Tuesday, March 31, 2009

Melcor Development 2

I am continuing my review of this stock (TSX-MRD) today. The first thing to mention is that there is insider buying. All this buying, so far, has occurred under $5.05. Also, options granted in December 2008 have been held, rather than sold. This shows that insiders have some faith in this company. There is no insider selling.

The next thing to look at is the Ratios. Do they point to this stock being a good buy? The first is the yield, which is Price/Dividend. The 5 year average is 3% and the current is 7.5%. If they do not reduce it this year, it will be even better at 9%. All the quotes on current yield uses the last one issued, and for this stock, no one is saying what the dividends for 2009 will be.

The next ratio to look at is the P/E ratio. There is a wide difference in what analysts think this stock’s EPS will be for 2009. If we assume earnings of $.65 then the P/E is almost 7 and not much below the 5 year average of 8. Just having analysts think that the earnings will be much lower for 2009, in itself, will depress the stock’s price. The company has real estate in Alberta, so it will not recover until Alberta’s economy recovers. It is hard to say when this will happen, and the analysts may be right in assuming it will not occur in 2009.

However, if you look at the trailing P/E, that is the P/E ratio, but using the current year earnings, the Trailing P/E is just over 3%, compared to the 5 year average of 10%. The other thing to look at to see if the current price is good is the Graham Price. The current price is almost 75% below the Graham Price. The other good thing is the strong balance sheet, where the Asset/Liability Ratio is 1.78. It is not as good as the 10 year and 5 year averages for this stock, but anything over 1.50 is healthy.

The one negative thing I have to say about this stock is the negative cash flow for the year ending in 2008. Also, the Return on Equity (ROE) was lower in 2008 at 13% than the 5 year running average of 19%. If you look at the charts, this stock has not done as well as the TSX Real Estate Index for the 1 year and 3 year periods. It has done better for the 5 and 10 year periods. This stock has been hit hard by the recent recession, but then, it is a small cap stock. Before this recent period, it was doing better than the TSX Real Estate Index. It has a strong Balance Sheet, and usually companies than can survive a recession can do very well. The point is that they have to survive the recession, and I think this company will do so.

In looking at the analyst ratings on this stock, they are very few following this stock, but the only rating that this stock seems to have is a buy. (See my site for information on analyst ratings.)

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi- family sites and commercial sites. It operates mostly in B.C. and Alberta. The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is www.melcor.ca. See my spreadsheet on this company at www.spbrunner.com/stocks/mrd.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Monday, March 30, 2009

Melcor Development

I am reviewing this stock (TSX-MRD) today as I have just received the annual report on this stock. I bought this stock in 2008, and so far, I have only lost money on it. When I was reviewing the stock in September 2008, I got an estimate for the earnings of $1.64. However, the earnings came in lower at $1.31. Earnings estimates have since then been reduced.

I am going to continue to hold this stock. What I like about it at the moment is that the current price is below the book value. The current price is $4.50 and the book value at December 2008 is $10.41. Also, the current price of $4.50 is also almost 75% off the Graham Price of $17.52. The problem is that this company is in real estate in Calgary. This company will probably not pick up soon.

The other thing I like about this stock is the increase in dividends over the years. Over the last 5 years, it has increased its dividend some 30% per year. However, the last 10 year the dividend increases is not so impressive at 10% per year. It would appear that it plans to decrease dividends for 2009, as the last semi-annual dividend was only $.17 a share. However, it had already issued dividends for $.25 in the first part of 2008, to have an increase in dividends of 5% for 2008.

There may not be a decrease in dividends for 2009, but we will not know until the all the dividends have been declared for 2009. This company also has the happen of a habit of issuing special dividends. They have a problem in 2008 annual report, as there is a negative cash flow. A good cash flow is necessary in order to increase dividends.

The next things to discuss are the Asset/Liability Ratios and the Return on Equity (ROE). First of all the Asset/Liability ratios is healthy at 1.78, where anything over 1.50 is good This means that total assets can cover total liabilities. The ROE is much at 13.2% for December 2008 is lower than the 5 year running average of 19%.

2008 was not a great year for this company. The Earnings are lower, the ROE is lower and the Cash Flow is negative. However, this is a Real Estate company and they all are having a hard time. We are not going to see any improvements in the company until the economy picks up in Alberta.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi- family sites and commercial sites It operates mostly in B.C. and Alberta. The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is www.melcor.ca. See my spreadsheet on this company at www.spbrunner.com/stocks/mrd.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Friday, March 27, 2009

SNC-Lavalin 2

To start on a positive note, this company (TSX-SNC) has raised their dividend to $.15 a share for the first one due in March 2009. This is a 25% raise in their dividends. It shows that the company has faith in the stock and expects it to do well in the future.

The other thing to mention is that this stock is on everyone’s great dividend paying stock lists. This stock is on the Dividend Achievers list at www.dividendachievers.com, the Dividend Aristocrats list at www.tmxmoney.com/en/individual.html (see indices) and also on Mike Higgs’ list at www.dividendgrowth.org/Report.htm. The next thing I looked at was Insider Buying and Selling on this stock. There was an awful lot of Insider Selling from April to September of 2008. There has recently been a modest amount of Insider Buying and Insider Selling since. Most of the Insider Buying has been in the $30 - $35 range.

I then looked at the spreadsheet to see how the ratios were doing. The most important is the Price/Earning Ratio (P/E) and the Yield. The P/E ratio has come down a lot. The 5 year average is over 30. The current P/E is 15. The 5 year average for the Yield is less than 1%. The current yield is 1.9%. Both these ratios point to a good price. However, you should note that on Mike’s list, he gives an historical high dividend yield of 2.10% and a historical average of 1.60%. On this basis, this stock is only better than the historical average yield.

