Thursday, July 31, 2008

The Bottom Billion, by Paul Collier

The full title is “The Bottom Billion Why The Poorest Countries Are Failing And What Can Be Done About It.” This is a very interesting book about the poorest people on earth and what the Western World can do for them. It does not give practical advice for individuals, but it does give practical things governments and aid agencies that give out aid can do.

What I like about Paul Collier’s book is that he looks at various things that have been done to help poor people and poor countries and then tries to analyses these things to see if they actually work or not. I like that he advocates practical things that seem to work. He talks about some standard solutions that do not work and solutions that do work.

I think that this is a very important book on world poverty. It is filled with statistics and common sense. He tries to come up with workable practical solutions. What I did not like about Jeffery Sach’s book on the End of Poverty, is that he comes up with grand schemes to help the poor. We have had grand schemes before, and they have not worked.

For book on Amazon see http://www.amazon.com/Bottom-Billion-Poorest-Countries-Failing/dp/0195311450. For book review at Oxford Press, see http://www.oup.com/us/catalog/general/subject/Economics/Developmental/?view=usa&ci=9780195311457 and at Financial Times see http://www.ft.com/cms/s/0/4858ed7e-0178-11dc-8b8c-000b5df10621.html?nclick_check=1.

He is also on www.ted.com, a wonderful site of speakers on all sorts of ideas. He is at http://www.ted.com/index.php/talks/paul_collier_shares_4_ways_to_help_the_bottom_billion.html.

Wednesday, July 30, 2008

TransAlta Corp 2

This is a utility company (TSX-TA) and what you expect from a utility company is around 8% return, with 2% to 4% of that return to be dividend income. The 10 year return on this company is 7.8%, with some 3% from dividend. This is because the company’s stock price has increased quite a bit over the last 5 years. The 5 year return is some 19%.

As I mentioned yesterday, at present, most analysts have a hold on this company and there is an offer to buy it at $39 a share. The stock has had a checkered past and there has not been much in the way of dividend increases until this year. The current dividend has increased from $1.00 per to $1.08 a share, the first increase in some 8 years. The company had a bad year in 2006, but has since recovered. Over the long term, this has been a good steady company for me with a return since 1987of some 9.3%.

I can see why most analysts have a hold call on this stock. No one expects it to go past $36 over the next year, so, it is not a good buy at present. Also, the current P/E is 22.5 and this is high for a utility company. It would not be a good buy unless the stock price pulled back a bit. The one good thing from the March 2008 report is the Accrual Ratio is -5% and this tends to show that a stock is throwing off more cash than is apparent. Such an Accrual ratio usually means that a stock will go higher, but this is only the first quarterly report for 2008.

I have reloaded my spreadsheet with 2008 estimates and figures from the March 2008 quarterly report.

TransAlta Corp is an electric generation and marketing company. They operate in Canada, the U.S., Mexico and Australia. Its web site is http://www.transalta.com/. See my spreadsheet on this company at http://www.spbrunner.com/stocks/ta.htm.


This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

Tuesday, July 29, 2008

TransAlta Corp

This is another utility company (TSX-TA) in which I have invested. It is not the any dividend achiever list, as they do not consistently raise their dividends. However, I like utility companies, as they tend to do well. I have been invested in this company since 1987 and I have an average annual return of 9.3%. Over the last 5 years, I have earned some 19.6% return on this company.

At present, most analysts have a hold on this company. There is an offer to buy it at $39 a share. There are investors that feel that the company can do more to maximize shareholder value. I think the hold rating is given by analysts because it would seem that this company is overvalued.

The problems with this company are that Revenue and Earnings per Share (EPS) are not growing much. Revenue, for the past 5 years to December 31, 2007, is 8.8% per annum and EPS is 6.4 % per annum. The problem being that you if you cannot grow revenue, you cannot grow much. At December 31, 2007, the Graham price was $19.85 and the stock price was $33.35. For a utility company you would like to see the Graham price and the stock price much closer. The reason for the low Graham price is the low growth in EPS and the low growth in Book Value. Book Value has barely grown over the 5 or 10 years.

The Current Asset/Current Liability Ratio is only at .54 and the Asset/Liability ratio a bit better at 1.26. This means that the company has a high debt. However, most utility companies have high debt ratios. The really only bright spot is the Operational Profit Margin is very good at 30.5% and the Accrual Ratio is at least negative. Although an Accrual Ratio of -1.8 is not that great.

This company is an electric generation and marketing company. They operate in Canada, the U.S., Mexico and Australia. Its web site is http://www.transalta.com/. See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/ta.htm.


