Pharmaceutical company around for 125 years;

Focusing more on consumer products, diagnostics, and medical devices;

Diagnostic tools used in genetic testing, infectious diseases, and oncology;

Consumer products division makes dietary supplement Ensure;

Vascular unit has variety of guide wires, drug-eluting stents, and other products;

Stock yields 1.9%.

(Info via Marc Lichtenfeld, Investment U, as reported by, 22 Nov 2017)

A ‘Monster’ Stock

MNST Monster Beverage Corp. Nasdaq: 

  1. Predicted to grow its earnings per share by 22.55% over the next three years;
  2. During that time, revenue is expected to increase from $3,312M to $4,074M, with profit coming in at $971M (up from $792M ) – a growth rate of 22.55%;
  3. Accordingly, margins should be extremely healthy;
  4. Earnings growth over the past couple of years was 82.10% – possibly indicative of future outcomes.

In sum… MNST has a track record that suggests it has the capacity to grow at an elevated rate, and provide a commensurate return on investment.

Thirteen analysts at MarketWatch have a buy rating on the stock, with five rating it a hold and one a sell (22 Dec 2017).

(Info via Matthew Smith, November 24, 2017, as reported at news)

A Fortune 500 Company

CE Celanese Corp. NYSE:

With its HQ in Irving, Texas, Celanese Corporation, also known as Hoechst Celanese, is a Fortune 500 global specialty materials and technology company.

It is a leading producer of acetyl products, which are intermediate chemicals for nearly all major industries.

It is the world’s largest producer of vinyl acetate monomer (VAM).

Its operations are primarily located in Asia, Europe, and North America.

Its largest plant is in the Clear Lake area of Pasadena, Texas – home to the world’s largest acetic acid plant.

It reported net sales of $5.4 billion in 2016.

(Info via Wikipedia)

Number of Ratings:  21

Number on the Buy Side:  11

Average Target Price:  109.75 (closed at 106.54, 22 Dec 2017)

(Info via 22 Dec 2017)

For the past four quarters, earnings per share (EPS) have exceeded expectations.

(Info via

I always take EPS seriously in my quest for return on investment.

Most Valued Cloud Company


Headquartered in San Francisco, California, this is an American cloud computing company.

Its revenue comes from a customer relationship management (CRM) product.

Salesforce also capitalizes on commercial applications of social networking through acquisition and internal development.

As of early 2016, it is one of the most highly valued American cloud computing companies, with a market capitalization above $61 billion.

In August 2017, Salesforce announced that it had reached the $10 billion revenue run rate, becoming the first enterprise cloud company to do so.

Its common stock is listed on the New York Stock Exchange, and is a constituent of the S&P 500.

(Info via Wikipedia)

Number of Ratings:  46

Number on the Buy Side:  38

Average Target Price:  121.62 (closed at 102.63 22 Dec 2017)

(Info via

For the past three quarters, earnings per share have either exceeded or met expectations.

Such results have earned CRM a place on my watch list, because of the return on investment it can provide me.

(Info via

The Creator of Photoshop

ADBE Adobe Systems, Inc. Nasdaq:

An American international computer software company, headquartered in San Jose, California, United States.

Has historically focused on the creation of multimedia and creativity software products, with a recent move into rich Internet application software development.

Best known for Acrobat Reader, the Portable Document Format (PDF), Adobe Creative Suite, as well as its successor Adobe Creative Cloud, and Photoshop (image editing software).

(Info via Wikipedia)

Number of Ratings:  32

Number on the Buy Side:  20

Average Target Price:  197.28 (closed at 175.00, 22 Dec 2017)

(Info via

Earnings Announcement for ADBE:  14 Dec 2017

For the four quarters (Feb-Nov 2017), earnings per share exceeded expectations.

(Info via

14 Dec 2017:  Adobe delivered record revenue of $2.01 billion in Q4, representing 25 percent year-over-year growth.

In fiscal year 2017, Adobe achieved annual revenue of $7.30 billion, also representing 25 percent year-over-year growth.

