I hope you had a wonderful Thanksgiving weekend surrounded by friends and family. Like most Canadians I have a great deal to be thankful for including the bounty of this year’s harvest and the many people who help to make our country a better place to be.
When it comes to investing, I’m thankful for the great investors—both past and present—who’ve shared their wisdom through their writings. While many authors helped me along the way, I’m going to focus today on four books that have made an impact on my portfolio over the years.
The first book stands out like a shining beacon in a dark world. It is none other than Benjamin Graham’s The Intelligent Investor, which was the first book on investing that actually made sense to me. While Mr. Graham’s writing has aged a little bit over the decades since his death, the clear philosophy embodied in it put me on the path to value investing. It’s a volume that should be on every investor’s bookshelf and I suggest picking up the 2006 edition (ISBN 0060555661), which contains additional modern commentary from Jason Zweig.
While Benjamin Graham’s book made the biggest impact on my portfolio, it can be a daunting read for new investors. For those just starting out I recommend A Random Walk Down Wall Street by Burton G Malkiel, which is now in its 11th edition (ISBN 0393246116). The book provides a solid overview of the markets, a look at the history of the market (a topic I love), and it also discusses modern portfolio theory in an easy to understand way. Overall, the book makes the case for indexing, diversification, and keeping costs low, which are all good things.
Those looking for a more digestible primer on practical value investing should pick up David Dreman’s Contrarian Investment Strategies: The Next Generation (ISBN: 0684813505). (I prefer the 1998 edition to the more recent edition and used copies of it can easily be found online.) Mr. Dreman’s book starts off with a lovely parable about an investor who goes to Wall Street determined to be a conservative investor only to find themselves gambling like a speculator. It also builds on Benjamin Graham’s earlier work and carries the value investing torch into a new era. The book contains many diversions along the way, which make it well worth reading.
There are only a few investing books that I automatically pre-order and they include new editions of James O’Shaughnessy’s What Works on Wall Street. The fourth edition (ISBN: 0071625763) is huge and contains a feast of data for numerically minded investors. It has a plethora of return tables, graphs, and figures that highlight methods that have performed well over the course of many decades and others that have fared poorly. It’s marvellous tome and I refer to it frequently, but I admit that it’s suitable only for more advanced investors who love data.
Naturally there are a huge number of other investing books that deserve a spot on your bookshelf, but these four should get you going. Let me know about the books that made you a better investor in the comments section below.
Safer Canadian Dogs
Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.
The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.
My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.
Here’s the updated Safer Dogs of the TSX, representing the top yielders as of Sept. 24. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase—barring some calamity.
|Name||Price||P/B||P/E||Earnings Yield||Dividend Yield|
|Potash Corp (POT)||$28.53||2.1||13.31||7.51%||6.90%|
|National Bank (NA)||$42.57||1.54||9.42||10.62%||4.89%|
|Bank of Nova Scotia (BNS)||$60.63||1.5||11.33||8.82%||4.62%|
|Bank of Montreal (BMO)||$75.91||1.37||11.97||8.35%||4.32%|
|Power Corp (POW)||$29.27||1.12||8||12.50%||4.25%|
|Royal Bank (RY)||$74.40||1.95||11.32||8.83%||4.25%|
Source: Bloomberg, Oct. 8 2015
Price: Closing price per share
P/B: Price to Book Value Ratio
P/E: Price to Earnings Ratio
Earnings Yield: Earnings divided by Price, expressed as a percentage
Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage
As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)
Thomas Russo on Value Investing
Thomas Russo talks about global value investing and says, “I consider myself to be a farmer—not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I’m very comfortable planting a few rows and just tending to them carefully.”
Love & Money
Long-term Relationships and Credit Scores
Keep in mind that asking for your date’s credit score on the first date might result in it being the last.