This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Monday, July 28, 2008

Fortis Inc 2

Most analysts on the internet seem to have a buy rating on this stock (TSX-FTS). Some have recently switched to a buy from hold because of the recent pull back of the stock price. There has also been some insider buying for this stock. There is a fair range in the expected Earnings per Share (EPS) for this calendar year, ranging from the low $1.40 to $1.60. The quarterly EPS for March 31, 2008 is $.55 compared to the one of year ago of $.35. This is an increase of 57%.

This is a good stock, which for the last 10 years has consistently raised their dividends. However, note that prior to 10 years ago, they had some difficulties and did low the dividends. Their dividends have been rised an average of 6.4% yearly over the last 10 years and 10.8% over this last 5 years. Their current dividend rise is 22% from $.82 a share to $1.00 a share. The revenue for the quarter ending March 31, 2008, at $1,146M is higher than the $483M of a year ago by 137%.

The current and trailing P/E ratios are 17.3% and 20%, which is lower than the 5 year averages, which are 19% and 20.3%. For the quarterly ending March 31, 2008, both the Operational Cash Flow and the Operational Profit margin are up. The Accrual Ratio has greatly improved for March 31, 2008 quarterly report to 1.8%. These are items that I found negative on Friday for this stock in connection with the 5 years ending December 31, 2007. The other negative, which was the high debt level, is about the same.

By and large, this is a good stock, with a nice increasing dividend and it is selling at a reasonable price. It is also a relatively low risk stock. It is a good stock to buy if you are interested in low risk dividend paying stocks.

This company provides gas and electricity to customers across Canada, through regulated holdings that include a natural gas utility in British Columbia, and electric utilities in 5 provinces in Canada, and 3 Caribbean countries. It owns non-regulated hydroelectric generation assets across Canada and in Belize and upper New York State. It also owns and operates hotels in eight Canadian provinces as well as commercial real estate in Atlantic Canada. It had recently bought Teresen, a BC gas utility. Its web site is http://www.fortisinc.com/. See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/fts.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Friday, July 25, 2008

Fortis Inc

I bought this company in 1987 (TSX-FTS) and make additional purchases in 1995 and 1998. According to Quicken, I have made some 13.8% average annual returns on this stock. This return, of course, includes dividends. I have made a return of 16.5% over the last 5 years. The spreadsheet gives a 5 year return of 20.6% as the spreadsheet goes to 2007 and my figures are more current. According to my spreadsheet, this stock has increased its dividend over the last 10 years by 6.4% per year and over the last 5 years at 10.8% per year.

Revenues on this stock have been increasing much quicker than the Earnings per Share (EPS). Revenues have increased over the last 5 years at 30.6% per year, but the EPS has only increased by 6.3%. However, if you look at the revenue per share, it has only increased by 9.7% per year over the last 5 years. This is because the company has increased its revenue by buying other companies. Their most recent purchase was of Teresen in 2007. For this stock, the book value has increased by 14% a year over the last 5 years and the accrual ratio at the end of 2007 is a low 1.7%.

Now I will turn to the negative stuff. The debt load is quite high, with a current Asset/Liability of .59 and the Asset/Liability of 1.39. However, please note that the debt load has always been quite high on this stock. The Operational Cash Flow increase over the last 5 years is low at 3.5% and the Operational Profit Margin has decreased in 2007 to 13.7% compared to a 10 year average of 18%.

Overall, this has been a great company for me. It has been a very steady earner with nice increasing dividends. This stock has done slightly better than the TSX over the last 5 years, but slightly under the TSX over the past year. Note that the charts do not include dividends, which are quite good and add another 3.5% earnings on average over the last 5 years.

This company provides gas and electricity to customers across Canada, through regulated holdings that include a natural gas utility in British Columbia, and electric utilities in 5 provinces in Canada, and 3 Caribbean countries. It owns non-regulated hydroelectric generation assets across Canada and in Belize and upper New York State. It also owns and operates hotels in eight Canadian provinces as well as commercial real estate in Atlantic Canada. It had recently bought Teresen, a BC gas utility. Its web site is http://www.fortisinc.com/. See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/fts.htm.


This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Thursday, July 24, 2008

Tracking Stocks In A Bear Market

Yes, the Earnings per Share (EPS) on some stock have been going down. However, if you have been paying attention, in this market decline, as in all market declines, the Price/Earnings (P/E) ratio has also been going down. This is what happens to even good stocks in a market decline. And, lower levels of P/Es can persist for sometime.

You can still do fine in a Bear Market if you have invested in good dividend paying stocks. By good dividend paying stocks, I mean stocks that have a history of increasing their dividends on a regular basis. In a down market, the way to see if you are making progress is to track your dividend payments rather than the total value of your stocks using the stock price.

