HOLD FIRE ON BUYING ENERGY STOCKS

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  The stock markets are in the doldrums and it isn’t even summer yet! Prices are wallowing without direction, with the obvious exception of energy shares which leap up and down like kangaroos depending on what crude oil is doing at any particular moment.

Subscribers to our Internet Wealth Builder and Income Investor newsletters have done very well with our energy-related picks, such as Peyto Energy Trust (TSX: PEY.UN), which is up more than 150% since we recommended it in September 2003 and Italian oil giant ENI (NYSE: E) which has gained almost 75% since January 2003.

But that’s history. The question is whether you should jump into the energy sector now if you’ve missed the boat to this point. The answer is probably not. Yes, there is talk of crude oil going to more than US$100 a barrel, a hitherto seemingly impossible level that was given sudden credibility recently when the renowned brokerage firm of Goldman Sachs said that US$105 oil was quite feasible in the relatively near term. So energy stocks could continue to move higher from here.

However, taking a flyer on that would be risky business. We could just as easily see a pull-back in crude prices if demand begins to soften and/or the Middle East starts to pump out more supply. A slip back to below US$50 a barrel could knock 10% to 15% off current share prices – more if it were seen as the start of a long downward trend.

So investors who haven’t participated in the oil boom should keep their cool for now. If there is a price correction, review the situation at that time. As long as the world economy looks reasonably healthy, that would be a time to enter. But if we appear to be tumbling towards recession, stand well clear. Oil prices won’t be able to hold at anything like today’s levels if the international economy enters a prolonged slowdown phase. If that happens, sit tight until the next upward cycle begins. That will be a trigger for oil prices to start moving higher once again.

AN ISHARES PRIMER

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  Exchange-traded funds (ETFs) have become very popular in the past few years. Investors seem to like their simplicity (most of them track a specific index) and their on-going fees, which are much lower than those of mutual funds.

The best-known ETFs in Canada are the iUnits, which were designed by Barclays Global Investors Canada and are administered by them. There are a dozen of them and they trade on the Toronto Stock Exchange. For more information go to www.iunits.com

However, the mother lode of ETFs is found south of the border, primarily on the American Stock Exchange. There, the number one position is occupied by iShares, created and operated by Barclays’ American division. There are more than 100 of them and the variety is mind-boggling.

Recently, we prepared an overview of iShares for members of the Internet Wealth Builder. We’ve made it available for Investing Today readers as well; you can find it at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2188

A BOOK FOR TAX TIME

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  The income tax deadline is less than a month away and if you need help or want to save a few bucks, I have a suggestion. Get a copy of Essential Tax Facts, a new book from Evelyn Jacks who I consider to be Canada’s number one expert on the subject.

There are two things I especially like about Evelyn’s books. First, she writes in a clear, easy-to-understand manner. Second, she offers a wide range of practical tips that really work. I can’t imagine anyone reading this book and not finding at least one way to save money.

You’ll find a wealth of useful information here: how to maximize home office expenses, what tax-friendly perks to negotiate at work, how to cut taxes on investment income, taking advantage of GST rebates, rules for claiming moving expenses, advice for negotiating the maze of allowable automobile expenses, and so much more that I can’t begin to cover all the ground.

The cost of the book is only $20 plus tax. You can get more information and place an order on-line at http://www.knowledgebureau.com/enBookBrowse.asp

WHEN TO SELL A SECURITY

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  It’s hard to decide when to buy a stock or mutual fund or other security but I think that the sell decision is even tougher. Some people never want to let go. If a stock is doing well, they want to hold on to it in hopes it will make even more money for them. If it is losing ground, they keep it with the idea of waiting until they get back to break-even and then selling. There never seems to be a “right” time to say goodbye.

After witnessing this tendency among investors for many years, I’ve put together some guidelines that may help you determine when it is time to chuck out a security from your portfolio. You can read all about it at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2179

BANK REPORTS POPULAR

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  Our series of Special Reports on big bank mutual funds have been a hit with readers. They’ve been snapping up copies of the new TD Funds Report in numbers that are surprising even to us. Seems like a like of people own TD mutual funds and want the inside scoop on whether they have the right ones in their portfolios. The Report is available at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=537

The cost is $22.95 plus tax (on-line pdf version). There is also a print version available by mail. Call our toll-free number at 1-888-287-8229 for details.