Earnings per share were reported as 1.26, versus 1.16 consensus EPS forecast (source CNBC).

Record Adobe Document Cloud, Creative Cloud, and Adobe Experience Cloud Revenue in fiscal 2017.

The company is raising its fiscal 2018 revenue target, and remains bullish about delivering strong bottom line and top line growth.

This has got to be an attention-grabber for an investor looking for a good return on investment product.

(Info via

Stunning Earnings Surprise

DXC Technology Company NYSE:

DXC Technology offers one of the highest EPIs at 3.6 and a high return on capital of 28 percent.

The company resulted from the merger between Computer Sciences Corp. and the Enterprise Services business of Hewlett Packard.

Its revenues are growing rapidly, while the market value is still discounted by 16 percent.

According to MarketWatch, 13 analysts have a buy rating on the company, eight with holds – average target price of 102.00 (closed at 95.89 22 Dec 2017).

According the, the earnings surprises for the past three quarters have been stunning – 26.14, 26.19, and 35.29 respectively.

It is estimated that DXC Technology Company will report earnings 2 Feb 2017.

According to Zacks Investment Research, the consensus EPS forecast for the quarter is $1.98 – based on nine analysts’ forecasts.

The reported EPS for the same quarter last year was $0.81.

I reported on the company in this blog post:

(Info via Jean-Didier LaPointe, as reported in The Globe and Mail, 5 Dec 2017)

See References section for a definition of EPI.

NB:  More stock news and return on investment details in future blog posts.

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Earnings Calendar

Mutual Fund MER Lookup

The fund profiles on (link below) will show you the management expense ratio for your mutual fund.

That’s the standard way of measuring fees.

You can look up other funds in the same category to see how they compare.

(Info via Rob Carrick, as reported in The Globe and Mail, 22 Dec 2017)


Most commonly, a Dutch Auction is an auction in which the auctioneer begins with a high asking price, and then lowers it until some bidder accepts the price, or it reaches a predetermined reserve price.

It has also been called a clock auction or open-outcry descending-price auction.

Given that such a sale never requires more than one bid, it is a good way of auctioning goods quickly.

Strategically, it’s similar to a first-price sealed-bid auction.

In contrast, the winning bid may be less than the bidder was willing to pay in a traditional English auction.


The extra compensation an investor demands for taking on longer-term debt.

It usually compresses as tightening cycles progress – an acknowledgement that the withdrawal of monetary stimulus is designed to smooth the business cycle, and reduce tail-risk outcomes.

But, even if the yield curve doesn’t flatten for that reason, further rate hikes may start to cause traders to deduce that the Fed isn’t on track to tighten much more, and may actually ease policy going forward.

(Info via Luke Kawa, as reported in The Globe and Mail/Bloomberg News, 28 Nov 2017)

Adjusted Funds From Operations – AFFO:

This is the financial performance measure primarily used by an investor in the analysis of real estate investment trusts (REITs).

It is generally equal to the trust’s funds from operations (FFO), with adjustments made for recurring capital expenditures used to maintain the quality of the REIT’s underlying assets.

The calculation factors in the adjustment to GAAP straight-lining of leasing costs, rent, and other material factors.

It is considered to be a more accurate measure of residual cash flow for an investor than simple FFO.

This provides for a more accurate base number when estimating present values and a better predictor of the REIT’s future ability to pay dividends.

This is a non-GAAP measure.

(Info via Investopedia)

GARP (Growth at a Reasonable Price): 

A portfolio investment strategy that combines the tenets of both growth and value investing by finding companies that show consistent earnings growth, but don’t sell at overly high valuations.

The term was popularized by investing legend Peter Lynch.

(Info via

Economic Performance Index (EPI)

Return on capital divided by cost of capital.

An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders.

A higher EPI displays a greater rate of wealth creation – best for return on investment.