You can survive a Bear Market by first making sure that you have good stocks. You really only lose money if the companies you invested in get into financial difficulties. Stocks that have high debt can be problematic in Bear Markets. So review your companies and make sure that they are in good shape. Make sure that there are no alarms concerning debt. If EPS or Revenues fall a bit, do not worry, this often happens in Bear Markets. What you want to worry about is big drops in EPS or Revenues that the companies do not explain to your satisfaction.

If you have done the above, now all you need to do is hold on. With your dividends that are coming in, hold them as cash in case some good buys come up.

I have a stock portfolio rich in good dividend paying stocks and it has survived very well in declining markets. In the last market slow down in 2000, 2001, my portfolio value (that is the total of the stock prices) declined, but my dividend income continued to increase. When the market recovered, my portfolio value recovered very nicely also. The same is happening now. The value of my portfolio is declining, but my dividend income continues to increase.

Wednesday, July 23, 2008

Giving, by Bill Clinton

Giving - how each of us can change the world - is a great book. It is a very easy read. It inspired me to start lending money via Kiva.org. On this website, you can loan small amounts of money to people all over the world. It finally seems that I was actually helping someone. All the money I have given to charity seems to have disappeared down a black hole, never to be seen again, never to actually do any good for anyone.

Now if you are a capitalist, as I would judge anyone who invests is, Kiva is the perfect investment for the future. Here you seem to be investing in people who want to be capitalists. If we want to keep the wealth we now have, I feel we must do something to spread around some wealth. Charity never seems to help. I have been giving to charity since I started to work in the late ‘60s. This is something like 40 years ago. I cannot point to any improvement in anyone’s life or any improvement for the poor of Toronto, where I live. In fact, we seem to have a lot more poor in Toronto now than there was 40 years ago.

Getting one great idea from a book is fantastic. What else can I say? If you believe in liberty, freedom and capitalism, then investing in potential capitalists in poor counties may be a very good investment indeed.

This micro-credit site is at http://www.kiva.org/. Bill Clinton’s site is at http://giving.clintonfoundation.org/. The book is on Amazon at http://www.amazon.com/Giving-How-Each-Change-World/dp/0307266745.

On the web, you can find both positive and negative reviews of this book. There are a lot of negative reviews. However, I read books all the time, often having 3 or 4 on the go at one time. I read mostly non-fiction (history, economics etc) and some sci-fi. Most of the negative reviews feel that the book is too filled with feel-good stories when there is so much misery around the world. Sorry, but I still feel that if a book gives you one great idea, it is worth it.

Tuesday, July 22, 2008

Bombardier Inc 2

Is this currently a good stock (TSX-BBD.B) to buy? Considering the business that it is in, this stock is a high risk. So, if you cannot stand to invest in a high risk stock, this stock is not for you. The insiders are overall, selling not buying. Some people have a buy rating and some a hold rating. It seems some have changed to a buy when the stock has come down from the high $8 range to the high $6 range. For the past year, this stock has done better then the TSX and recent decline is with the current market decline.

This stock has an the financial year ending at January 31each year, so the financial data I am looking at is the year ending at January 31, 2008. Everyone seems to expect the Earnings per Share (EPS) to be substantially higher for the 2009 annual report. Most expect the EPS to be in the low $.50 range. Since the dividend payments have been restarted, Bombardier is expecting earnings to improve also. If the EPS is $.51, then the dividend yield will be 19.6%. This stock’s dividend yield has been in the low 20% range, so this seems a reasonable EPS to expect.

Cash flows were very strong for the year ending in January 31, 2008, but I do not expect this to be repeated at the same rate for the current year, but they should be stronger than in the past few years. The asset/liability ratio is low at 1.18 for January 2008 and slightly worse at 1.16 for April 2008. However, the ratio for this stock has never been high. The company carries a lot of debt. The Return on Equity (ROE) is better for 2008 at 10.2%, but it is not back to where it was before the stock got into trouble. The Accrual Ratio is very good at -7.4%. This is one of the few bright spots for this stock.

This is clearly a turn around situation and as such is a risky situation. So, clearly, unless you can stand a lot of risk, you should not invest in this stock. However, I feel that this stock could once again become a great stock for my portfolio. The stock certainly seems to be getting back on track. However, it is still in the airplane business and this, as always, is risky.

See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/bbd.htm. The problem with this company is that the stock price is only in Canadian Dollars, but the financial reporting is in US Dollars. To make the spreadsheet figures compatible, I have used the US Dollar financial figures and converted the stock prices into US Dollars. I also show revenue, earnings and dividends in Canadian Dollars

Bombardier is a manufacturer of business jets, regional aircraft and rail transportation equipment. They also provide financial services and asset management. They are an international company, selling and manufacturing all over the world. The controlling shareholder is the Bombardier family. Its web site is http://www.bombardier.com/.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Monday, July 21, 2008

Bombardier Inc

I bought shares in this company in 1987 (TSX-BBD.B) . Up until 2001, I was making some 35% return per annum on this stock. When the stock first dropped in 2002, I had still made some 28% return per annum on this stock. Even by the lowest point in 2005, I had made some 13% per annum on this stock. By that time, it seemed to be turning itself around, so I never sold. At the current price, I have made some 16% return on this stock per annum.