The Globeinvestor site rates this stock a 4 star rating (out of possible 5 stars). The consensus rating on this stock is a Buy. There are a lot of Buy Ratings on this stock. There are a few Strong Buy Ratings and at least one Sell Rating. There are no other Ratings given by analyst. (See my site for information on analyst ratings.)

There are a couple of things that may not point to a good price. The first is the Price/Book Value ratio. This ratio is currently at 4.4 and the 5 year average is 5.52, but the 10 year average is 4.09. The other thing is the Graham Price. This stocks price is much higher than the Graham Price and the reason for this is that it is a growth stock. However, when this stock becomes a mature stock, you will probably see it fall to the Graham Price. When this might be, I do not know.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is www.snc-lavalin.com. See my spreadsheet on this company at www.spbrunner.com/stocks/snc.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Thursday, March 26, 2009

SNC-Lavalin

I am reviewing this stock (TSX-SNC) today as I have just received the annual report on this stock. I bought this stock in December 1998 and I have made a return of 29% per year. Included in this is selling 1/3 of my holdings for $55.78 a share in July 2008. This is quite a bit above the current price of $32.05. I sold some of this stock in July 2008 as I held too high a percentage of it in my portfolio. I do not like it if any stock becomes too high a percentage in my portfolio. If something happens to such a stock, your portfolio can suffer greatly.

What I like about this stock is the good growth in Revenues and Earnings over the last 5 and 10 year period. This is also a stock that grows its dividend, with the 5 year dividend growth at almost 29% a year. However, the yield on this stock is very low, with a 5 year average of just under 1%. This is a dividend paying growth stock and my return has consisted of 1% dividend and 28% capital gain.

The Graham Price is quite a bit below the stock price. Even with the decrease of the stock price to $32.05, the stock price is still 75% higher than the Graham Price. This is because the stock price has been growing in the 20% range per year, and the Earnings and Book Value have been growing in the 10% range per year.

The next things to discuss are the Liquidity Ratios and the Return on Equity (ROE). First of all the Liquidity Ratio and the Asset/Liability ratios are low at 1.08 and 1.19. It is much better if they were both at 1.50; however, they are at least over 1.00. This means that assets, both total and current can cover the liabilities, both total and current. The ROE is much better with the ratio at 28.5% for the year ending in December 2008 and the five year average being 19.3%.

The one thing to worry about is the Accrual Ratio, which is very high at 4.58%. It would be much better if the Operations Cash Flow were a lot higher than the Net Income. For 2008, they were almost the same amount. I must admit that I have done very well by this stock. SNC-Lavalin is a well thought of company. I plan to hold on to the stock I have left.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is www.snc-lavalin.com. See my spreadsheet on this company at www.spbrunner.com/stocks/snc.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Wednesday, March 25, 2009

Outliers by Malcolm Gladwell

The full title of this book is Outliers, The Story of Success, by Malcolm Gladwell. Gladwell had also written another book that I have read called The Tipping Point. I am currently reading his book called Blink. His books are very easy reads and you always learn something.

One of the most interesting subjects that he talks about is what he calls the 10,000 hour rule. What it is, is that to get really good at anything, you must spend 10,000 hours on it. This would be approximately 8 hours a day, every day for about 3 ½ years.

The first person he talks about his Bill Joy, a co-founder of Sun Microsystems, which was one of the critical players in the computer revolution. He started at the University of Michigan in 1971 and came across their new Computer Center. He started at this university when computer terminals and time-sharing systems came in. The University of Michigan’s new Computer Center had the latest. The center was open 24 hours a day and he lived near the center and spent a lot of his time there. The center gave out fixed amount of time on their computers, but then some of the kids figured out how to get unlimited amount of time on the systems. This was how he got to spend a phenomenal amount of time programming.

In this chapter, he also talks about the Beatles. They got invited to Hamburg. In Hamburg, you did not just play for one hour sessions; you had to play for eight hours. The played at a club seven nights a week and they played almost non-stop until after midnight. On their first trip, they played 106 nights for five or more hours. By the time of their success in 1964, they had performed live an estimated 1200 times.

If you do not know who Bill Joy is, you will certainly know who Bill Gates is. He went to a private school called Lakeside. There was a Mothers’ club that raised money to put in a computer terminal. It had a direct time-sharing link to a mainframe in downtown Seattle. Bill Gates got to do real-time programming as an eighth grader in 1968. When the Mothers’ Club ran out of money to pay for the kids computer club’s programming, they got an offer to test out a company’s software programs in exchange for free programming time.

All these people may have been very brilliant, but they also got opportunities to put in huge amount of time at the things for which they got famous. They got opportunities and they took advantage of their opportunities. There is, of course, much more to this book. For book reviews, see the New York Times review at www.nytimes.com/ and www.nytimes.com/. Also, see a Social Capital blog at socialcapital.wordpress.com.

Malcolm Gladwell has his own site at www.gladwell.com. On this site, he talks about his three books of The Tipping Point, Outliers, and Blink. Also on this site, he has his New Yorker magazine articles, his Blog, and his biography. Wikipedia has an article on him at en.wikipedia.org and he is at TED at www.ted.com. He is also on YouTube.

This book review and other books I have reviewed are on my website at www.spbrunner.com/books.html. Also on my website is how to find this book on Amazon if you care to purchase it. See www.spbrunner.com/books.html.

Tuesday, March 24, 2009

Davis Henderson Income Fund 2

I am continuing my reviewing of this stock (DHF.UN) today from yesterday. I purchased some of this yesterday and if the price goes down any, perhaps I will purchase some more. This is an income Trust stock and it has been recommended a number of times by the Investment Reporter.

I am first looking at Insider Buying and Selling. There is little of this and but there was some in September 2008 at prices under $16.00. This buying was by a director. There has been no activity since then. So, this action tells us little.

