Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Gordon Pape: We’re experiencing a tech correction, but here’s why the sector has ‘a ton of running room’
The dazzling performance of the technology sector almost single-handedly turned what should have been a dismal year for the markets into a winner, Gordon Pape writes. Investors are rightly asking what happens now. Are we about to see a repeat of the dot-com crash?
While today’s leading technology companies are well financed and hugely profitable. But there are still many high-priced firms that are only marginally profitable or are operating in the red. Many of these companies are taking a pounding right now. By contrast, company’s such as Alphabet (Google’s parent) Microsoft Amazon and Apple are down from their record highs, but not by as much. One piece of good news to take away: Some good quality tech stocks with a bright future are now back in reasonable buying range. Read more here.
What’s with ETF ‘distributions’ that don’t distribute any cash?
If you invest in exchange-traded funds, chances are you have already encountered a “phantom” distribution – or soon will, John Heinzl writes. To demystify the topic, let’s use iShares Core S&P 500 Index ETF (XSP) as an example. According to the iShares website, on Dec. 22 XSP declared a total distribution of $1.92382 per unit, of which 26.792 cents was paid in cash. The rest – $1.65590 – was classified as a reinvested distribution. If not cash, what did the investor get exactly? A tax liability.
For the unitholder, the reinvested capital gain will be reported on a T3 slip and taxed in his or her hands. To recognize that tax has been paid, the unitholder must then increase the adjusted cost base of the units by the amount of the reinvested distribution. Failing to do so could result in the investor paying more tax than necessary when the units are eventually sold. Read more here.
More from John Heinzl: Peloton, Premium Brands and more investing stars and dogs for the week
Rob Carrick’s 2021 ETF Buyer’s Guide: Best U.S. equity funds
The recent outperformance by U.S. stocks argues for some caution in selecting exchange-traded funds, Rob Carrick writes. This third instalment of The Globe and Mail ETF Buyer’s Guide can help you by showing exposure to tech stocks, beta measures as well as recent and medium-term returns. ETFs listed in the guide have at least a five-year track record and can be considered for core U.S. exposure, which means they could be your one and only U.S. equity fund. Read more here.
More from Rob Carrick: In a hot housing market, we need to check our smugness about owning versus renting
The trouble with bitcoin: Why the crypto craze can’t last
Words of caution about bitcoin may seem quaint after a year in which bitcoin’s price has shot from less than US$10,000 to more than US$56,000, and financial institutions have rushed to embrace cryptocurrencies, Ian McGugan writes. But anyone who is thinking of investing should realize that purchasing bitcoin amounts to gambling on an asset that may be manipulated in price, doesn’t produce any cash flow and no longer has much practical value as a means of money transfer.
Fans no longer tout bitcoin’s ability to create a better, fairer financial system. They seem more interested in making a profit. True enthusiasts celebrate their willingness to “hodl” – a deliberate misspelling of “hold” that has become a synonym for buying and sitting on digital tokens, hoping they will go up in value. Read more here.
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Customers are flocking to this online bank for rates that beat the big banks
What’s happening at EQ Bank is worth a look because it tells us a lot about the state of alternative banking today, Rob Carrick writes. Customers are more open to moving their money than ever before. EQ offers 1.5 per cent for regular accounts and 2.3 per cent for tax-free savings accounts and registered retirement savings plans. By comparison RBC’s regular rate on its eSavings account is 0.05 per cent and its offer of bonus interest is a model of confusing, unhelpful marketing.
EQ’s regular savings account rate isn’t quite the highest out there, but the RRSP and TFSA rates are exceptional and, thus, very likely to be pared back. At a time when the pandemic is driving elevated savings rates for households where jobs and incomes have held steady, offering higher rates than the big banks is resonating with people like never before. Read more here.
What investors need to know for the week ahead
In the week ahead, Canadians will get a look at February’s inflation numbers on Wednesday. Other economic data on tap include Canadian housing starts, existing home sales and average prices for February as well as manufacturing sales and new orders for January (Monday); U.S. retail sales, import prices, industrial production and capacity utilization for February, plus business inventories for January (Tuesday); U.S. housing starts and building permits for February (Wednesday); Canada’s new housing price index for February (Thursday); Canadian retail sales for January (Friday).
Companies reporting their latest financial results in the week ahead include FedEx, Nike, Accenture, Power Corp., Alimentation Couche-Tard and BRP.