Stocks Under $10 – January 4

Happy new year!

Last night I printed out a list of TSX stocks held in the XIC ETF and I went through the ones under $10. I used freestockcharts.com to review the price history charts. My selection is based purely on price charts, consolidation, and volume. No one’s paying me to call out their stocks. I also didn’t perform any analysis on the fundamentals of each company. I love good charts, so this is a list of some good-looking ones.


Top Picks 
  • TRQ – Turquoise Hill Resources Ltd.
  • SSL – Sandstorm Gold Ltd.
  • LUN – Lundin Mining Corp.
  • KEL – Kelt Exploration Ltd.
  • IT – Intertain Group Ltd.
  • PD – Precision Drilling Corp
  • TA – Transalta Corporation
  • TOG – Toro Oil & Gas Ltd.
  • AIM – Aimia Inc.
  • MEG – Meg Energy Corp.
  • EXE – Extendicare Inc. (I already own shares of this one)
Decent Charts
  • WEF – Western Forest Products Inc.
  • ECN – ECN Capital (this is a newer stock)
  • SGY – Surge Energy
  • SPE – Spartan Energy
  • NSU – Nevsun Resources Ltd.
  • AAR.UN – Pure Industrial Real Estate Trust (This is a REIT)
  • NG – Novagold Resources Inc.
  • HBM – Hudbay Minerals Inc.
  • JE – Just Energy Group Inc. (This is an income fund)
  • MRE – Martinrea International Inc.
  • ESI – Ensign Energy Services Ltd.
  • DRG.UN – Dream Global Real Estate Investment (This is a REIT)

Some Things to Note

It looked like most of the picks were from the mining sector (mainly the golds) and from the energy sector. Looking at the gold ETFs, I really can’t tell if they bottomed long enough (think longer consolidation) to trigger a substantial bull run (bull, bullish = positive moves up in price). Although there is a hedge component to investing in precious metals should things go badly in the markets, you can still experience volatility with commodities. If it pains you not to participate in the potential gold rush (think swing trade, not super long term), then you could get in with fewer shares and consider managing your profits, i.e. moving your stop (your selling price) up as the reward doubles, triples, etc.

The energy sector, specifically oil, could make for a good swing trade, if not, then maybe for the longer term, for as long as oil keeps going up. Even though Trump could threaten trade with Canada, if oil goes up, this could be the trade that’ll boost your portfolio’s growth.

Some of these pay a dividend, some of them don’t, or recently stopped paying one. If you’re going to invest, please do your research and decide what you’d like the stock to bring to your own portfolio. Are you looking for a swing trade? Long-term growth? Income? These are some things to think about.

My Little Reminder/Warning

Please don’t just buy because it’s finally time to and you feel you can follow someone who seems to know what she’s doing for herself. We all have different capacities for risk and I fall into the category that falls under “aggressive!” The outcomes of my own investment decisions fall on me, just like they will for you. Know what you want for yourself and invest at your own risk!

Some More on Sectors

Rack

My closet, the retail sector.

How I Stumbled Upon Sectors

With investing, I try to think in terms of the big picture. I find it useful to be aware of the moving parts within this picture. When I started to learn about stocks, I was clueless. I couldn’t read a financial column. JP was reading the Wall Street Journal and he had to translate everything for me. At that point, I only understood how a stock worked and what a brokerage account was, but that was it. I had taken courses in business, accounting, and investing, but so much of it went over my head. I just had a lot of different information floating about and not enough experience to apply this information as a novice trader.

I decided to take the Canadian Securities Course to get a better idea about the financial industry, investments, how they work, what professionals do, and what investors need to know. It was great because I could go at my own pace and get more into the stuff on equities. I honestly can’t say studying for the exam was loads of fun, but I was happy enough to pass. I loved that I ended up with a better idea about the workings of the financial world and Canada’s economy.