The next thing to look at is what the ratios tell us about the current price of this stock. The current yield is over 14% and this is quite a bit above the 5 year average of 8%. The P/E is currently running at around 7 and this is lower than the 5 year average of 12. Also, the Graham Price is at $20.36 and this is over 36% above the current price. These things all point to the price of this stock at about $13 to be a very good price.

I have updated my spreadsheet today with estimates. Looking at what analysts are saying there is a big difference in their expectations on earnings and cash flows for 2009 and 2010. Along with this, analysts seem to see this stock either as a Strong Buy or as a Hold. This makes the consensus a Buy. When there is such a polarization of opinion, the consensus does not tell you much. However, even if you go with the lowest estimates, this stock’s Graham Price is still over 30% higher than the current price. You will also still have a good P/E ratio and a high yield.

This is, of course, a Unit Trust stock and will be taxable from 2011. It is expected that their distributions will be cut after 2011. However, in the mean time, you can earn a great yield.

Davis & Henderson provides programs to customers who offer chequing account and lending services within Canada. It manages the cheque supply programs for virtually all of the financial institutions in Canada, including the Big Six banks. Its web site is www.dhltd.com. See my spreadsheet on this company at www.spbrunner.com/stocks/dhf.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Monday, March 23, 2009

Davis & Henderson Income Fund

I am reviewing this stock (DHF.UN) today as I have recently been reading about it and I am considering buying it. This is an income Trust stock and it has been recommended a number of times by the Investment Reporter.

At this point, I usually talk about the 5 and 10 year growth figures that are good and then talk about the ones that are not good. However, this information can be seen on my spreadsheet, and to just repeating the figures here is boring. So instead, I will talk about the growth figures I like. First of all, I should point out that this stock went public in 2001, so there are no 10 year figures. The best figures are the 5 year growth in the Closing Price. This is 8%. The reason it is so high is because of the dividends paid.

This stock has gone down a lot in this present bear market and has recently recovered with the market recovery. The decline at present is close to 40%. This decline has shoved up the yield from around 8% to 14%. Most analysts think that the dividend is fairly safe, so you can earn a good return while the stock recovers. However, please note that the distributions on this stock are considered to be interest, so you would not get the dividend break on any money received.

Most of the 5 year growth figures on this stock are rather mediocre. However, there are two I would like to point out. The first is the growth in distributions, which for the last 5 years is 5.8%. The other thing to point out is that a lot of what is earned is paid in distributions, so the growth in book value for the last 5 years is a meager 1.7%.

The next thing to talk about is the liquidity and this is low at .72. However, the Asset/Debt ratio is a healthy 3.10. So this means the balance sheet is relatively strong. The Accrual Ratio is neither good nor bad at 2.8%. The Return on Equity (ROE) is good at a running 5 year average of 17% and a 2008 number of 17.4%. This stock has not been given a stability rating, but it would be considered to be a medium risk. It is a profitable company, and while it will not make you rich, it should provide a reasonable return.

Davis & Henderson provides programs to customers who offer chequing account and lending services within Canada. It manages the cheque supply programs for virtually all of the financial institutions in Canada, including the Big Six banks. Its web site is www.dhltd.com. See my spreadsheet on this company at www.spbrunner.com/stocks/dhf.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Friday, March 20, 2009

Gennum Corp 2

As I said yesterday, I am reviewing this stock (TSX-GND) because I follow it. In looking at Insider Buying and Selling, I see that the CFO, CEO and some directors have increased their share holdings. There is mostly Insider Buying. I also note that Gennum Corp is buying back their stock. I have updated my spreadsheet with estimates. Do not forget that the purple in my spreadsheets are only estimates and as with all estimates can be very wrong.

Looking at the ratios, with the current price, the P/E is 14.4 against a 5 year average of 25.6. The current yield is 3.9% against a 5 year average of 1.5%. These are both very good changes. Also, the Price/Book Value ratio is .98 against a 5 year average of 3.16 and the Sales/Price ratio is 1.14 against a 5 year average of 3.46. These are also good changes showing that the current price is a good one. Also, as I said yesterday, the current price of $3.60 is lower than the 2008 Graham Price of $7.92 and potential Graham Prices of $4.98 of 2009 and $6.28 of 2010.

The other good thing about this stock is the strong balance sheet. The Liquidity Ratio and the Asset/Liability Ratio are both very good at 4.63 and 5.37, where anything over 1.50 is a good figure. The accrual ratio is also negative, and this also points to a good current price.

In looking the ratings given this stock by analyst, there are Strong Buys, Buys and Hold Ratings, with the consensus rating being Hold. The reason for the Hold ratings is that no one expects this company’s earnings to be good in 2009. They also expect that Revenues will decline for 2009. So what we have here is the stock at a good price, but with worries that its earnings and revenues are going to fall. The risk level for this stock is high, so if you buy such a stock, you have to be prepared to be holding a very risky stock.

In looking at the charts, this stock peaked in the last bull market and it has been trading in a band until the latest bear market. Since this bear market has started, it has only gone down.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores for the world's most advanced consumer connectivity, video broadcast and data communications products. Leveraging the company's proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. A recognized award-winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Germany, India, Japan, Korea, Mexico, Taiwan, the United States and the United Kingdom. Its web site is www.gennum.com. See my spreadsheet on this company at www.spbrunner.com/stocks/gnd.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Thursday, March 19, 2009

Gennum Corp

I am reviewing this stock (TSX-GND) because I follow it. I have always liked technology stock. I used to own this stock. I held it between 1998 and 2006. I make some 5.5% per year return. I sold this stock, as it seemed to go up and down within a band and never getting anywhere. Since I sold this stock, it has only gone down. It seemed to have had its best days prior to 1999. This is a dividend paying stock, but it is not on anyone’s list of good dividend paying stock.