(Info via Jean-Didier LaPointe, as reported in The Globe and Mail, 5 Dec 2017)

See Stunning Earnings Surprise for an EPI on a company.

Future-Growth-to-Market-Value Ratio (FGV)

In percentage terms, FGV represents the portion of the market value that exceeds the company’s current operating value.

The higher the number, the higher the baked-in premium for expected growth and the higher the risk.

A negative number reflects a discount.

For example, a future growth value of minus 50 percent means that the market value would need to increase by 50 percent to equal what the company is worth, if its operating profit stays flat forever.

(Info via Jean-Didier LaPointe, as reported in The Globe and Mail, 5 Dec 2017)

Free-Cash-Flow-to-Capital Ratio:

The ratio gives a sense of how well a company uses the invested capital to generate free cash flows, which in turn could be used to reduce debt, pay and/or increase dividends, stimulate growth, etc.

A positive figure is good – five percent and above excellent.

(Info via Jean-Didier LaPointe, as reported in The Globe and Mail, 5 Dec 2017)

Net Asset Value (NAV):

Net asset value (NAV) is the value per share of an ETF or a mutual fund on a specific date or time.

With both security types, the per-share dollar amount of the fund is determined by any liabilities the fund has, the number of shares outstanding, and the total value of all the securities in its portfolio.

As it relates to mutual funds, NAV per share is calculated once a day, as per the closing market prices of the securities in a fund’s portfolio.

All of the buy and sell orders for mutual funds are processed at the NAV of the trade date.

However, in order to get the trade price, investors need to wait until the following day.

Mutual funds pay out virtually all of their capital gains and income – a negative for return on investment.

Accordingly, changes in NAV are not the best measure of mutual fund performance.

NAV is best gauged by annual total return.

ETFs and closed-end funds trade like stocks.

As such, their shares trade at market value, which can be a dollar value below (trading at a discount) NAV or above (trading at a premium).

ETFs have their NAV calculated at the close of the market daily for reporting purposes.

But, they also calculate intra-day NAV multiple times per minute in real time.

(Info via Investopedia)

Return on Equity

This is one of the key ratios to measure profit.

It is net income (or bottom line) of the company, divided by the book value of shareholders’ equity.

Put another way, it measures the return on investment that is generated to owners of the company’s stock.

Forward-Looking ROE Versus the Sector Median

A figure of 7.1 percent implies that the company’s forward ROE is 7.1 percent higher than that of the sector to which it belongs (higher figures preferred).

Standard Deviation of ROE Over the Trailing Five-Year and 10-Year Timeframes

Measures how volatile a company’s reported ROE is over those periods (lower figures preferred).

Debt-to-Equity Ratio (D/E):   

Should be less than that of the sector median to avoid overly leveraged companies.

A figure of 0.7 implies that the company’s D/E ratio is 30 percent lower than the median of the sector to which it belongs.

Price-to-FFO Multiple:

The most popular method of ascertaining the relative value (return on investment) of a REIT (real estate investment trust), like Prologis (PLD), is by using its Price-to-FFO (Funds From Operations) multiple.

The price-to-FFO multiple for REITs holds the same significance that the P/E (Price-to-Earnings) ratio holds for companies operating in other industries.

NAV (Net Asset Value) is also a valuation method for REITs.

(Info via Jennifer Matthews, 19 Jun 2017, 3:34 pm EST, as reported at

For more on PLD, go to Commercial REIT Above Water.

Outsourced Chief Investment Officers (OCIO)

OCIOs have the ability and experience to perform initial due diligence on a hedge fund manager, as well as on an on-going basis.

They are able to access the best hedge funds at reduced fees and/or reduced minimums which, in many cases, compensate an investor for the fee to an OCIO.

At no time should an OCIO be earning commissions.

(Info via Arthur Salzer, as reported in the Financial Post magazine, December 2017)

Efficient Markets Hypothesis

All information is reflected in the prices of stocks and other assets, and markets as a whole are more rational, smarter, and stable than any individual investor.

