- Comments (2)
- Text Size: Down Up
moneysense.ca, 12/07/12
This and That: Dividend Investors, Financial Advisors and more…
Lessons for Dividend Investors
The Globe and Mail’s John Heinzl wrote a column on the seven lessons he has learned as a dividend investor. We could quibble about some of the points but most of the points apply to all intelligent investors.
Who is a “Financial Planner”?
This article in the New York Times explains the difference between brokers who only have to satisfy the “suitability” standard and true financial advisors who are held to the “fiduciary” standard.
Buy European (stocks)
The economic crisis in Europe is no reason to avoid European stocks. In fact, since the crisis has depressed prices, this may be a good time to go shopping for European stocks, says this SmartMoney article.
Other interesting reads
Fortune magazine recently released its list of the biggest companies in the world ranked by revenue. It is astonishing to see the increase in the number of Asian (mainly Chinese) companies that made the Fortune 500 over the past decade. Canada currently has 11 companies in the list.
In an interview with CNBC’s Squawk Box, Warren Buffett says that while US housing is picking up, the rest of the economy is slowing down. He also says that in the last couple of months, “things have started to slip pretty fast” in Europe as well.
The Globe and Mail’s Tim Cestnick explained some of the basic rules that need to be satisfied for an investment to be interest deductible.
Rob Carrick says that a slow decline in home prices isn’t such a bad thing after all.
The National Post’s Gary Marr cautions against fibbing on the insurance policy application.
SmartMoney magazine offered an interesting peek into the work day of a professional trader.
moneysense.ca, 12/07/12
The analysis in the SmartMoney article on Euro stocks is somewhat deficient, and I would argue the conclusion is wrong.
GDP does impose a practical supremum on earnings per share, i.e. in the long run, barring major changes in how well an index represents its underlying economy, it’s not reasonable to expect earnings per share for a representative index to grow faster than GDP. If you look at graph 4 in the MSCI Barra report he refers to, you can see this clearly. The green line (real EPS) fluctuates, but it’s always below the orange line (real GDP).
If one doesn’t expect real GDP in Europe to be higher ten years from now, it doesn’t make sense to buy European indices, unless one thinks valuations are low. But they’re not, for the most part. The MSCI Europe Index has a P/E of 12.4x right now, with an earnings growth rate of 2%. The MSCI US Broad Market Index has a P/E of 15.5x but with an earnings growth rate of 9.6%. Doesn’t seem like any great discount yet for the Euro indices.
Moreover, private sector GDP (i.e. GDP minus the government spending component) correlates more clearly with equity returns, and private sector GDP growth has been negative for several years now in several of the major European countries.
The technicals say Europe is a no go. The market sentiment is also voting no on Europe right now, but that doesn’t mean you throw out the baby and the bathwater. There are some wonderful brands out there. I look at one that I just opened a position on (Siemens) which is essentially GE-conglomerate with their hands on every industrial segment (except financials). A significant portion of their sales now are generated outside Europe and are best of breed in China in segments where the Chinese 2.0 is going to emerge (i.e. healthcare, alternative energy). The stock has been getting schmucked and had some rough quarters, but this business is not going bankrupt anytime soon. These type of brands are out there and doing great things and might be worth building positions over time as fear and pessimism persist.
@sageinvestors