I’m approaching (not quickly enough) the end of my three year contract with my mobile phone provider. I have nothing against this particular company, but I hate the fact that I’m tied in to a set bill for 36 months. Even though my bill, at $60, is pretty affordable for virtually unlimited data and limited minutes (which I never use up), I hate paying for something that I don’t use consistently. It’s a choice I made in order to buy an iPhone (which is more expensive to buy outright). When I reach the end of my contract, I’m certainly not planning to renew.
If I were in the US, I could easily find all the information I might need at: http://www.no-contract-plans.com. Sage Harman has collected information on plans, providers and plans that allow users to remain in control by avoiding long-term contracts.
I only wish Canadian telecoms were more friendly to people to want to avoid contracts. A pay-as-you-go option sometimes makes sense, but I also think there should be reduced rate plans for those who don’t get a “free” phone from the service provider. Bundling induces opacity which doesn’t serve the consumer. When August comes and I’m finally free of my contract, I’ll write again about the options I find and what I eventually choose.
Last week, I wrote about Loblaws. They reported positive earnings and they planned to spin off their real property into a REIT. As a result, their share price jumped.
I could copy and paste for Canadian Tire. They reported better than expected earnings for the prior quarter and they plan to spin off their real property into a REIT. As a result, their share price jumped. One difference is that the corporation plans to retain 80-90% ownership of the REIT, which will be half the size of the Loblaws trust.
Since the share price had been consistently rising, and was already well above its pre-2008 level, the jump in value has pushed its momentum up into the top performers of the TSX.
The company faces some headwinds, being in retail in Canada. At the same time, they have a new management team which has been in place for almost a year. It seems that the company doesn’t get a lot of respect, so when there is good news, it’s easy to see why the stock reacted as though it were a pleasant surprise.
Last week, I wrote about Loblaws. Although the share price has drifted back a little, it still presents a positive outlook. The extent to which it could continue to rise depends on how many people take more time to do their research and eventually choose to buy, versus those who have owned for a long time and may be taking profits.
About five weeks ago, I wrote about Gildan Activewear. At that time, it was trading around $40. It’s now around $43, up 6.8%. It’s no longer in my top five, but it maintains strong, positive momentum, just behind Loblaws and Bombardier (which I’ll probably look at next week).
Stocks were higher two months ago, in March. For a couple weeks, it looked as though they might lose their momentum and begin to slide in earnest. There was a week or two where I was watching very closely. However, sentiment seems to have resolved positively, and the past month looks like a line “from the lower left to the upper right,” to steal a phrase from Dennis Gartman.
Over the past week, interest rates have risen, so bond values have fallen, which has been consistent over the past month. In comparison, stocks have better momentum. A portfolio that is divided between stocks and bonds should be overweight stocks at this point. Despite the market dictum “sell in May and go away,” it looks like stocks might do alright over the coming weeks. Or maybe it’s just the last two weeks of May.
Looking at the various asset classes that I follow in my asset rotation model, I see that European stocks (XIN) continue to outperform and maintain the best outlook. Hong Kong and American stocks remain virtually tied in second place, though fairly far behind European stocks. I’m still not sure why they’re performing so well, but looking in two of my accounts, I see +21% and +17% (over a three or four month period?) and I’m not complaining.
I remember when this stock was a darling of a certain big name mutual fund company in the early 2000s. It performed well for a few years, before heading south and dragging many investors’ returns down with it. It can be difficult to see how a company can be profitable by competing on rock-bottom prices. In that situation, any mistake can erase margins that are already thin.
However, Loblaws (L) has released some good news recently. On May 1, 2013, the company made two announcements. First, they will raise their quarterly dividend by 9%. Second, they will spin off $7 billion worth of their real estate properties into a REIT in July. These are both good news for investors, and the share price has jumped accordingly.
The majority shareholder of Loblaws is George Weston Ltd. (WN), which also experienced an increase in share value. These companies both have positive momentum, among the best in the TSX 60.
After a couple weeks of uncertainty, stocks have pushed ahead. They again show a clear advantage over bonds. Looking at the economy, interest rates and inflation remain subdued, which is generally supportive of economic growth. These are the conditions that help generate profits in business.