(Info via Brian Milner, as reported in The Globe and Mail, 12 Dec 2017)

Fundamental Analysis

A method used in the search for return on investment to evaluate how much a company is worth by looking at certain metrics, such as earnings, revenue, etc., and how they relate to macroeconomic conditions.

Technical Analysis

Focuses on forecasting the direction of stock prices (and other asset classes) by looking for trends in historical market data, such as price and trading volume.

(Info on fundamental/technical analysis via Emily Halverson-Duncan, as reported in The Globe and Mail, 12 Dec 2017)

Price-to-Earnings Ratio

A measure of how expensive a stock is for an investor – certainly a factor in evaluating return on investment.

(Info via Ian McGugan, as reported in The Globe and Mail, 12 Dec 2017)


Future prices are higher than near-term contracts.

(Info via Pratish Narayanan as reported in The Globe and Mail, 13 Dec 2017)

An Economic Performance Index (EPI) is derived by dividing return on capital by cost of capital.

An EPI ratio greater than one is indicative of a company’s capacity to create wealth for its shareholders (i.e., return on investment).

A higher EPI suggests a greater rate of wealth creation.

Future-Growth-Value-to-Market Value

This metric represents, as a percentage, the portion of the market value that exceeds the company’s current operating value. 

The higher the value, the higher the baked-in premium for expected growth and the higher the risk.

A negative number reflects a discount.

As an example, a future-growth-value ratio of minus 50 means the market value would need to increase by 50 percent in order to equal what the company is worth, if its operating profit stays flat forever.

Free-Cash-Flow-to-Capital Ratio:

This ratio gives a sense of how well a company uses the invested capital to generate free cash flows, which could be used to reduce debt, pay and/or increase dividends, stimulate growth, etc.

A positive figure is good – five percent and above excellent.

(Info on EPI, Future-Growth-Value Ratio, and Free-Cash-Flow-to-Capital Ratio via Jean-Didier LaPointe, as reported in The Globe and Mail, 19 Dec 2017)


In trending markets, a stock with beta less than one has historically moved less than the S&P 500 index.

Low values are best.

Five-year beta less than 0.8 reduces market sensitivity.

Industry-Relative Earnings Variability:

Measures how volatile a company’s earnings are relative to its industry median.

Low values are best.

Less than one-third is ideal.


Five-year standard deviation of monthly ROE is a measure of risk.

Should be less than at least half of its peers.

Market Cap:

Should be at least as great as half of its peers.

(Info on beta, ROE, and market cap via Emily Halverson-Duncan, as reported in The Globe and Mail, 21 Dec 2017)


A digital currency that has gained traction, because it operates outside the traditional financial system.  

Through ‘block chain’ technology, bitcoins can be sent to someone without involving an intermediary, such as a bank or payments network.

Bitcoin has no backing from a central bank – unlike traditional currency.

Its value fluctuates wildly.

(Info via Rob Carrick, as reported in The Globe and Mail, 23 Dec 2017)

A Sweep Account is a bank account that automatically transfers amounts that exceed, or fall short of, a certain level into a higher interest-earning investment option at the close of each business day.

Quite often, the excess cash is transitioned into money market funds.

(Info via Investopedia)

Most Swaps are derivative contracts, wherein two counterparties ‘swap’ the cash flows of one party’s financial instrument for those of the other party’s financial instrument – the cash flows being calculated over a notional principal amount.

(Info via Wikipedia)

A Collateralized Debt Obligation (CDO) is a form of structured asset-backed security (ABS).

Originally developed for the corporate debt markets, CDOs have evolved over time to encapsulate the mortgage and mortgage-backed security (MBS) markets.

(Info via Wikipedia)

An Asset-Backed Security (ABS) is a security whose income payments, and hence value, emanate from and are collateralized (or ‘backed’) by a specified pool of underlying assets.

The pool of assets is typically a group of illiquid and small assets which cannot be sold individually.