This company got into difficulty in 2003, and cut their dividend in 2004, then eliminated the dividend in 2005. The stock hit the low point in 2005 when it eliminated its dividend. This stock has been doing better since the low in 2005 and with the announcement of the final results for the quarter ending April 28, 2008, Bombardier has reinstated their dividend.

I certainly suffered big loses in my portfolio because of the drop in this stock, and it is still only worth 1/3 of what it was worth in 2001. But before it crashed, it was an excellent stock and it consistently raised its dividend and split it stock. I am hopeful that now that it has reinstated its dividend, it will again raise it consistently.

This stock has a controlling shareholder of the Bombardier family. A controlling shareholder is not necessarily a bad thing. I know that, especially in the US, they frown upon controlling shareholders. However, I believe that the Bombardier family has been working very hard to make this company an outstanding company again. I feel that when controlling shareholders work to make a company a fine investment for all the shareholders, not just themselves, controlling shareholders are good. I do not mind investing in companies, such as Bombardier that have controlling shareholders.

See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/bbd.htm. The problem with this company is that the stock price is only in Canadian Dollars, but the financial reporting is in US Dollars. To make the spreadsheet figures compatible, I have used the US Dollar financial figures and converted the stock prices into US Dollars. I also show revenue, earnings and dividends in Canadian Dollars. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Bombardier is a manufacturer of business jets, regional aircraft and rail transportation equipment. They also provide financial services and asset management. They are an international company, selling and manufacturing all over the world. The controlling shareholder is the Bombardier family. Its web site is http://www.bombardier.com/.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

Friday, July 18, 2008

TransCanada Corp2

Since I started a review of this stock (TSX-TRP), I thought I might as well finish it before I move on. I note that a number of people have a buy rating on it and some with a hold rating (as they think it is overvalued). This is utility stock, from which you would expect slow growth and a good dividend. The Graham price is only $30.71, according to my calculations, but the current price is $38.36. So, I can see why they might think it is overvalued. Although, I see most analysts, what ever their rating, have a 12 month stock price of $43-$44. This is higher than current price, and also this stock provides dividends, with a current yield of 3.8%.

The following figures are based on 5 year averages to December 31 2007, the last Annual Report date. Revenues are increasing at 11% per year. Revenue increases are good as they what that will eventually push up the earnings. The Earnings per share (EPS) has increase by 8.5% per annum. The dividends have been increasing by just over 6% a year. This is good as it is better than inflation.

The cash flow is increasing at a health rate of 17% per year. The closing price is up on average, 16% per year. The book value has only increase by 8.6% per year, but you tend to get low growth in book value when a large portion of the earnings is paid in dividends. The payout ratio on this stock runs about 60%.

The Current asset/Current liability ratio is low at .76. This means that the current assets cannot cover the current liabilities. However, the Asset/Liability ratio is at a better 1.55. The current Return on Equity (ROE) is good at 12.6%. The Accrual Ratio at -.17%, and this is not bad ratio.

As I had noted previously, if you compare this stock with the TSX, you will see that it has not done as well as the TSX over the last 5 years, but has done as well as other Utility stocks. Part of the reason that charts show that this stock has not done was well as the TSX, is that the charts only take into account the stock price movements. They do not consider the dividend payments.

As for 2008, the dividend has already been increased by almost 6%. This is certainly a good sign. However, most people feel that the EPS will remain the same as or be slightly lower than for 2007. A lot of people feel that we are going to have slow or no market growth in the near future. If this occurs, the place to have your money is in dividend paying stocks that increase their dividends on a regular basis. This stock certainly fits that bill.

The only real negative on this stock is the low Graham Price. As in all stock, you have to way the negatives and the positives to see if a stock is suitable to buy or hold. All stocks will have some negatives. This has been a good stock for me and I will continue to hold it.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/trp.htm. (I have reloaded this spreadsheet because of new 2008 figures. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.

Thursday, July 17, 2008

TransCanada Corp

This stock decreased its dividend in 2000 from $1.12 to $.80. This was almost a 30% drop in the stock’s dividends. It took the stock price 2 to 3 years to recover from this. If you look at the spreadsheet, you will see that all the figures for the last 5 years are much better than the 10 year figures. People who had held this stock through its problem certainly suffered. Why I bought this stock in 2000, was because I recognized it as a good stock that was in some difficulty, but that it was bound to recover from its problems.