In turning my attention to the various asset classes in my rotation model, European stocks (XIN) maintain the lead. That pleases me, since I’ve owned it since February 1st. In the ensuing three months, it has risen in value almost 10%. By contrast, the TSX has fallen almost 2%. American stocks (SPY, IWM) also look attractive, followed by Hong Kong stocks (EWH).
The TSX group (Standard & Poors, a division of McGraw-Hill) has changed their website AGAIN, and no longer shows the average P/E of the TSX index. The result is that I haven’t yet found a way to calculate a fair market value. It was nice to see, but it didn’t inform my investment decisions anyway.
This year, just for a change, I waited until April 30 to submit my taxes. My wife and I both had almost no income other than from dividends. I had heard before that a person can earn about $30,000 of dividend income before owing any taxes. But I had to see it first hand before I could really understand it.
This means that a couple can each earn about $30,000 or together earn $60,000 and not owe taxes. This is really nice for a couple to plan for in retirement. At the same time, there are some drawbacks. First, the dividend are earned in a taxable account, meaning that it doesn’t help if all your investments are in RRSPs. Second, the investments need to be evenly split between the two individuals to minimize taxes owing. Third, income is grossed up before getting a dividend tax credit, so although no tax is owing, Benito’s such as OAS, GIS and any other income-tested benefits may be clawed back or unavailable.
Still, I’m not complaining. I’m far too young to qualify for OAS anyway.
Last week I was concerned because stocks had lost momentum and been surpassed by bonds. The past week has been more favourable to stocks, and they now are showing equal momentum to bonds. When neither asset class has a clear advantage, it’s a time of uncertain outlook. Interest rates are low, inflation is low and economic news is not particularly optimistic. There’s an old stock market dictum that says, “Sell in May and go away.” If I had to guess, I’d say it seems likely to hold true again for this year.
Looking deeper, at the various assets in my asset rotation model, I see that European stocks (XIN) continue to dominate. In second place, for anyone investing in USD, is the S&P 500 (SPY). I continue to own XIN and remain very pleased with the performance.
Ewwwwww. The stock market has been volatile. It hasn’t been outrageous, as it would pending a crash, but it has been rocky. Gold has particularly negative momentum at the moment, small caps in Canada and the United States have turned negative and even emerging markets are looking down.
I’m not entirely sure why European stocks, followed by US large caps and real estate, have the best momentum. I wonder if some of the reason lies in the fact that the ETF is currency hedged, and perhaps the Euro is falling in value compared to the CDN$. Whatever the reason, I will continue to own XIN.
The momentum of Canadian stocks, compared to bonds, has turned negative. This could just be a momentary lapse, but bonds appear safer than stocks at the moment. This moment is a risky time and I will continue to watch the market movement very closely.
I’m somewhat reassured. A week ago, investor sentiment seemed to be teetering on the edge. The past week has been volatile, but only because the stock market rose before falling back to near where it began the week. That’s not the type of action I would expect from a market that’s beginning a multi-week decline. In fact, it appears that even though some nervous money was scared out of stocks, most investors have remained calm.
I am pretty annoyed, but not at the market. Rather, the TMX website has been reorganized again, and I can no longer find the average P/E or the average dividend yield of the market as a whole. I suspect that the company prefers people not have have this type of information (for free). I’ll get over it, though, since my fair market value estimate doesn’t really inform my investment decisions. Still, it was a nice barometer to have.
European stocks (XIN) are again leading the pack in momentum. IWM is not far behind, but the broader US market (SPY) has edged ahead. I’m not sure why the American markets are outperforming the Canadian market to this degree, but it probably makes up for years where the Canadian market led the way, benefitting from increasing commodity prices. Those days appear to have passed.
Gildan Activewear Inc. is vertically-integrated global manufacturer and marketer of basic apparel products for customers. It sells active wear products to screen print markets in North America, Europe and other international markets as well as selling socks and underwear.
The P/E ratio looks expensive at 21, but it’s not much over the five year average of 18.5. The dividend yield is 0.9%, but debt to equity is just 12%. Institutional ownership, a vote of confidence by professional money managers, is 85%. 11 of 17 analysts rate the stock a buy and just 1 rates it a sell.
It appears to be a well-managed company that is relatively stable. Given the recent volatility, the fact that it’s now on my radar may be a reflection of its stability.