All my following figures are for the year ending at the last annual statement of November 2008. The earnings growth for the last 5 and 10 years was 12% and 5% per year. This is not bad, especially, the 5 year growth figures. The 5 and 10 years growth for dividend was 3% and 6 % per year. These also are not bad figures. Other positive figures are Liquidity Ratio and the Asset/Liability Ratio at 4.63 and 5.37 respectively. These are exceptionally strong figures. Also, the Return on Equity (ROE) for 2008 and last 5 years average were 20.8% and 10.9%. The one for 2008 is especially strong. The other good thing to note is the accruals are negative with an Accrual Ratio of -2.72%. Negative accruals are a good sign.

There are lots of negatives. The 5 and 10 year figures for growth in the Closing Price was -19% and -10%. These are awful. The 5 and 10 year figures for revenue growth are .15% and 4.3% per year. The 5 year growth is especially bad. The 5 and 10 year figures for cash flow growth are -7% and 1.3% per year.

The thing to note on this stock is that the Graham Price has been consistently lower than the stock price until recently. Currently this stock is trading below its Graham Price. This stock is becoming a mature stock from a growth stock and mature stocks usually have a stock price much nearer to the Graham Price than growth stocks. Since this is a dividend paying stock, it might have a worth while future as a good stock.

The main problems with this stock are the lack of Revenue growth and the lack of Cash Flow. In better economic times, this may change. What I would like to see is an increase in the dividends, showing that the company has faith in the future of this stock. The current dividend yield is 3.4% and this is much better than the 5 year average of 1.5%. For 2006 and prior it had a dividend yield of less than 1%. This is acceptable in the growth stock, but not a mature stock. In a mature stock, you want a yield closer to 4% than 1%.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores for the world's most advanced consumer connectivity, video broadcast and data communications products. Leveraging the company's proven optical, analog and mixed-signal products and IP, Gennum enables multimedia and data communications products to send and receive information without compromising the signal integrity. A recognized award-winner for advances in high definition (HD) broadcasting, Gennum is headquartered in Burlington, Canada, and has global design, research and development and sales offices in Canada, Germany, India, Japan, Korea, Mexico, Taiwan, the United States and the United Kingdom. Its web site is www.gennum.com. See my spreadsheet on this company at www.spbrunner.com/stocks/gnd.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Wednesday, March 18, 2009

First Service Corp 2

I am continuing the reviewing of this stock (TSX-FSV) from yesterday. This stock is also traded in the US (NASDAQ-RSRV). Looking at the insider buying, insider selling report, I see lots of buying last summer, lots of selling at the end of 2008, and most recently a bit of buying at under $10 per share. The net effect of this buying and selling is that the CEO and the CFO both have slightly less shares and other officers slightly more shares. The net of the past year is a net to insider selling.

As I said yesterday, some the ratios are showing that this stock is at a good price, especially, that the price is under the Graham Price. The Globe and Mail gives this stock 3stars out of a possible 5 stars. There is a discrepancy in what people think of it. There is the odd Sell Rating, Hold Rating and Underperform Rating, however, most are Strong Buy Ratings with a few Buy Ratings. The Consensus rating is a Buy Rating. (See my site for information on analyst ratings.)

If you look at the charts, you will find that this stock has done worse than the TSX and the TSX Real Estate Sub Index, for all periods from YTD to 10 years. This is mainly because of the recent sharp decline in the stock price for this stock. It recently has gone from $15.50 to just under $10. However, you also see in these charts that this stock peaked in Mid 2007 and has basically gone down ever since.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Its web site is www.firstservice.com. See my spreadsheet on this company at www.spbrunner.com/stocks/fsv.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Tuesday, March 17, 2009

First Service Corp

I am reviewing this stock (TSX-FSV) because I follow it and I own it and I want to buy some more stock. I just do not know if this is the stock, I want to buy. This stock has come down a lot lately. It has declined from $31.80 to $9.82, a decline of almost 70%.

I bought this stock in 2002 and I have so far have lost some 10% per year on it. I have just updated my spreadsheet as the December 2008 3rd quarterly report has come out. This is not a stock on anyone’s list as it is not a dividend paying stock. However, in 2007, they issued preferred shares to their common stock shareholders and the preferred shares are paying a dividend. Up until 1999, they used CDN$ in their financial reports. Since that time, they have used US$. My spreadsheet is in CDN$ as this is what is important to me as I live in Canada.

If you look at Earnings per Share (EPS), you will see the 5 year growth is -2.49%. This is because the year ending in March 2008, was a bad earnings year for them. The earnings expected for this year and 2010 are expected to improve. They have done better than expect until the 3rd quarter ending December 2008 and here they had an EPS loss. However, for the first 3 quarters they have made $1.81 US, which is higher than for the year ending March 2007. So this is an improvement.

Another positive thing is that the stock price at $9.82 is below the Graham Price of March 2008 of $14.32 and below the Graham Price for December 2008 of $17.84. Also, their net income has improved, along with the Accrual Ratio. The Accrual Ratio for March 2008 was 19.02%. It is now -8.68%, which is a very good improvement. The other positive thing is that the Asset/Debt ratio is now 1.51, up from 1.37 at March 2008. However, the Liquidity Ratio is lower at 1.22 when it was 1.29 at March 2008. Tomorrow, I will look to see what the analysts are saying about this stock.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Its web site is www.firstservice.com. See my spreadsheet on this company at www.spbrunner.com/stocks/fsv.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Monday, March 16, 2009

Cinram Intl Inc 2

Cinram Intl Inc 2
I looked at this stock (TSX-CRW.UN) on Friday and said I will continue the review today. The one thing you can say about this stock is that there is lots of insider buying. There was some insider selling in June 2008 when the stock was still over $6. However, there has been only insider buying since November 2008 and continuing to the present. This was when the stock was below $4 and especially when it has been below $2. I have updated my spreadsheet with some estimate figures.

This company started paying dividends (or distributions) in 2002 and stopped at the end of 2007. The reason they were stopped is because of debt covenants. There have been no indications that the dividends will be reinstated anytime soon.