Because of the popularity of these reports, we recently updated the RBC Fund Special Report. It originally came out in the summer of 2004 but the revised new version looks at the RBC line-up based on performance results to Feb. 28, 2005. It can be purchased for $19.95 plus tax at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=530

The CIBC Funds Special Report is offered at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=508

IWB MEMBERS TAKE PROFITS ON MGM MIRAGE

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  Members of our Internet Wealth Builder newsletter were recently advised to take profits on shares on U.S. casino giant MGM Mirage (NYSE: MGG). The stock was originally recommended in July 2004 at US$42.89 by contributing editor Tom Slee. It was trading at US$75.86 when he issued his sell signal, for a gain of 77%.

It was Tom’s second big gainer in the past couple of months. In February he recommended taking half-profits in Shopper Drug Mart (TSX: SC) for a gain of 125%.

Contributing editor Yola Edwards has also been cashing in some chips, selling May Department Stores (NYSE: MAY) for a three-month gain of almost 30% after the company was targeted for a takeover bid by Federated Stores.

Our 22% off introductory offer to the Internet Wealth Builder is still available for a limited time. Details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=539

NEW RECOMMENDATION FOR INCOME INVESTOR READERS

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In the March 23 issue of our Income Investor newsletter we introduced a new contributing editor: Gavin Graham, Vice-President, Director of Investments for the Guardian Group of Funds (GGOF), one of the country’s leading houses for income trust investing. In his first article, Gavin recommended shares in Canadian Oil Sands Trust (TSX: COS.UN), then trading at $84.23. At the close of trading on April 7, they were up to $89.41, for an advance of 6% in about two weeks. Gavin Graham’s column will appear monthly in the newsletter. A three-month trial subscription for just $14.95 plus tax is available at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=396

BROKERAGE RESEARCH LEAVES MUCH TO BE DESIRED

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  If you are one of the thousands of investors who rely on research from the brokerage firms to help make your investment decisions, you may be getting incomplete or flawed advice. Read the inside story from Tom Slee, who spent many years as a professional money manager and who holds both CFA and CGA designations. You’ll find it at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2180

CRIME ON THE RISE - STAY OR MOVE?

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  You live in an area where crime is on the rise and where property values are lagging. Should you hang tight and install a security system or bite the bullet and move elsewhere? That’s the question we got from an African-American woman in the U.S. mid-west recently. You can read our answer at http://www.buildingwealth.ca/qa.cfm

You’ll also find answers to questions about buying past service in pension plans, repaying a Home Buyers’ Plan loan, and RRSP problems. And, of course, we always invite your personal questions.

INTRODUCING VALUEFORUM.COM

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  I am pleased to announce a new business arrangement with ValueForum.com, a New York-based website that is designed to provide value-oriented investors with an on-line community where they can participate in discussions and obtain access to a range of useful information on dividend/income securities including income trusts, REITs, preferred shares, high-yield bonds, closed-end funds, special value situations, and general investment topics.

The site is a premier destination for a community of like-minded investors, where discussion is monitored to prevent abuse and the Terms of Use are strictly enforced. Although it has been existence for a relatively short time, ValueForum.com has become recognized as a safe and trusting community of investors where discussion is not stifled, people don't have to wonder whether they are talking to one person or various aliases, the environment is respectful, and nobody is attacked for expressing their point of view.

A key feature that makes ValueForum.com stand out from other investment community sites is the "Stock Ratings" system. Individual members of the site submit ratings on the particular stocks they closely follow and research, ranking a stock anywhere from a Strong Buy to a Strong Sell, and providing a justification of their rating. The result is a large database capturing the combined knowledge and skill of the membership base, presented in a user-friendly format.

Other key features include the discussion forum, an interactive message board with unique features such as private groups, where users participate in ongoing discussions about the stocks that have been rated, economic trends, and other topics surrounding value investing. The site also has a group polling application, where any site member can create a multiple choice poll to gather the group consensus on any particular question. ValueForum.com also offers a quarterly stock picking contest. Members may pick three different stocks that they own or plan to own and that they have rated in the Stock Ratings area. The prize for winning the contest is a $250 Amazon.com gift certificate.

Make a visit to the site by going to their Home Page at www.valueforum.com and see what it’s all about.

ValueForum.com is supported by income from passes. A six-month pass currently costs US$75, a 12-month pass currently costs US$125, and a three-day pass (for trial purposes) currently costs US$10. When a "pass" expires, the member may elect to purchase a new one. To join, please visit: http://www.valueforum.com/forums/join.mpl

Please use the referral code: gpape on the gift certificate line to receive one free month when you sign up for a six-month pass, or two free months when you sign up for a 12-month pass.

That’s all for this month. See you in May. Please feel free to forward a copy of this issue of Investing Today to your friends or anyone you think might be interested. If you have received this copy from someone and would like to be on our regular distribution list, go to http://www.buildingwealth.ca/InvestingToday/Newsletter.cfm to sign up.