(Info via Wikipedia)

A Mortgage-Backed Security (MBS) is a form of asset-backed security secured by a mortgage or collection of mortgages.

The mortgages are sold to a group of individuals (a government agency or investment bank) that packages, or securitizes, the loans together into a security that an investor can buy.

(Info via Wikipedia)

A Basis Point, otherwise known as bps or ‘bips,’ is a unit of measure that is used in finance to describe the percentage change in the rate or value of a financial instrument.

One basis point is equal to 0.01% (1/100th of a percent), or 0.0001 in decimal form.

(Info via Investopedia)

Backwardation is the market condition wherein the price of a commodity’s forward or futures contract is trading below the expected spot price at contract maturity.

Also applies to short-term interest rates being higher than longer-term rates, which is a prelude to an inverted yield curve.

(Info via Wikipedia)

Standard Deviation is a commonly used statistic for measuring dispersion.

It is a easy way to measure an investment or a portfolio’s volatility.

The lower the standard deviation, the lower the volatility.

As an example, a biotech stock has a standard deviation of 20.0 percent with an average return of 10 percent.

(Info via Investopedia)

Return on Investment (ROI) is usually expressed as a percentage, and is usually used for personal finance decisions to ascertain a company’s profitability, or to compare the efficacy of different investment options.

The return on investment formula is:  ROI = (Net Profit / Cost of Investment) x 100.

References  (source of stock ticker symbols)  (images, except inspirational one below, courtesy Pixabay)

Inspiration and Quotes

Image with inspirational message on it.

“Science is about knowing; engineering is about doing.”  Unknown

“Unless you love everybody, you can’t sell anybody.”  Jerry Maguire

“My word is stronger than oak.”  Anon

“I build my cars to go, not stop.”  Enzo Ferrari about the quality of his brakes

“If you think you’re going too slow, slow down.”  Jay Leno’s advice for comedians

“Being stubborn is good for you.  You will live longer.  You will have a better work attitude.  You will have a better attitude towards your health.  And, you won’t care what others think about you.”  Anon 

“It’s not about how hard you got hit.  It’s about getting up, and carrying on full steam ahead.”  Stallone

“Every great why needs a great how.”  Anon

“Always be happy and positive.”  Hulk Hogan

“The road to truth has many turns.”  Anon

“What gets measured gets managed.”  Anon

“A good business is like a strong castle with a deep moat around it.  I want sharks in the moat.  I want it untouchable.”  Warren Buffett

“The market is not the economy.  The market is a measure of future profitability.”  Dean Baker, Director of the Center for Economic and Policy Research

“Be like Caesar’s wife – above reproach.”  Alan Dershowitz

“You don’t know how far you can go till you try.”  Peter Hicks, former helicopter pilot who has survived multiple brain surgeries and struggles on with a smile (a friend of mine at the Y)

“He’s like a carnival barker, but there’s nothing under the tent.”  Laura Ingraham

“Old challenges require new approaches.”  Trump

“There’s no put option on winning.”  Anon

“If you get the company right, you’ll get the stock right.”  Jim Chanos

“He who fights with monsters might take care lest he thereby become a monster. And if you gaze for long into an abyss, the abyss gazes also into you.

And those who were seen dancing were thought to be insane by those who could not hear the music.

That which does not kill us makes us stronger.”

Above three quotes courtesy Friedrich Wilhelm Nietzsche, who was a German philosopher.

Mike Tyson can now read his work.

Not bad for someone who couldn’t read or write as a youngster.

“Focus on what you can control, and you’ll get a lot more done.’  Aristotle

“Stock market lore… stocks don’t grow to the sky.”  Anon

“Stocks are not priced for sainthood, but they’re priced to go up.”  Anon

“The proof in the pudding is when you are eating.”  Anon

“Bull markets don’t die of old age.”  Anon

“Great investors are hard to find.”  Kenneth C. Griffin, Chief Executive of Citadel LLC

“Life is a lot more fun when you say yes than no.”  Richard Branson

“When the facts change, I change my mind.  What do you do?”  Economist John Maynard Keynes

“The spiritual eyesight improves as the physical eyesight declines.”  Plato

If you’re not familiar with the work of Steven Wright, he’s the famous Erudite (comic) scientist who once said:  “I woke up one morning, and all of my stuff had been stolen and replaced by exact duplicates.”