First of all, I should admit that I have done very well by this stock since I bought it in 2000, just after it cut its annual dividend. According to quicken, I have made some 17% total return per annum on this stock. I would have made a higher return if I had not bought more of this stock in 2006. Since these purchases, I have made only some 11.5% total returns per annum on this stock. Over the last 5 years, I have made some 13% total returns on this stock.

My actual returns, compared to the spreadsheet have to do with the timing of purchases and the fact that the spreadsheet goes from year end to year end and my returns from Quicken are to date. If I look at my stock over the 5 years to December 31, 2007, quicken says I have earned 16.66% on this stock and my spreadsheet says total earnings are 16.34% per annum. Differences are due to formulas and rounding.

It would appear from my spreadsheet that dividends have added some 4% return to this stock over the last 5 years. If you compare this stock with the TSX, you will see that it has not done as well as the TSX over the last 5 years, but has done as well as other Utility stocks. Part of the reason that charts show that this stock has not done was well as the TSX, is that the Charts only take into account the stock price movements. They do not consider the dividend payments.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/trp.htm. See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

Wednesday, July 16, 2008

How You Lose Money In The Stock Market

The biggest reason you lose money in the stock market is if the company you invest in goes bankrupt. If you have invested in solid companies, you just have to ignore the volatility that sometimes shakes the stock market. No market always goes up, or goes straight up. No market always goes down, or straight down, for that matter. There are always gyrations in stock markets.

If you notice, in the western world, our markets have consistently, on a long term basis gone up. What kills markets is if a country is invaded or if a country goes bankrupt. I do not think that either is going to happen in Canada.

In bear markets, stock prices for growth-type companies fall further than stock prices for value-type companies do. If you are invested in dividend paying companies, stock prices fall more for companies that cut dividend, than stocks prices on ones that do not cut their dividends.

If a company cuts their dividends, their stock price will be depressed for a few years. An example is TransCanada Corp (TSX-TRP). If a company cuts their dividends completely, their stock price will be depressed for quite a few years. An example is Bombardier Inc. (TSX-BBD.B). For dividend paying companies, it often depends on how much they cut their dividends and for how long they cut their dividends.

Over the next few days, I will talk about these companies (TransCanada Corp and Bombardier Inc) and put up their spreadsheets.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

Tuesday, July 15, 2008

Now Is The Time To Do Nothing

I looked at the market this morning; saw that the TSX had dropped some 400 points and decided to write this blog. You can only lose by selling into a dropping market. If you are unhappy with the stocks in your portfolio, it is far too late to do anything constructive about them.

There is a certain cyclical aspect to the market. So, this will probably not be the worse time this year. September or October, or both, will probably be the worse time. These months, if there is a bad time for the market, are smack dab in the middle of it.

The Cyclical aspect of the market means that the market will rise from January to April or May. For the summer months, you will have the market just mucking about, dropping or a slight bull raise. September and October are the worse months for market drops. I cannot see anything else happening in these months this year, but a drop. Usually, we have a year end rise. If nothing drastic happens after October, this will probably happen this year. But, who knows? I could be wrong.

See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

Monday, July 14, 2008

Buying Life Insurance

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

When I bought insurance, I got a $50,000 Whole Life Participating Policy. This means I got covered by insurance for life (Whole Life) and I got dividends each year (the participating part of the policy). Currently I am paying no premiums and I am getting some $250 each year in dividends over the premium due each year on my policy. In 2007, my dividend was $1123.49; my premium was $866.45, so I got $257.04 in cash. When I bought my policy in 1985, there were all sorts of fancy policies being offered, especially the new style Universal Life policies.

When you buy life insurance, do not forgot that you are buying guarantees. Life Insurance is not an investment, what you are getting is guaranteed future payments. So, when I bought Life Insurance, I bought a plain vanilla type policy. Nothing fancy at all. I wanted a policy that would do what Life Insurance was developed to do, which was to pay a set amount of money at my death to my beneficiaries.

At the time, I bought this policy; I was married and had a small child. I also had investments. This policy was to ensure that my husband had enough money to pay for my funeral and any taxes required on my investments. He would not have to sell any investments if he did not want to. It is important for an investment portfolio that stocks from it do not have to be sold at a specific time, as it may be an inopportune time to do so. For example, in the current market, you would not want to sell stocks as the market is very volatile and we keep getting bear market type declines.

Through my work, I was covered by group term insurance policy. If this were not the case, I would have attached to my policy a term insurance rider. This would have been probably a 20 year term insurance rider. Attaching a term insurance rider to a policy is a very cheap way of getting insurance coverage. The purpose of it was to help my husband support our child, partially replacing the income I was bringing into the family unit. It would be for 20 years as it is meant to cover the time it takes for our child to become an adult and therefore self-sufficient.

