Market Buzz – A Consolidation and Two Great Sales
After a good beginning to the past week, the S&P/TSX composite index ended down just over one per cent. As I was piecing together this column, I read and heard a number of pundits state there was real reason for the declines at week’s end.
This though seems a tad curious given the fact we have seen the S&P 500 run around 60 per cent from its March lows with the operating PE (trailing) expanding a massive ten points to just under 28 times earnings over the period. Given that historically we have seen markets trade at a multiple of closer to 15 when the economy has just turned from contraction to expansion (as we have seen in Q3), a consolidation or near-term correction should not be a surprise.
Switching gears, we take a look at some brief positive tidbits of news from a couple solid stocks from our Canadian Small-Cap Universe (www.keystocks.com).
The first, came from World Point Terminals Inc. (WPO:TSX), which announced that it had completed the transaction with Statoil South Riding Point LLC, a subsidiary of StatoilHydro ASA, pursuant to which Statoil acquired the shares Bahamas operations.
The sale process began in July, 2009, when World Point signed a stock purchase and sale agreement with Statoil for the sale of the company’s Bahamian operations. The final purchase price for the shares was
The second set of positive news came courtesy of Seacliff Construction Corp’s (SDC:TSX) contraction division Dominion Construction, which announced it had been awarded three major contracts in British Columbia, valued at approximately $77.9-million in total. The first new contract, valued at approximately $48.6-million, is for the construction of a four-story, 170,000-square-foot office building at the Broadway Tech Centre in Vancouver. Construction is expected to begin in early November of this year and to be completed in January, 2012.
Finally, we look forward to the release of The Cash Store Financial Services Inc’s (CSF:TSX) first quarter 2010 conference call for the three months ended September 30th, 2009 on Thursday, October 29th of this coming week.
Looniversity – Investing vs. Speculating
The main difference between speculating and investing is the amount of risk undertaken in the trade. Typically, high-risk trades that are almost akin to gambling fall under the umbrella of speculation, whereas lower-risk investments based on fundamentals and analysis fall into the category of investing. Investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk. On the other hand, speculators are seeking to make abnormally high returns from bets that can go one way or the other. It should be noted that speculation is not exactly like gambling because speculators do try to make an educated decision on the direction of the trade, but the risk inherent in the trade tends to be significantly above average.
For KeyStone, the need to become overly speculative in search of blue sky type returns is neither necessary or a strategy that will pay off long term. We believe that through diligent research, investors are able to uncover excellent long-term investment opportunities, without the extreme levels of risk found in many stock market speculations.
Put it to Us?
Q. I am looking at investing in some U.S. IPO’s. Can you tell me how I would go about doing this as an average investor?
– Ian Orion; Calgary, Alberta
A. First off, an IPO is an initial public offering and the first sale of stock by a private company trying to go public. An IPO often serves as a way for companies to raise capital for funding current operations and new business opportunities. To get in on a U.S. IPO, you will need to find a company that is about to go public. This is done by searching S-1 forms filed with the U.S. Securities and Exchange Commission. To participate in an IPO, an investor has to be registered with a brokerage firm. When companies issue IPOs, they notify brokerage firms, which in turn notify investors. Many Canadian brokerage firms have U.S. affiliates which may be able to help you in this respect.
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