His mind thinks differently than ours does… here are some of his gems:

1 – I’d kill for a Nobel Peace Prize.

2 – Borrow money from pessimists – they don’t expect it back.

3 – Half the people you know are below average.

4 – 99% of lawyers give the rest a bad name.

5 – 82.7% of all statistics are made up on the spot.

6 – A conscience is what hurts when all your other parts feel so good.

7 – A clear conscience is usually the sign of a bad memory.

8 – If you want the rainbow, you’ve got to put up with the rain.

9 – All those who believe in psycho kinesis, raise my hand.

10 – The early bird may get the worm, but the second mouse gets the cheese.

11 – I almost had a psychic girlfriend, but she left me before we met.

12 – OK, so what’s the speed of dark?

13 – How do you tell when you’re out of invisible ink?

14 – If everything seems to be going well, you have obviously overlooked something.

15 – Depression is merely anger without enthusiasm.

16 – When everything is coming your way, you’re in the wrong lane.

17 – Ambition is a poor excuse for not having enough sense to be lazy.

18 – Hard work pays off in the future; laziness pays off now.

19 – I intend to live forever… so far, so good.

20 – If Barbie is so popular, why do you have to buy her friends?

21 – Eagles may soar, but weasels don’t get sucked into jet engines.

22 – What happens if you get scared half to death twice?

23 – My mechanic told me, “I couldn’t repair your brakes, so I made your horn louder.”

24 – Why do psychics have to ask you for your name?

25 – If at first you don’t succeed, destroy all evidence that you tried.

26 – A conclusion is the place where you got tired of thinking.

27 – Experience is something you don’t get until just after you need it.

28 – The hardness of the butter is proportional to the softness of the bread.

29 – To steal ideas from one person is plagiarism; to steal from many is research.

30 – The problem with the gene pool is that there is no lifeguard.

31 – The sooner you fall behind, the more time you’ll have to catch up.

32 – The colder the x-ray table, the more of your body is required to be on it.

33 – Everyone has a photographic memory; some just don’t have film.

34 – If at first you don’t succeed, skydiving is not for you.

35 – If your car could travel at the speed of light, would your headlights work?


I hope you find this Return on Investment:  Best Personal Finance Advice blog post to be most helpful, and that you are now better informed about where to put your money to work.

If you still have lingering questions about any of the content in this blog post, please give a shout.

If having private investing lessons with me is of interest to you, you can reach me here.

Or, if using me as a trading adviser would be a better choice for you, please use the contact link.

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Here are my previous blog posts: 


After Hours Trading

Trading Volume

Stock Trading Stops

Currency Trading Strategy

How to Pick Stocks

Stock Trading Rules

Three Winning Stock Trading Strategies

Forex Trading Techniques

Forex Pivot Points

MACD Divergence,

ADR Indicator

Best Forex Indicator

The HNW Club


Market Update

Margin and Leverage

Support and Resistance

Stock Market Forecast Next Five Years

Trading Forex News

SimpleFX Trading Tool

Stocks to Buy Today

Investment Strategies

Portfolio Investment

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HAVE FUN and ENJOY LIFE!  Remember – FAMILY comes first!

Here’s To Your Success and Quality of Life,


Peter R. Bain
PS:  Don’t let them steal your dreams!
PPS:  I will help you achieve your dreams!

About Peter R. Bain

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Peter R. Bain

I am a speaker, trader, writer, aviator, car nut, Harley enthusiast but, above all else, I am here for you at TradingSmarts, which I founded some 15 years ago.

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