Life Insurance has not changed all the much over the years. You do not tend to get participating policies anymore, as most Insurance companies are now owned by stockholders, not policyholders. However, you can still get Whole Life Insurance (that is coverage as long as you live). You can also add cheap term riders on the policies to cover the expensive years when your partner would need extra money to support any underage children. I still believe in getting insurance for the original purpose it was meant for; and to get simple policies. You should be buying a future guarantee of money on a future event.

I should also mention that when I worked, I worked for a number of different Life Insurance companies as a Business Analyst in the computer systems area.

See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

Friday, July 11, 2008

BFI Income Fund

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

I have a spreadsheet for this stock (TSX-BFC.UN). I note that a number of people have a buy rating on it.

The following figures are based on 5 year averages to December 31 2007, the last Annual Report date. Revenues are increasing at 43.5% per year and money available for distribution increasing at almost 16% per year. The distributions have been increasing at the rate of 10% per year, but I note that no increase has so far been made since the end year of 2006. Prior to that, there were increases every year, even though they were rather random. The payout ratio is currently in the low 70s.

The cash flow is increasing at a health rate of 20% per year. The closing price is up on average, 27% per year. However, note that there have been no increases since 2005. It is expected that increases will start again as the stock has been affected by the Canadian/US currency exchange since some two-thirds of their business is in the US.

The Current asset/Current liability ratio is at .85. This means that the current assets cannot cover the current liabilities. However, the Asset/Liability ratio is at a health 1.81. The current Return on Equity (ROE) is not bad at 5%. I do not like the Accrual Ratio at 17%, as it could mean the cash flow is not as good as it appears. However, if you include the Financial Cash Flow into this Ratio it is better at 1.5%

The distributions are expected to increase this year to $1.91, a 5% increase. Distribution Income available for dividends is expected to increase to $2.57, a 3.6% increase. Cash flow per share is expected to increase to $3.09 and 6.8% increase. Do not forget that these are estimates, so they may or may not be right. The Graham Price based on Distribution Income is at $25.31 and the stock price is at $21.14, so it shows good value.

I have compared this stock, over the last year with the S&P/TSX composite index and the industrials (of which it is part) and this stock has done worse than both these indexes. I can only find two stocks that are in the same business. They are Waster-Connections (WCN-N, NYSE) and Newalta Income Fund (TSX-NAL.UN). This stock has done worse than WCN, and slightly better than NAL.UN.

Is it a good buy? This is hard to say. It has a good yield, which at the present price has distributions at 8%. The stock will probably not fall anymore, so you can get a good yield. The taxes on the distributions in 2007 are good. 19% of the distributions was considered to be return of capital and therefore not taxed. It also had 19% to Dividends, which are taxed more lightly than other types of income. The risk level on this stock is probably medium, so only buy if you can afford to take this level of risk.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/bfc.htm. See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

They are a full-service waste management company providing non-hazardous solid waste collection and landfill disposal services for municipal, commercial, industrial and residential customers in five provinces and ten U.S. States. Note that two-thirds of their business in US. Its web site is www.bficanada.com.

Thursday, July 10, 2008

Retiring Using 8%, 4% Rule

In trying to figure out how to handle retirement, I came across the 8%, 4% rule.

There are three main risks to retirees. They are longevity risk, inflation risk and market risk. This is from Jonathan Chevreau column of June 14th, 2008. He was talking about Dr. Moshe Milevsky’s book Annuities are Personal Pensions. See http://www.amazon.com/Are-You-Stock-Bond-Financial/dp/0137127375 and
http://search.barnesandnoble.com/Are-You-a-Stock-or-a-Bond/Moshe-Arye-Milevsky/e/9780137127375/
and http://www.thesweeneyagency.com/profiles.php?showsite=146. Note that Dr. Milevsky does not talk about the 8%, 4% rule, but I think that the longevity risk, inflation risk and market risk are important to this discussion.

The 8%, 4% rule means that you should count on making 8% a year on your investments and you should count on spending 4% a year from your investments. The 8% return is not too difficult, especially if you have some good dividend paying stocks in your portfolio. You can usually count on making 2% extra on dividend paying stocks. It is a good idea if you use stocks that increase their dividends at least at the long term background inflation ration rate of 3%.

To get an idea on what your pensions are worth, say a pension like the CPP, multiply your annual pension amount by 20. CPP is indexed to inflation so the 20 factor is about right. However, if you have a pension that is not indexed to inflation, the factor to use would be 5 or 10.

So, roughly, if you say have saved in an investment or other accounts $1,000,000, you can spend $40,000 and you would hope to make $80,000. The next year you will start with $1,040,000 and can take out $41,600 and expect to earn $83,200. If you are receiving the top CPP amount for 2008 of $884.58 and you have the in an investment or other accounts of $1,000,000, you can spend $48,491 the first year. Your CPP would be worth $884.58 x 12 x 20 or $212,299.29 so you will start with $1,212,299.29 and 4% of this is $48,491.