In looking at the usual ratios on the spreadsheet, there is not much to tell. You cannot look at P/E or Yield as there are no earnings and the distributions has been suspended. The ones we can look at are not bad, whereby the Price/Sales ratio is now .04 and this is lower than the 5 year average of .39. This company is not expected to make much in cash flow for 2009, but if it does as expected, the Price/Cash Flow ratio is 2.28 and this is lower than the 5 year average of 4.05. The last ratio to look at is Price/Book Value and the current one is 2.80 compared to the 5 year average of 3.15. In all these ratios, lower is better.

Other ratios we can look at are the ones concerning debt and accruals. The Liquidity Ratio is at 1.40 and this is higher than the 5 year average of 1.18, but it would be preferable to be at 1.50. The Asset/Debt Ratio is at 1.01 and this is lower than the 5 year average of 1.24. Here again, this ratio would be better if it was at least at 1.50. However, the accrual ratio is very good at -8.04. Any accrual ratio of -5 or better is great.

There are lots of Hold ratings on this stock, and a few Underperform. The consensus rating would be a Hold. (See my site for information on analyst ratings.) The analysts with the Hold ratings seem to feel that this stock will have positive earnings for 2009. Others feel that this company will not have any positive earnings and are looking to the stock underperforming. It is interesting that there seems to be no Sell ratings.

If this stock is going to do well again, there is probably plenty of time to see this as the stock is worth just over $1.00 currently. On the other hand, if you invest in it now, it would not cost much and therefore you could not lose much. This stock no longer fits into what I want to buy, which is dividend paying stock, so I will probably pass it currently, but I will continue to track it.

Cinram is the world's largest provider of pre-recorded optical discs and related logistics services for leading motion picture studios, music labels, publishers and computer software companies. Cinram also provides distribution and logistics services to the telecommunications industry in North America and Europe through its wireless subsidiaries. Its web site is www.cinram.com. See my spreadsheet on this company at www.spbrunner.com/stocks/crw.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Friday, March 13, 2009

Cinram Intl Inc

I am reviewing this stock (TSX-CRW.UN) because I follow it and I used to own it. I know it has done quite badly lately, but it can be just as instructive too look at a failing stock as a successful stock. I bought this stock in 2000. At that time, it was coming out of a slump and was transitioning from making VHSs to DVDs. I sold this stock in June of 2007 as it seems to be having a hard time and I liked the stock Saputo better. I make an annual return of 19% on this stock during the time I held it. This figure, of course, includes dividends.

When looking at the price chart on this stock, it looks like I sold it at just the right time. The stock took a dive at the end of June 2007 and it has not recovered yet. After I bought this stock, I did keep an eye on it, as I knew its past history. This stock had a big run up in price from 1994 to 1998 and then crashed between 1998 and 2000. I have just updated my spreadsheet as the December 2008 report has come out.

The only real bright spot with this stock is that it is still earning a good revenue stream. However, there are other positive things as well. It also still has a positive cash flow, it has been coming done recently, but it is still positive. If you look at the balance sheet, it is relatively strong, with liquidity being at 1.40. I prefer to see this figure at 1.50, but at least they have current assets to cover their current liability. The Asset/Liability ratio is not as good at 1.01, but it is not that bad.

If course, there are very strong negative things about this stock. To begin with, it just does not seem to be able to make any profit. If you look at figures for earnings, cash flow, book value and stock price, they have all crashed over the last 2 years. They lost a lot less in 2008 than in 2007, but I do not think this is pointing to the end of their problems. I will look at what the analysts are saying on Monday.

Cinram is the world's largest provider of pre-recorded optical discs and related logistics services for leading motion picture studios, music labels, publishers and computer software companies. Cinram also provides distribution and logistics services to the telecommunications industry in North America and Europe through its wireless subsidiaries. Its web site is www.cinram.com. See my spreadsheet on this company at www.spbrunner.com/stocks/crw.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Thursday, March 12, 2009

Johnson and Johnson 2

As I said yesterday, I will talk about what analysts say about this stock (NYSE-JNJ) today. The other thing to note is that the 2008 annual report is just out and I used this to update my spreadsheet and I will republish this spreadsheet today.

What I noted is that some of the 5 and 10 year growth rates are down as a result of the 2008 December figures. However, in most categories, this stock still made a decent showing. The worse showing is the 5 and 10 year growth in the closing price. However, this is to be expected as we are still in a bear market.

In looking at the charts on this stock, it has done better than the S&P 500 in all periods, except the YTD period and in this period is about even with this index. The thing I noted that this stock has basically gone sideways since 2005. It has had its ups and downs, and you could have make money, in US$ if you bought at the relative lows and sold at the relative highs. However, this is not how I like to invest. I like to buy and hold a stock. You also might have made money by buying at a relative low and then holding, but it is easier to pick relative lows looking back at a stock, than to pick relative lows at any particular point in time.

Looking at the ratios on this stock, current P/E of 10.8 is lower than the 5 year average of 17.8 and this point to a current good price. Also, the current yield is 3.8% against the 5 year average of 2.3%, so this would point to a current good price. The current book value of 4.4 is lower than the 5 year average of 5, so this would point to a good price. The negative is that the current stock price of $48.70 is still higher than the graham price of $37.00. You tend to get higher stock prices on growth stocks, but I do not think of JNJ as growth stock. Even with the current fall in stock price, the current price is about 30% off the Graham Price.

