Six stocks and ETFs for buy-and-hold investors
No investment should be completely ignored, financial advisers say, but these offerings are solid and would not need high vigilance
By: JOEL SCHLESINGER
Date: November 14, 2016
Investing is seldom easy and worry-free. In fact, excess fretting about investments can lead to panic selling during rough times. That’s why buying, holding and often forgetting – for the most part – can be just the prescription for long-term profits.
No investment can be completely ignored, but consider these “buy and hold” offerings as parts of your portfolio that would not require high vigilance.
JPMorgan Chase & Co.
The key to buying a good investment is paying attention to valuation. Even if a company has sound fundamentals – solid profits, low debt and growing revenue, to name a few – it may not be a good buy if the market overvalues it.
Buying low and selling high is predicated upon purchasing a stock that’s inexpensive relative to its good fundamentals, says Daniel Popescu, president of Harbourfront Wealth Management in Vancouver. “By purchasing a stock which is inexpensive today, investors are more likely to get a good head start.”
U.S. investment bank JPMorgan Chase fits the bill, Mr. Popescu says. The entire sector is undervalued, he says. But JPMorgan Chase is especially attractive because of growing net income and expanding profit margins. Yet as a single selection among many in the sector, investors must be aware of company-specific risk, so it should always be part of a diversified portfolio.
iShares Core MSCI All Country World ex Canada ETF
Exchange-traded funds are excellent set-and-forget investments, particularly those capturing as much of the investment world as possible. And this iShares option does just that, while excluding Canada.
“It’s a great complement to a Canadian equity portfolio, as it gives investors access to global mid- to large-capitalization stocks in both the developed and emerging markets,” Mr. Popescu says.
Of course, an investor needs to address the Canadian component, too. ETF options abound for the Canadian market, including the largest by market capitalization, the iShares S&P/TSX 60 Index ETF, which invests in Canada’s largest publicly traded companies.
Power Corp. of Canada
Power Corp.’s main subsidiaries – Great-West Lifeco Inc. and Investors Group Inc. – are likely more recognizable than their parent firm, but Power Corp.’s low profile is what makes the conglomerate attractive, says Hardev Bains, president of Lionridge Capital Management in Winnipeg. “The market has always applied a bit of a discount to buy at the Power Corp. level,” he says. “It’s the conglomerate discount effect.”
The main reason Mr. Bains considers Power Corp. a long-term buy is its leadership. The Desmarais family – one of the wealthiest in Canada – built the firm and largely remains at the helm. Still, Power Corp. faces headwinds, particularly at the mutual-fund firm Investors Group. “It has some challenges coming up in terms of pressure on fee structures, but it’s very entrenched in a good position in its marketplace.”
Imperial Oil Ltd.
The energy sector may be out of favour at the moment, but this integrated Canadian oil company is a long-time stalwart, says investment blogger Jean Lespérance, who has written previously about buy-and-hold stocks on howtoinvestonline.blogspot.ca.
Battered but not broken, Imperial’s current share price offers a good entry point. “Surviving even in these bad times, it’s my bet that oil prices cannot stay really low forever, and if or when they rebound, so will Imperial,” he says.
Imperial, which produces, refines and markets oil and gas products, continues to pay a relatively steady dividend while trading about 20 per cent below its high-price range, which it hasn’t reached in about two years. Its long history suggests it should recover, but Mr. Lespérance cautions: “The obvious risk is that oil prices stay low for a long time.”
Horizons Seasonal Rotation ETF
Winnipeg portfolio manager Doug Nelson says investors really shouldn’t forget about their investments. Common sense dictates they should review their portfolio regularly to adapt to changing circumstances. Yet those prone to forget can pick an investment that will adapt to changing conditions.
One option is the Horizons Seasonal Rotation ETF, an actively managed fund that adapts its holdings according to seasonal trading biases in the North American markets.
“As an investment that you buy and hold over time, the manager is continuously adjusting the asset mix based on current market conditions, based on historical trading patterns,” says Mr. Nelson, who is president of Nelson Financial Planning Corp. in Winnipeg.
Recent history suggests the strategy has worked, at least for Canada. The ETF has outperformed the S&P/TSX Composite Index over the past five years.
Purpose Total Return Bond ETF
Investors seeking to play a little defence with their portfolios and also see benefits when equity markets are down should consider this actively managed bond ETF. Its manager “is able to allocate between different types of fixed income investments with the goal of generating a lower risk return, particularly in a potentially rising-interest-rate environment,” Mr. Nelson says.
Yet, as with all investing strategies, diversification and risk management are paramount to long-term success, he says. “You should never have more than 5 per cent allocated to any one investment.”
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