No one knows how long he or she will live, so with the 8%, 4% rule, you will have money until you die. Yes, you might leave an estate, but you also might have high expenses the last few years of life. This plan basically plans on 4% increase in income per year to help with inflation. The long term background inflation maybe 3%, but it can very greatly. There is also the market risk. With the higher than inflation increase per year, you will have some flexibility to decrease the amount you spent each year.

For a list of the stocks for which I have put up spreadsheets, see my web site at http://www.spbrunner.com/stocks.html.

Wednesday, July 9, 2008

Computer Modelling Group 2

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

Looking over my last entry, I notice I did not finish this stock off. This stock has recently been rising, which is a good sign. It is an Information Tech stock and since March it has done better than the S&P/TSX Info Tech Index and since May has done better than the general index. Yesterday at a price of $18.33, the P/E is 18.5 and the Trailing P/E is 20.6. This is higher than the 5 year average for these figures of 15.3 and 19.1. Usually you want to get it below the 5 year average, but the P/E has been rising lately, so this is a value judgment on whether P/E is acceptable or not.

They have also recent raised their dividends. Their annual dividend has been moved to $.80. They have also declared a special dividend for June 2008 of $.25. This would mean a total of $1.05 dividend this year. This is higher than what the expected Earnings per Share of $.99, so you have to wonder what the company thinks the Earnings per Share will be this year.

Will this stock be a future dividend paying growth stock added to our lists of such stocks? Only time will tell.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/cmg.htm. See my website at http://www.spbrunner.com/stocks.html.

It is a computer software technology and consulting firm engaged in the development and sale software. (Note I had incorrectly labeled this stock in yesterday’s blog, but I have corrected this.) Its web site is www.cmgl.ca.

Tuesday, July 8, 2008

Computer Modelling Group

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

Since we seem to be in a bear market, we should have some fun. This company (TSX-CMG) is a dividend paying growth stock that would also be considered to be a small cap with a capitalization of around $115 million.

First, I will give you the negative news. The Graham Price on this stock, March 2008 is $6.89 and the price at the same time is $15.20. However, this is not surprising as this is a growth stock, but it is a caution, as it shows that the stock is risky.

Other than that, what is not to like about this stock. The following figures are based on 5 year averages to March 2008, the last Annual Report date. The revenue is up 20% per year and the Earnings per Share up on average 22% per year. Dividends are up on average 27.5% per year. The closing price is up 55% per year on average. The cash flow is up on average 23% and the book value up on average 15%. At March 2008, the asset/debt ratio is a health 2.5, the Return on Equity (ROE) is a health 38% and the Accrual Ratio at -5.5% is good.

This would be a great stock is you can accept the risk. Besides all the fine stuff above, insiders are buying this stock.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/cmg.htm. See my website at http://www.spbrunner.com/stocks.html.

It is a computer software technology and consulting firm engaged in the development and sale software. Its web site is www.cmgl.ca.

Monday, July 7, 2008

RioCan Real Estate Spreadsheet

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

The next question is would I purchase this stock at the present time? On my spreadsheets, I not only look at the past, but I also look at what is happening today. The main bright spot seems to be that the dividend went up in November 2007, so the total dividends this year will be up slightly. However, this would seem to only increase the Payout Ratio. The value-type items that I am concerned about do not seem to be changing for the best with the March 1st quarter report or estimates for this year.

For the 1st quarter 2008, the Asset/Debt ratio for this stock for 1st quarter 2008 is still at 1.47. For this quarter, the Asset/Book Value ratio is still high at 3.12. The revenue for this 1st quarter went up, but so did expenses, so the cash flow is not going up.

I realize others have buy ratings out on this stock, but I feel that it would not be prudent for me to buy more of this stock in this economy, given that the ratios concerning debt are a concern to me. I am a value investor, and this stock does not, at present, fit into my good value frame. I am going to hold what I have for now, but no buy any more.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/rei.htm. See my website at http://www.spbrunner.com/stocks.html.

This is an equity real estate trust and it owns a portfolio of retail properties across Canada. Its web site is www.riocan.com.

Friday, July 4, 2008

RioCan Real Estate

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

I bought this stock (REI.UN-TSX) in January 1998 and according to Quicken, I have made a 14.5% average annual return since that time on this stock. According to Quicken, I have made a 16.5 average annual return on this stock over the last 5 years. So I have done very well.

