This isn't the first time that I've written about Canada, a well-run country that has avoided many of the mistakes made by the United States. Its budget deficit is moderate, its balance-of-payments deficit is also small, its banking system is in pretty good shape and it faces very little inflation risk, since the country has maintained a reasonable monetary policy.
At this point, you might well be asking: Well, if you've said this all before, why does it bear repeating now?
The answer is simple: As I've hunted for attractive investments recently, I have noticed that a very high percentage of those companies are domiciled north of the border.
In short, it's time to invest in Canada.
Our Healthy Neighbor to the North
When I analyze Canada's current investment allure, I realize that it's partly because of the investments I find attractive these days.
If I found the conventional tech sector exciting, I would expect to find a lot of potential investments in California and Taiwan. If I liked biotech, my investment targets would be clustered in California and around Boston, with a smattering in Switzerland.
If - for some reason - I were looking for investments related to the automobile industry, I would look not at Detroit but at China and India, where the carmaking sector is showing remarkable growth as increasing consumer wealth enables them to take to the roads. And if I were looking for nuclear-power-equipment companies, my first ports of call would be France and Japan.
You get the idea.
In years past, Canada had always seemed a rather boring country to invest in. The big industrials never showed all that much growth, while the tech sector was represented by Nortel Networks Corp. (OTC: NRTLQ), which went bust, and JDS Uniphase (NASDAQ: JDSU), truly one of the great growth investments of all time - in fact, a true 100-bagger (too bad we can't figure out how to make time run backward, investing now and selling back in 2000!).
In the current economy, however, where excessive money creation and too-low interest rates have made natural resources the place to be, Canada has come into its own.
A Market Whose Time Has Arrived
As a banker back in the early 1980s, I personally knew the entrepreneurial oil companies in Calgary, and found the place great fun, rather more like the TV series "Dallas" than was the real Dallas itself. Since then, the Athabasca tar sands - which contain as much oil as the entire Middle East - have become viable. So the Calgary oil sector, after a difficult couple of decades, has revived in full swing.
For Americans, it is becoming increasingly clear that Athabasca represents our chief hope of not being held up at gunpoint by oil-controlling dictators, so the oil sector in Calgary is both economically interesting and strategically important. Given the size of the deposits, and Canada's political stability, Calgary is now a more important oil-investment nexus than either Houston or Abu Dhabi.
As I've researched gold-and-silver-mining companies over the past year, it has become increasingly clear to me that Canada is also the center for this sector, too. As Calgary is to oil, Vancouver is to gold-and-silver mining.
As is the case with oil, there is little point in investing in gold and silver mines in unstable countries; if the metals become scarce or if the price increases, you will only get expropriated. Thus, I am not a great fan of Coeur d'Alene Mines Corp. (NYSE: CDE), because its largest silver mine is in Bolivia, a country where Western property rights are very poorly respected.
However, the Vancouver-based mining companies - whether we're talking about gold or other minerals - control a vast range of deposits throughout the Americas and represent a very interesting investment field, indeed.
In the old days, Vancouver was reputed to be full of crooks; the huge 1990s mining scandal of Bre-X got started when a tiny Calgary mining concern appeared to have made a major gold strike in Indonesia. The gold samples turned out to be fraudulent, a revelation that led to the company's collapse.
There's probably still some of that going on among the smallest players, but the better-established companies with decent reputations have a track record of successful mine development, and are well worth considering as investments.
Uncovering Investment Gems
When looking at a resources company, I first check its cash flow and balance sheet - I want to make sure the firm can easily pay for its exploration and won't be forced into a weak position if there's a hiccup in its output market. After completing those tasks, I turn my attention to the company's "resource base," determine whether not its major operations are in reasonable countries, and calculate whether the firm's exploration efforts are replacing its output.
With the "Seven Sisters" oil majors, that is very often not the case: They operate in horrid environments like Venezuela, Angola and Nigeria, depend primarily on traditional sources of oil, and are often losing out in new exploration to local companies.
With Calgary and Vancouver companies, you often find successful operations, as well as resource-base growth through successful exploration. Those are the companies to go for: Your company is becoming more valuable - not less - each and every year.
For such dependable growth, it's even worth paying a modest premium. I also look at the balance sheet and cash flow, to make sure the company can maintain itself in a price hiccup. Theoretically, quarterly earnings and the Price/Earnings (P/E) ratio are less important. But it's important to point out that if a resource company can't make profits at the prevailing prices of the 2009 fourth quarter, there's probably something wrong with it!
One final point: If you see or uncover derivatives losses, avoid the company - management should have better things to do with its shareholders' money than play speculative games with Wall Street!
[Editor's Note: Martin Hutchinson has terrific foresight. He warned investors about the dangers of credit-default swaps - half a year before those deadly derivatives ignited the worldwide financial firestorm. Hutchinson even predicted where and when the U.S. stock market would bottom (a feat that won him substantial public recognition).
During the stock-market rebound that started in the middle portion of March 2009, Hutchinson's calls on gold, commodities and high-yielding dividend stocks made winners of investors who took his advice.
Experts are taking notice. And so should you.
Hutchinson is now making those insights available to individual investors. His trading service, The Permanent Wealth Investor, combines high-yielding dividend stocks, gold and specially designated "Alpha-Bulldog" stocks into winning portfolios.
