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INVESTMENT INSIGHT
Market wisdom from one of Canada’s most respected professional investment managers



By Patrick McKeough  | Monday, February 11, 2013


 
INVESTMENT INSIGHT

I take a conservative approach to investing, searching patiently for value. And I take a safety-first approach. One of the first principles of good investing is to avoid devastating losses – to win by not losing, you might say. This approach has paid off handsomely, as subscribers to our investment newsletters and our portfolio management clients can tell you. It produces steady gains, a commitment to long-term wealth, and confidence in the future. But once a year we do something a little more dramatic. Our subscribers demand that we start out each year with a number-one stock pick. So my investment team and I exchange ideas, weigh various candidates, and announce the choices for each of our four publications.

And the results often exceed our own expectations. The outstanding performer in the past year was the Number 1 stock pick of 2012 for Stock Pickers Digest, our advisory that focuses on more aggressive investing.

Alimentation Couche-Tard Inc. (TSX: ATD.B) shot up 28% in less than two weeks last April when it acquired a group of retail outlets in Europe. Over the course of the year it rose more than 60% from the time we named it our Number 1 stock for 2012 in January.

An impressive gain, but the most successful of our Number 1 aggressive Stocks of the Year actually make it look rather modest. Autodesk Inc. (NASDAQ: ADSK), our top pick for 2004 for both Stock Pickers Digest and Wall Street Stock Forecaster, our newsletter for U.S. investing, was the Number 1 stock among all 500 on the S&P 500 that year! The stock rose 203% for the year.

Helped by a hedge fund

The top Canadian stock of 2012 for The Successful Investor, our flagship advisory, had an interesting run that ended with a big upswing in the stock. Canadian Pacific Railway Ltd. (TSX: CPR) has endured more than its fair share of criticism, but we see the long-term value that has been overlooked by too many investment advisors and media commentators.

Our cause was helped along by U.S. hedge fund Pershing Square Capital and its insistence that Hunter Harrison become the new CEO of Canadian Pacific. In fact, we had been predicting this outcome with considerable confidence. His no-nonsense, cost-cutting leadership was one reason the share price had risen over 42% by year’s end.

Not every top pick soars, of course. Our Number 1 stock for our advisory on U.S. investing, the Wall Street Stock Forecaster, did not have the surge in share price enjoyed by the previous two picks. International Business Machines Corp. (NYSE: IBM) gained less than 1% from the time we picked it.

But it remains one of the most reliable stocks on the market and one of the biggest long-term gainers in the history of Wall Street. And of course, IBM has paid a dividend every year for 96 years and raised it each of the past 17 years. No investor with a serious long-term approach to building wealth will ever regret holding this stock in his or her portfolio.

Our first ever Number 1 safety-conscious pick

In 2012 for the first time we added a Number 1 pick for our most conservative publication, Canadian Wealth Advisor. No one expects spectacular gains from the most conservative investments on the market. Their first requirement is to stand up to even the most turbulent markets and produce solid returns in income and capital gains over time.

Still, our first Safety-Conscious Pick of the Year more than lived up to expectations. One of Canada’s leading real estate investment trusts, RioCan REIT (TSX: REI.UN) gained 8% on the year and rewarded investors with a 5.4% dividend yield.

We can be certain that our conservative, value-oriented approach will continue to achieve good results. It has been successful for more than four decades. Our subscribers and wealth management clients can have particular confidence in the fact that our approach has been effective in volatile markets – of which we’ve had more than our fair share in recent years.

Next time, I’ll discuss my three-part investing program that serves as a starting point for successful stock market investing.

 Patrick McKeough, host of the TSINetwork.ca investment website, has been a professional investment analyst for more than three decades. He is also a portfolio manager and the editor and publisher of four investment advisories: The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest, and Canadian Wealth Advisor.

Follow Pat on Twitter and Facebook. For more information, visit www.tsinetwork.ca.

Notes and Disclaimer

© 2013 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.

 
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