The following figures are based on 5 year averages to December 2007, the last Annual Report date. The Revenue is increasing nicely for a REIT at 10.5% average per year. For REITs and Unit Trust, you want to look at Distributable Income for Funds from Operations (FFO) not Earnings per Share (EPS). The Distributable Income is what money is available for dividends. For this stock, the average FFO increase per year is 4%. The dividends are increasing at an average of 3.7% (this is above inflation) and is good. The 5 years average increase in the Closing Price is 20%. Return on equity for 2007 is good at 10.5%.

The negatives that I see are that the debt level is increasing with an Asset/Liability ratio of 1.47 in 2007. This is below the 5 year average of 1.61 and also you would want to see this ratio at, at least 1.5. This ratio has been decreasing over the last 5 years. The Book Value is not increasing, the 5 year average is -2%. You do not expect to see increases as REITs distribute most of their cash, but it has been decreasing over the last 5 years. The accrual ratio is 7%, which is higher than I would like to see.

The dividends distributed have been divided basically 50/50 between Income and Return of Capital. (When you receive Return of Capital, this lowers your Adjusted Cost Basis for income tax purposes.)

I will put up my spreadsheet tomorrow.

Thursday, July 3, 2008

Husky Energy Purchased

I decided to buy some of this stock (HSE-TSX) to day. What I look for in a buy is a relatively reasonable price for the stock. Paying a reasonable price for a stock will greatly affect your long term returns for the stock

To get Earnings per Share (EPS) price, I look at what several sites might say about what the EPS might be for the current year. I look at the GlobeInvestors.com, Big Charts site, Investor’s Digest paper, and TD Waterhouse information. The Investor’s Digest is a bi-monthly paper to which I subscribe. TD Waterhouse site has their own reports plus Financial Post Investor Reports and Ink Company Insider reports. If the stock is also sold on an American Exchange, the stock could have Standard & Poor Stock Report and Reuters ProVestor Plus Report. The Globe Investors site, Investor’s Digest and Big Charts site can use the same analyst for EPS values, so be careful. From looking at these different sites and reports, I try to strike a reasonable EPS value for this year.

Once you have an EPS value for this year, you can get a P/E value and yield value. You can also get such values directly from the Globe Investors site. The Globe Investors site uses an EPS for the last 12 months.
I also get a trailing P/E. This is using current price/last year’s EPS. Next, I compare the P/E, Trailing P/E and Yield to an average for the last 5 years based on the closing price of the stock for last 5 Fiscal Years. This will help to determine if the price you want to pay for a stock is reasonable.

With this purchase, I only used a third of the money I got from my SNC sale, but got enough dividends on HSE to replace the dividends I will lose from my SNC sale. I have started on my Blog a list of the “Sites I Use”.

See my spreadsheet on Husky Energy at http://www.spbrunner.com/stocks/hse.htm. See my website at http://www.spbrunner.com/stocks.html.

Wednesday, July 2, 2008

Husky Energy

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.
I do not own any of this stock (TSX-HSE), but I have been tracking it. I am looking at it today as a friend asked me to. This company is into oil and natural gas. They have been making money. They are into energy, after all. After selling SNC yesterday, I am looking for something to buy; this stock currently pays a very nice dividend and has some good characteristics, so I am considering it.

All my following figures are for the five years prior December 2007. Revenues have been increasing nicely on average at 19% and Earnings per Share (EPS) at some 32%. Dividends have been increasing at the rate of 43% yearly, but I note that this company gives out regular and special dividends. I take it that the company divides the dividends in such a manner so that they can cut the dividend if necessary, by only cutting the special dividend and not the regular one. It would look better to investors.

The Current Asset/Debt ratio is only .98, but this is better than normal for this company. The average over the last 10 years is .73. The Asset/Debt ratio is a healthier 2.19. The cash flow from operations has been increasing at a healthy 19% and the operation profit margin for 2007 is 30%. The Return on Equity (ROE) is very good for 2007 at 27% with the 5 year average at 25%.

The only negative notes are the Accrual Ratio is very high at 18% (it is not good if over 5%), the Current Asset/Debt at .93 as noted above, and the Price/Book Value ratio of 3.1. These ratios point to the debt being higher and the price being higher than what you might want in a value stock.

This stock has both value and growth characteristics, with better growth characteristics. This stock is on the Mergent’s Dividend Achiever’s List, but not on the S&P/TSX Canadian Dividend Aristocrats list. This stock is involved in oil and gas, so I do not think you can buy and hold for ever. You need to keep an eye on these energy companies as oil and gas has a history of price fluctuations. I note that a number of people have a buy rating on this stock. It has done better over the last year than the TSX composite Index, but not as well as the Energy Index, that includes this stock.

See my spreadsheet at http://www.spbrunner.com/stocks/hse.htm. See my website at http://www.spbrunner.com/stocks.html.

Husky Energy is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky Energy works in Western Canada, off-shore Eastern Canada and off-shore China and Indonesia so it is an international company. Its web site is www.huskyenergy.ca