This is going to be a great discussion I'm sure with some good trading ideas. I'd like to start off by asking you Norm about your model portfolio. With the exception of Fairfax, it's filled with US stocks. Even after the S&P 500’s big outperformance in recent months, are you seeing better value in US stocks?
Well, there are a few factors there. First, the Canadian market is rather small. Second, as you point out, parts of the U.S. market are offering better value at the moment.
Which parts are the most attractive right now?
In the U.S., some of the financials are interesting because they're still stuck under a cloud from the 2008 collapse. Then there are stocks here and there that are interesting. But I'm not overly keen on the markets in Canada or the U.S. as a whole at the moment.
Let's throw this open to our users now. Here's one from Rob.
I personally tend to avoid commodity stocks because it tends to be a field where technology is not your friend over the long term. Having said that, a good number of commodity names have been poping up on some of my screens as of late. But, it's fair to say that I'm not a specialist in the ar
Any particular stocks you can mention that have popped up?
Of large names, things like Teck Resources (TCK.B), Inmet Mining (IMN), First Quantum (FM), Suncor Energy (SU), Penn West Petroleum (PWT), etc
The TARP warrants on some of the big financials can be quite interesting. I'm a little loath to suggest them to a wide audience but, for specialists, they are worth looking at. Just be sure to read up on the details. For those who are interested, they should also be compared to the long-term options that are avaialble.
Again, the size of the markets is an issue for me. If you're looking for a collection of good value stocks, there is just not as much to pick from in Canada. Much of it is small or illiquid. Now, I like several such stocks, but I wanted to stick to larger and more liquid names for the G&M portfolio. When it come to valuation, both markets are fairly pricey at the moment. (I'll tackle indexing next)
The issue of valuation combined with indexing can be a tricky one. At the core, indexing can be a good strategy due to its low costs. However, I think that it suffers from the notion that it's a good idea to buy an index at any price. Nonetheless, I'm not an advocate of frequent market timing. Just perhaps at the edges when some markets get out of line.
Sorry, La cloche, I don't follow New Millennium
I'm not sure that the U.S. banks will get back to their glory days any time soon. In addition, there are many real risks out there for them. So, further declines are a possibility. However, their prices are very low and many could do well should the economy continue to recover modestly. But, I tend to measure things in years. I don't mind buying cheap and then holding for 3-5+ years.
I got to ask about RIM, since it’s still trading near 10-year lows. In fact, it is trading very close to its net current asset value right now. Does this make the stock a compelling buy?
Well, I have a bit of RIM via Fairfax which owns some. I've been looking at RIM for well over a year becuase it has been trading at a low P/E for much of that time. But, I thankfully, held off on it. I think a good case can be made for the company at current prices. However, I suspect that moving into the end of the year we might see a little tax loss selling. So, even better prices could be around the corner. I'd like to see some improvment in its business before jumping in, even if that does mean paying a slightly higher price.
It's a good question that I might answer in a few ways. But, I'll try to stick with some practical pointers. Keep a close eye on the accounting. So, a book like Financial Shenanigans by Howard Schilit can help out there. Also, pay attention to how managment gets paid. If they are greedy and/or have a small/no stake in the firm, that's a bad sign. I'm also trying to wait longer when dealing with "new low" stocks because value investors tend to buy in a touch too early.
Hi Chris, there are lots of great people to follow. I'm sure most keep up with Warren Buffett & Charlie Munger. In Canada, follow folks like Prem Watsa, Francis Chou, Tim McElvaine, Irwin Michael. Well, how long do you have becuase the list goes on for some time!
Unfortunately we've been bombarded with questions here right at the end of our allotted chat time. So, we'll have to wrap it up soon, but first, we have these two questions from Meredith and mg on the precious metals sector.
Sorry, I don't have much to say about Kinross, Silver Wheaton, or Sandstorm Gold.
Darn. How about TransAlta or CNQ? We have questions on those too
Both TA and CNQ come up on different screens. TA, is on the dogs of the TSX 60 list, and it has come down a fair way, so it's worth looking at. I am concerned about its dividend. CNQ is also on one of my large cap Graham value screens, and if I recall correctly, David Winters (Wintergreen fund in the US) was a big holder. He has had some good things to say about it.
OK, thanks Norm. With that, we'll have to wrap it up. Norm is one of our participants for Strategy Lab, a new, regular series that promises to bring lots of fresh investing ideas and perspectives.
We look forward to future discussions with Norm.