The more I learned about investments, markets, and the economy, the more fascinating money was to me. I became more aware of the psychological component with money, spending, saving, and investing. There is nothing static about the markets, the spending trends that drive the economy, the saving spells that slow it down, and particularly the movement of money between the different sectors and industries.The market is constantly in flux because it’s made of many different components that drive these fluctuations. Money is always being made somewhere.

One of the most important things I learned is that getting a good read on the economy will help you make better investment decisions. Having even just a basic understanding of the economy can make the difference between a novice investor and a savvy one. I found that watching sectors has helped me make money in the short term and longer term. Sector watching can also give you some idea where the overall markets might be headed towards. Sector movement can help determine why a market is up or down. Understanding sectors is important enough to me that I discuss them along with the economy in my book, Loonie to Toonie.

One of my readers seems to share my interest in sectors and has been asking me about where to find more information on them. I’m happy that she’s recognized the importance of understanding sectors and wants to do her own sector research.


Some Places to Look Up Sector Performance

Click here for a great list of sector indexes that track TSX stocks. If you click under “Symbol,” you will be taken to the index’s chart. You can select the time frame at the bottom of the chart. I suggest looking at the 1-year chart, or even longer. I find that longer time frames provide better insight on overall sector performance. For U.S. indexes, you can find a handy sector list here.

I’m often stalking stocks and looking for new ones that might possibly make a move in the near future. As I mentioned in a previous blog, “Stock Picking – Part 3: Factoring in Sectors and the Market,” I look at stocks, their respective sectors, and the market. It’s easier for me to just type in a sector index’s ETF symbol when I’m on my charting screens.

One thing to note: ETFs don’t always move in sync with their corresponding indexes because ETFs are actively traded on the exchanges. Sometimes ETFs will move more or less than their index as it depends on the trading volume and demand, or lack thereof. Having said this, looking at the sector or market indexes will provide a more accurate picture than the ETF. I’m super lazy, so it’s easier for me to just type in a sector ETF that I’m familiar with if I’m just looking on my phone and I’m not on my trading platform at my desk.

Reports on Sectors and the Economy

Economic reports happen every day. Some get more attention than others. The more important the report, the more effect it’ll have on the markets. Some of these reports are sector-focussed. Some sectors give big clues as to where the market could be headed. For example, a strong economic report on new home sales could indicate an optimistic economy and stronger retail sales. I always look at the US economic calendar to see where there might be a lot of action or potential change in the markets. To know what these reports mean and their significance, click on “Event Definitions.” Here is the Canadian economic calendar and here is the international economic calendar. Many different financial websites have economic calendars, so find ones with formats and reports more suitable to you and your interests.

Media

I sometimes watch CNBC and BNN because I like to listen to industry folks. I could watch that stuff all day (especially CNBC’s Fast Money as they’re traders who sometimes have highly entertaining arguments!). There are always so many different points of view on stocks, sectors, and the economy. There are a lot of opinions out there, many of which are conflicting, but these provide additional context to the charts.

If you read any financial paper, newsreel, website, or blog, you’ll also find a lot of up-to-date reporting on micro and macroeconomic stuff. The news often discusses the employment situation in certain industries or businesses. Consider your own job and the industry you’re working in. You might be able to see where you can be headed career-wise if it’s a growing or steady industry. Look at your bills and see where you’re paying the most. Maybe it’s in a sector that you should invest in. Sectors are out there and also are very much a part of our everyday lives. We know more about them than we might be aware of.


I’m sure my rudimentary research methods would make any financial professional shake his or her head!

As important as it is to know about sectors, there is no exact science in applying this information. It’s just one aspect of financial understanding. Some of your best investments will be so long-term that they will endure decades of economic fluctuations and sector cycles.

In the spirit of being financially literate, understanding sectors and their relationship with the economy will make you more financially fluent. That is how more of us can engage in the important conversation on financial matters.

 

 

 

 

Stock Picking – Part 3: Factoring in Sectors and the Market

Part 3: Factoring in the Sectors and the Stock Market

Objective: To look at how a stock is performing in relation to its sector and the market.


Sectors

Many things can move the market. A major recession. An increase in interest rates. A major election. A major sector going up or down.