Looking at the analyst ratings, there are lots of Strong Buys, Buys and Holds on this stock, with the consensus rating being Buy. (See my site for information on analyst ratings.) I looked at insider buying and selling and it seems to be pretty much a mixed bag, so we do not learn anything there. However, there was more recent insider selling than insider buying

Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional. Its web site is www.jnj.com. See my spreadsheet on this company at www.spbrunner.com/stocks/jnj.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Wednesday, March 11, 2009

Johnson and Johnson

I am reviewing this stock (NYSE-JNJ) because I follow it. As Canadians, we are told we should be buying US stocks for our portfolio. It is often recommended that we have at least 25% of our portfolio in US stocks. I have never followed this, although I have tried dipping into the US market, but I have never made any money there. I bought some of this stock in June 2005 and realized a year later, in June of 2006 that it was going nowhere for me and sold. I lost almost 17% of my investment. When I bought in 2005, all the analysts were saying that it was a good buy at that time.

If we strictly look at this stock in US dollars, it does not look like a bad stock. In the following paragraphs, I will review my spreadsheet. The figures are not bad. However, from a Canadian point of view, would I have made money on this stock? The thing that I love about spreadsheets, is the “What if” questions you can ask. I have highlighted where I look at this stock from a Canadian perspective. If I held this stock for a 5 year period ending in 2002, including dividends, I would have made a return of 14%. However, this is the only good 5 year period for a Canadian. 5 year returns to 2003 would be 2%, to 2004 would be 4%, to 2005 -1%, to 2006 and 2007 would be almost -3, to 2008 would be almost 5% and if the end of 2009 was at current price, the return would be almost -2%.

Now turning to values in US$, I do not think this stock has done all that bad. All my following figures are for the year ending at the last annual statement of December 2007, the last annual report. The revenue growth for the last 5 and 10 years was just over 10% per year. The 5 and 10 years growth for Earnings per Share (EPS) was 11% and 12% per year. The dividend growth for the last 5 and 6 years was 15% and 14% per year. The Cash Flow growth for the last 5 and 10 years was 12% and 12% per year. The book value growth for the last 5 and 10 years was 13% and 12% per year. The closing price growth for the last 5 and 10 years was 7% and 9% per year. These last figures are not great, but not that bad.

The other good things about this stock is that the Liquidity (Current Asset/Current Liability Ratio) is 1.51 and this is lower than the 5 year average of 1.77, but it is still respectable and the Asset/Liability is at 2.15, which is also lower than the five year average of 2.40, but also respectable. Also, the Return on Equity (ROE) is good, as it was 24% for 2007 and this stock has a 5 year average rate of 27%. Tomorrow, I will look to see what the analyst say about this stock.

Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional. Its web site is www.jnj.com. See my spreadsheet on this company at www.spbrunner.com/stocks/jnj.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Tuesday, March 10, 2009

Richelieu Hardware Ltd 2

In looking at insider buying and selling on this stock (TSX-RCH), there is not much activity. There is slightly more selling, but all amounts are insignificant, so this does not tell us anything. I own a small amount of this stock, and I will at some point, buy more. I have updated my spreadsheet with estimates.

There are few Buy ratings on this stock, and lots of Hold ratings. The consensus rating would be a Hold. (See my site for information on analyst ratings.) What people like about this stock is that it has little or no debt. What concerns analysts are that this company’s profit is tied to home renovations. The market for home renovations is expected to be a tough market over the next little while. According to the Globe and Mail site, this is a 5 star company.

Next, I want to look at what the buy/sell indicators on this stock are saying. They are all pointing to a buy. The current price of $16.50 is below the Graham Price of $19.10. The Yield at 1.9% is higher than the 5 year average of 1.2%. The P/E ratio of 10.6 is below the 5 year average of 16, and the P/BV (Price/Book Value) is 1.59 is below the 5 year average of 2.74. As far a value indicators go, there are no negatives.

In looking at the charts, this stock has done better than the TSX for periods except the 5 year period. Over the last 5 years, it has not gone as high as the TSX and it did not fall as far as the TSX in the recent bear market. Over the last 10 years, it has done much better than the TSX.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is www.richelieu.com. See my spreadsheet on this company at www.spbrunner.com/stocks/rch.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Monday, March 9, 2009

Richelieu Hardware Ltd

I am reviewing this stock today (TSX-RCH) as I own it and I just got its annual report for the financial year ending November 30, 2008. I bought this stock June of 2007 and to date I have made a negative return of 16% per year. I initially bought this stock because it was recommend by the Investment Reporter. It is not on any of the dividend lists, probably because they only started to pay dividends in 2002. This stock would be considered to be a dividend paying growth stock. Today I will review how this stock has done in the past. Tomorrow I will look at it now and for the future.

All my following figures are for the year ending at the last annual statement of November 2008. The revenue growth for the last 5 and 10 years was 11% and 12% per year. The 5 and 10 years growth for Earnings per Share (EPS) was 10% and 17% per year. The dividend growth for the last 5 and 6 years was 12% and 19% per year. The Cash Flow growth for the last 5 and 10 years was 18% and 17% per year. The book value growth for the last 5 and 10 years was 16% and 17% per year.

The other good things about this stock is that the Liquidity (Current Asset/Current Liability Ratio) is 4.29 and this is higher than the 5 year average of 3.64 and the Asset/Liability is at 6.05, which is also higher than the five year average of 4.92. These are extremely good values when we are in a credit crunch. This company can very much cover any debt. Also, the Return on Equity (ROE) is good, as it was 15.6% for 2008 and this stock has a 5 year average rate of 16.8%.

There are some not very good figures on this stock. The 5 years growth for the Closing Price was only 1.2%. However, the 10 year growth was 19% per year. The 10 year figure is very good and it shows that you can make money on this stock for the long term. The 5 year return is not surprising as we in a bear market.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is www.richelieu.com. See my spreadsheet on this company at www.spbrunner.com/stocks/rch.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Friday, March 6, 2009

Pembina Pipelines 2

One positive thing to say right off on this stock is that there is lots of insider buying and very little insider selling on this stock (TSX-PIF.UN). This is quite different from Inter Pipeline I reviewed earlier this week. A positive thing is that this company says that it will maintain its current distribution through to 2013. It will also become a taxable corporation in 2010. I have updated my spreadsheet with more estimates today.