To find out more about The Permanent Wealth Investor, please click here.]
News and Related Story Links:
- Money Morning Special Investment Research Report:
It's the Best Investment in North America - and It Isn't the United States. - Money Morning News Archive:
News Stories About Canada. - Money Morning News Archive:
News Stories by Martin Hutchinson. - Money Morning Buy, Sell or Hold Feature:
Buy, Sell or Hold: JDS Uniphase Corp. (Nasdaq: JDSU) Is Yet Another Rising Star in the Broadband Revolution. - Wikipedia:
Derivatives. - UltimateDallas.com:
The Official Web Site for the Hit Warner Bros. TV Show - Dallas. - Wikipedia:
Athabasca Tar Sands. - Wikipedia:
Abu Dhabi Economy. - City of Houston:
Official Web Site. - The Canadian Broadcasting Corp. (CBC) News Archive:
Stranger Than Fiction: The Bre-X Gold Scandal. - Wikipedia:
The Bre-X Scandal. - InvestorWords.com:
Cash Flow. - Investopedia:
Reading the Balance Sheet. - Wikipedia:
Seven Sisters Oil Companies. - Money Morning Investment Research:
The Index That Thrashed the S&P 500.
What is the deal here, we pay for investment advice and this article is not marked sponsored material. If it had been I would have ignored it given the rip off I paid for with the Girger Index. We are paying for stock information and this guy is flogging a report or book. Your good articles are getting more scarce and now you call this investment advice. The reason one buys a report like this or the Geiger Index is we do not have the wherewithall or resouces tjo get all this information and that is what we are paying you to do……what's the deal. Read this article that seems like we are going to get some information and we get an great opportunity to buy a book?? This whole deal is becoming a ripoff.
Perhaps living in Bermuda and having a degree from a canadian University has made me more inclined to hold Canadian shares.Both MEL (T.) and VSX(V.) have done well for me.
Gentlemen
I have been reading your various stories on investemtents in the US. The universe is not centered on the US. There are other countries and opportunities to invest in. As this recent article extolls the virtues of investing in Canada, you should do that more often. Yes as Canadians we are more conservative and selective about our investments. As a Canadian, I welcome this opportunity to "blow our own horn". There are good investment opportunities here. There are many foreign companies that have and are investing in Canada. Seek and yea shall find!
Canada is working well for me. I own Osisko Mining. Its a pink sheet in the US
but I am up 35%. (OSKFF) I studied the company for a long time before investing
last year. Check it out!
… "Canada had always seemed a rather boring country to invest in" !! Boy – you Americans sure have big fat egos. It's no wonder your country has fallen flat on it's face !! Canada is an exciting and vibrant country who has "respect" for it's neighbor(s) and is anything but boring. Let's see who is "boring" when "you" – the US – comes begging for water.
An exciting and vivacious proud to be Canadian … DeeJay
Yes! ….. and your recommendations to take advantage of this are ?!?
You always mention California (One of few states west of mississipi) haha, guess what, there is another Washington. We have had a lot of tech, co here Microsoft among others ( who) among other things. I know that it is silly to mention since most people don't think that there is another Washington.
I also think that you should mention Canada. You practual practually said nothing about Canada. We in Washington (state for those of you who don't know the difference between Washinton DC) and Washington state appreciate our friends in Canada, I even have 3 of my sisters who live in CANADA. Pne who appreciates Canada. grammarpinks1gmail.com
Do you have any recommendations, say an ETF, to play all of this good news? It would be welcome.
I would like to know how to purchase shares of those promising Canadian companies. I am an old investor, but mostly in mutual funds. I call the mutual fund co. and buy shares, and hold to them. I also have an income-oriented portfolio of various products: preferreds, mutuals, bonds, notes etc. with Merrill Lynch. I know I can call my broker at ML and ask him to purchase those Canada equities, but I'd rather learn how to do it myself, for obvious reasons (not to pay commition, not to depend on the broker accessibility). Please, respond. I'll appreciate your advice. It will not be an investment advice, but how-to instructions. Eslanda
CLO:Claymore Oilsands Sector ETF is a good play for the oilsands group of companys
WOW, it's unbelievable that US investors never look beyond their backyards. Canadians are known to be conservative investors and Albertans are known as savers (Calgary has more millionaires per capita since there are only over 1 million people that lives in this Stampede City)…way to go CALGARY!!!!
Eslanda, there are many discount brokerages around especially in US. You will save tonnes of money by buying stocks yourself. Try Scottrade, Zecco, E-Trade, TD Waterhouse, etc…give them a call and ask. You might find one that suits your style.
Good luck…
I became an executor of a Canadian estate 2 years ago. No problem until recently, when the broker started saying that because I am a U.S. resident, they cannot do business with me. I tried moving the account to other brokerage houses, and they all said there is some old SEC ruling from 1934 that prevents Canadian investment accounts from having U.S. residents as account holders, and they will not even let me transfer the (lucrative) account to their company!
So I'm stuck in a weird limbo…I have to execute my responsibilities as executor, but nobody will let me trade!
I'm probably the not the first person this ever happen to. Do you know how I might solve my problem?
Thanks,
Robert