In the last couple of years, the oil sector took a big hit due to a saturated market with too many players getting greedy. A lot of the Canadian market is affected by oil because it’s one of our major commodities. So the Canadian market took a huge hit, along with our loonie. This impacted our businesses as it reduced our buying power outside Canada. Having said that, after being so down last year, we had a remarkable recovery and better performance than the US markets since January of this year.

Although the Canadian and US stock markets are different, I often check out the US stock market and sectors to give me an idea of the major trends going on in our part of the world. (I will definitely be looking at the US markets after the election results come out this November!)

The following is my list of sectors and industries that I like to examine. You may be more general or more specific as you can further categorize sectors by looking at the different industries that fall within them. I like to check these out from time to time to see if there are new opportunities, or if current opportunities look like they might run dry soon. Please note that this list doesn’t contain all the sectors and industries.

  • Utilities (XLU)
  • Consumer staples (food & beverages, cigarettes, household & personal care products) (XLP)
  • Healthcare (XLV)
  • Pharmaceuticals (PJP, XPH)
  • Transportation, shipping, and delivery services (IYT)
  • Financial (banking, lending services, and insurance) (XLF)
  • Retail (XRT)
  • Basic materials & construction (IYM)
  • Tech (XLK, AAPL, MSFT)
  • Energy (OIL, XOP, IYE )
  • Home building (XHB)
  • Gold (GLD, GG, AU, NEM)
  • Silver (SLV, SLW, AG/FR.TO)

The way I check out these sectors is by looking at their respective ETFs (exchange-traded funds) or the biggest stocks in those sectors, marked by the blue ticker symbols. If you’re not sure what an ETF is, that means you definitely haven’t yet read my book where I explain ETFs and indexes in easy-to-understand terms (Read it! The eBook is $2 right now!). I look at more than one ETF for some of the sectors.

You can create lists of any stocks you want to keep an eye on when you use freestockcharts.com. I have a list saved for sector ETFs. I can just easily go through my list on freestockcharts.com and check out the charts. Also, you can look up a sector by typing something like,”Retail etf,” anywhere on the screen in FreeStockCharts and a bunch of options will come up and you can select from the multiple options.

chart-1d

I apply the same principles when looking at the charts of each sector as I do stocks. I try to see if the sector has been hot for a while (well above the airplane) or if it’s just starting to warm up (at or below the airplane), or if it’s been quiet and moving sideways (along the runway). If a sector has been moving sideways and just starting to move up, I’m more interested in stocks that fall in that sector because it means there could be new opportunities to buy at lower prices. In investing, this is called “sector rotation.” If a sector is hot, I’ll wait for it and its stocks to cool off.

Remember the main M.O. of a savvy investor is to always look for new opportunities, not to follow a trend that’s far into its season.


The Stock Market

There is a lot of fear-mongering, even among savvy investors, with regards to stock picking and timing your investments with the market. It’s because people hate being wrong. No one wants to give wrong information. But for anyone who’s invested, you know you can be wrong for one month and then be right the next month and be well in the money. You can be right for one or two days and it’ll be months or, in rare cases, years before you’re in the money again.

It is hard to know exactly where the market is headed, but it’s easy to see where it’s been–to me, this is more important than making predictions. The way I see it, if it’s happened already, then you have something real to work with.

For the Canadian stock market, I look at these ETFs:

  • XIU (iShares X&P/TSX 60 Index)
  • XIC (iShares Canadian S&P/TSX Capped Composite Index)

For the US stock market, I look at these ETFs:

  • SPY (S&P 500 index)
  • DIA (SPDR Dow Jones Industrial Average)
  • QQQ (Nasdaq 100 Index)
  • IWM (Russell 2000 Index for smaller US companies)

I analyze the charts the same way I do for sectors and stocks on freestockcharts.com. I always compare stocks and sectors against the market. I ask these questions:

  • Is a stock lagging or leading its sector?
  • Is a stock lagging or leading its market (Canadian or US)?
  • Is a sector lagging or leading the markets?