First, I will look at the ratios on the spreadsheet to see if this stock is currently a good buying. The good things I see is that the yield is now 12%, and the 5 year average is only 7.9% and the P/E is currently at only 10.5% compared to the 5 year average of 19%. Also, the P/BV (Price/Book Value) Ratio is currently only 1.95 compared to the 5 year average of 2.31. When looking at the Graham Price, the current stock price is lower than the 2008 Graham Price of $13.25 and current stock price is lower than the potential Graham Price of $13.31, if analysts are right about what the earnings would be in 2009. There is no guarantee than any suggested future earnings will be accurate.

The next thing I want to note is that the Globe Investor site gives this stock a 5 star rating. The stock has stability ratings of SR-2 and STA-2L. Stability ratings are from 1 to 7, with 1 being the highest rating. This stock is considered a medium risk. In looking at the ratings for this stock, they are Strong Buy, Hold or Sell. The consensus rating is a Hold. (See my site for information on analyst ratings.) This is a very wide range of ratings as there is no Buy ratings and no Underperform ratings.

Even though analysts seem to expect that the distributable income, earnings and cash flow will be higher next year, they are still not giving this stock much in the way of a Buy rating. Pembina has pipelines for heavy oils going from the oil sands projects to refineries. There are worries about possible delays or cancellations in oil sands projects and how any such delays or cancellations will affect Pembina. I also have worries about the very low liquidity ratio of only .48. This means that the current assets cannot cover the current liabilities.

This is the biggest Pipeline Income Fund in Canada. It is a utility. It is engaged in the transportation of light conventional and synthetic crude oil, condensate and natural gas liquids in Western Canada. Its web site is www.pembina.com. See my spreadsheet on this company at www.spbrunner.com/stocks/pif.htm. I have also updated my index spreadsheet at www.spbrunner.com/stocks/indexport.htm for the stocks on my 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. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Thursday, March 5, 2009

Pembina Pipelines

I was asked to take another look at this stock (TSX-PIF.UN). As for Inter Pipeline, the financials for December 2008 has just been published. This is a stock that I own. I bought this stock 2001 and to date I have made a return of 13.7%. This return includes dividends. Today I will review how this stock has done in the past. Tomorrow I will look at it now and for the future.

All my following figures are for the year ending at the last annual statement of December 2008. The revenue growth for the last 5 and 10 years was 23% and 20% per year. The 5 and 10 years growth for Earnings per Share (EPS) was 19% and 14 % per year. The dividend or distribution growth for the last 5 and 10 years was 7% and 5% per year. The closing price growth for the last 5 and 10 years was 12% and 17% per year. This growth in closing price is not bad considering that this stock has gone down about 24% over the last 2 years.

The 5 and 10 years growth for Cash Flow was 12% and 5 % per year. The book value growth for the last 5 and 10 years was 4% and -2% per year. Book Value growth does not tend to be good on Income Trust stocks as they pay out a high percentage of their earnings in distributions. The Return on Equity (ROE) is very good for 2009 at 18% and the 5 year average is not bad either at 13%.

What I do not like is that the Liquidity (Current Asset/Current Liability Ratio) is only .48. This value has been declining over the last 5 years and I would prefer, especially since we are in a bear market, that this ratio be higher. The Asset/Liability is much better at 1.72. This ratio has also fallen a bit as it has a 5 year average of 1.85. The other thing I do not like is that the Accrual Ratio is rather high at 5.7% where any ratio above 5% is high.

This is the biggest Pipeline Income Fund in Canada. It is a utility. It is engaged in the transportation of light conventional and synthetic crude oil, condensate and natural gas liquids in Western Canada. Its web site is www.pembina.com. See my spreadsheet on this company at www.spbrunner.com/stocks/pif.htm. I have also updated my index spreadsheet at www.spbrunner.com/stocks/indexport.htm for the stocks on my 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. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Wednesday, March 4, 2009

Inter Pipeline Fund 2

One negative thing to say right off on this stock is that there is insider selling and no insider buying on this stock (TSX-IPL.UN). The insider buying/selling reports look at the past year and during this past year, there has been insider selling mainly by the company officers and some director insider selling. A positive thing is that this company says that it will maintain its current distribution in 2010 and beyond despite becoming taxable in 2011. There is no indication that the distributions will be increased. The problem of becoming taxable is one that all Income Trust companies share at this time. I have updated my spreadsheet with more estimates today.

Now, I will look at the ratios on the spreadsheet to see if this stock is currently a good buying. The good things I see is that the yield is now 12%, and the 5 year average is only 9% and the P/E is currently at only 11% compared to the 5 year average of 15%. Also, the P/BV (Price/Book Value) Ratio is currently only 1.39 compared to the 5 year average of 1.65. However, I do note that the P/BV is higher than the 10 year average of 1.28. When looking at the Graham Price, the current price is lower than the one for 2008 of $11.30 and lower than the potential one of $8.61 if analysts are right about what the earnings would be in 2009. There is no guarantee than any suggested future earnings will be accurate. These are only estimates and analyst estimates tend to go lower in bear markets and higher in bull markets. So do not read too much into any estimates.

The next thing I want to note is that the Globe Investor site gives this stock a 4 star rating. The stock has stability ratings of SR-3 and STA-3M. Stability ratings are from 1 to 7, with 1 being the highest rating. This stock is considered a medium risk. In looking at the ratings for this stock, they range from Strong Buy to Hold, with lots of Hold ratings. However, the consensus rating is a Buy. (See my site for information on analyst ratings.)

As I said yesterday, no one expects the earnings and cash flows for 2009 to be a good as that for 2008. However, they do not slip much from 2006 and 2007 figures. What does concern me is low liquidity rating of .86. This means that current assets cannot cover current liabilities. The Asset/Liability Ratio is better at 1.38, but I would be more comfortable with this stock if these ratings were higher.

This fund has four lines of business: conventional oil pipelines, oil sands transportation, NGL extraction, and bulk liquid storage. Inter Pipelines have four petroleum pipeline systems in Alberta and Saskatchewan, transporting approximately 20% of western Canada’s conventional oil production. They have Canada’s largest oil sands gathering business. They are Canada’s largest ethane production business, processing over 40% of all natural gas exported from the province of Alberta. They do bulk liquid storage of petroleum and petrochemical in Europe and they are the largest independent storage provider in the United Kingdom. Its web site is www.interpipelinefund.com. See my spreadsheet on this company at www.spbrunner.com/stocks/ipl.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Tuesday, March 3, 2009

Inter Pipeline Fund

I was asked to talk another look at this stock (TSX-IPL.UN). The timing is good, as the financials for December 2008 has just been published. This is also a stock I follow; however, I do not own any. Today I will review how this stock has done in the past. Tomorrow I will look at it now and for the future.

All my following figures are for the year ending at the last annual statement of December 2008. The revenue growth for the last 5 and 10 years was 47% and 31% per year. The 5 and 10 years growth for Earnings per Share (EPS) was 53% and 28 % per year. The 5 and 10 year figures for cash flow is 25% and 7% per year. This stock had a very good year for cash flow and earnings in 2008. However, no one seems to feel that this company can match these figures for 2009. The Return on Equity (ROE) is very good also for 2009 at 22% where the 5 year average is only 8.6%.

The dividend or distribution growth for the last 5 and 10 years was 3.1% and .87% per year. The 10 year growth is not good. The 5 year growth is not bad considering it is an income trust. This growth is above background inflation. The closing price growth for the last 5 and 10 years was 8.6% and 13.7% per year. Any growth over 8% is just fine. This stock has been hit by the recent bear market, and it has lost some 25% of its value.

What I do not like is that the Liquidity (Current Asset/Current Liability Ratio) is only .86. This value has been declining over the last 5 years and I would prefer, especially since we are in a bear market, that this ratio be higher. The Asset/Liability is better, but not great at 1.38. This ratio has also fallen as it has a 5 year average of 1.92. The other things I do not like are that the Accrual Ratio is very high at 13.15% where any ratio above 5% is very high and the book value is declining, not growing. It is an income trust and they tend to pay out good distributions, and not grow their book values, but 5 and 10 year negative growths are 3% and 5% per year. I would like these values to be closer to 0%.

This fund has four lines of business: conventional oil pipelines, oil sands transportation, NGL extraction, and bulk liquid storage. Inter Pipelines have four petroleum pipeline systems in Alberta and Saskatchewan, transporting approximately 20% of western Canada’s conventional oil production. They have Canada’s largest oil sands gathering business. They are Canada’s largest ethane production business, processing over 40% of all natural gas exported from the province of Alberta. They do bulk liquid storage of petroleum and petrochemical in Europe and they are the largest independent storage provider in the United Kingdom. Its web site is www.interpipelinefund.com. See my spreadsheet on this company at www.spbrunner.com/stocks/ipl.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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

Monday, March 2, 2009

Stock Market Returns Long Term

What I want to discuss today, is the long term implications of investing in the market. I was reading a book review of a new book called “The Cure for Money Madness” by Spencer Sherman. He talks about the predictability of US S&P 500 Index. For every 10 year period, from 1926 to the end of 2008, this index had positive returns except for 2 years. For the 10 year period from 1929 to 1938, the return of -8.6% and the 10 years from 1930 to 1939 the return was -1%.

The 10 years decline in the stock market occurred during the most brutal years of the Great Depression. This was a time when the world’s economy sank to its lowest point in recorded history. The heavy losses of the stock market crash give birth to the legendary image of investors jumping out of windows high above Wall Street. The losses in that market were very intense.

But another way of looking at this is that 97.3% of the time, the S&P 500 had positive returns for every 10 year period. Also, the S&P 500 had a higher return that one-month Treasury Bills 89% of the time. One-month Treasury Bills are about the safest investment. The S&P 500 also had returns higher than inflation 91% of the time.

What I want to turn to now is the TSX index. I have statistics for this index going back to 1957, the start of the index. See my spreadsheet at www.spbrunner.com/stocks/tsx.htm. If you look at the TSX index, the number of 5 year periods where the average yearly return on the index was negative is 2. These are the periods from 1970 to 1974 where it was -2.13 and from 1973 to 1977 where it was – 1.64. This means that for all the 49 5 year periods, the average yearly return was negative twice or 4% of the time. This also means that for these 5 year time periods, it was positive 96% of the time. There was no time period in the other periods where the average yearly return for the index was negative.

For the TSX, I also looked at how much of the time the return for the various periods TSX return was less than an average of 6% per year. For the 5 year periods, the 5 year average return was less than 6% for 16 periods or 33% of the time. Looking at the 10 year periods, the 10 year average return was less than 6% for 10 periods or 23% of the time. Looking at 15 year periods, the 15 year average return was less than 6% for 2 periods or 5% of the time. Looking at 20 year periods, the 20 year average return was less than 6% for 3 periods or 9% of the time. There were no other periods when the TSX return average per year less than 6%.

I also looked at the TSX index like Spencer Sherman for periods where the index return over the period was negative. For the 5 year periods, I found 3 times when the index declined over the 5 year period. The total 5 year return from 1969 to 1974 was -17.2%. The total 5 year return from 1972 to 1977 was -13.6%. The total 5 year return from 1997 to 2002 was -1.3%. There was only one 10 year period loss and that was from 1964 to 1974 and the loss was -1.1%.

The other thing we should consider is that dividends make up 30% of the TSX’s total return on average. That means that the TSX total return is really 30% higher than shown by the index. So, if you invest in dividend paying stock, you can make very decent return over the long term. We need to keep this in mind when the stock market plunges as it has been doing of late.

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