My ideal situation: A sector trading on its own page

If the stock market is moving downwards (for the previous month or longer), but a sector has been moving sideways and is starting to heat up, it’s likely going to lead the market. I’ll be looking for stocks in that sector using the criteria I discussed in Stock Picking Part 1.

My less ideal situation: A sector trading like the market will be more affected by the market

If a sector’s chart looks just like the stock market’s chart over the previous month or more, it’ll likely be affected by the market, so if the market goes down, your sector will likely go down with it too. An individual stock better have an amazing chart (LONG sideways trading–we’re talking about a LONG RUNWAY lasting months!) for me to buy it without a stabilized sector behind it.

The situation I avoid: A sector in trouble

If a sector is weaker than the market and it has been heading down on its own, I’ll avoid it and any stock in that sector until I see the sector stabilize and trade sideways again.

I’m not that concerned with what the stock market is doing. In the past, I’ve been shaken out of some great opportunities because I was staring too hard at the market, trying to predict its next move. As soon as the market sells off just a little bit, I’d freak out and exit my positions, only to have the market recover after (as it always does since the beginning of stock market history). What is most important to me is how a stock is trading relative to its sector and how the sector is trading relative to the market. I’m always looking to get in early, not late after the party has already started.

________________________

I recognize this is advanced information. You really can buy stocks of companies that you like without ever having to look at a chart and do well. This is more about my swing trading strategies which for me, it has been a great way to make money.


When I look for stocks, I always look at their sectors and the market. I check to see whether a stock is leading or lagging its sector and whether the sector is leading or lagging the stock market. 

Is the idea of stock picking getting you down? You can still invest in stocks without having to pick one. Next time, I’ll get into ‘buying the market’ which is code for investing in ETFs!

Hey Man, You Into Metal?

My man, JP, has long hair. He sometimes gets asked if he’s into metal or if he caught the latest metal show. Of course, this is regarding heavy metal music, not metallurgy or actual metals. Our friends Jill and Keith, however, are heavy into metal – metal mining, that is. Jill is the marketing VP and Keith is the founder and CEO-Pres of First Majestic Silver Corp., one of the world’s leading silver producers.

20160307_214000

Me and Jill

These lovely Vancouver friends of ours invited us to attend the annual Senior Silver Reception on the second night of the 2016 PDAC Convention this week in Toronto. This convention, by the way, is the largest convention for mining prospectors and developers in the world. It was an interesting reception on Monday night at Ripley’s Aquarium. JP and I had a great time drinking from the limitless supply of classy bevvies and listening in on conversations between investors and the corporate heads of Canada’s biggest mining companies. It is always fascinating to learn about the different investment and business strategies out there. While we only attended the reception, we vowed to attend next year’s mining convention–not just to eavesdrop, but also to partake in these conversations.

Precious metals weren’t only a hot topic because of this prestigious silver reception; the metals have made a notable comeback in the last couple of months. Oil made a bit of a recovery so far this month, which helped bring the loonie back up, but this recovery could be short-lived. Many analysts and investors are still pessimistic about this big sector. If oil goes down again, this could negatively impact the markets and the loonie. Also, if China, one of the world’s largest trading partners, slows down in economic activity, this will sink things down even further globally. Generally, precious metals become more valuable in times of economic uncertainty. As your currency is likely to fall along with the economy, tangible assets such as precious metals are good to have in your portfolio to hedge against potential economic extremes. This week, the global markets finished positive. I am, however, guardedly keeping my eye on oil and considering my next couple of moves.

Full disclosure: I am not being paid by Jill or Keith to write this. In fact, I am kicking myself for not buying First Majestic’s stock back in January/February (it has since more than doubled in price). For someone who actively trades stocks, I have nothing but a long list of sad excuses to explain why I didn’t get in then. I’m a little late to the metal party as the metals have been going up consistently for a while. In the next month or two, JP and I will be looking for metal prices to pull back and come down a bit – which is when we’ll take our next opportunity to get into metal, man.