Topic: How To Invest

Investor Toolkit: How you can make winning stock picks with our TSINetwork ratings: Part 1

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice on how to make winning stock picks. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away.

Today’s tip: “How you can make winning stock picks with our TSINetwork ratings”

We display our TSINetwork ratings (Highest Quality, Above Average, Average, Extra Risk, Speculative and Start-up) next to every stock we recommend in our newsletters — including our flagship publication, The Successful Investor.

We award these ratings on a point system, based on nine key factors to determine a company’s ability to survive a business setback and go on to greater success when conditions improve.

Companies with 11 or 12 points fall into the top category: Highest Quality. Those with eight to 10 points are of Above Average quality. Six or seven points means they are of Average quality; four or five points, Extra Risk; two to three points, Speculative; one or no points, Start-up.

In this week’s Investor Toolkit, we’ll examine four of these key factors for making winning stock picks.

  1. One point for offering products or services that benefit from habitual behaviour: These are firms that sell products that consumers must buy, no matter what the economy is doing. These companies can add stability to your portfolio. Food retailers, such as Loblaw (symbol L on Toronto), a stock we cover in The Successful Investor, are good examples of these types of firms.

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  1. One point for freedom from business cycles. Demand periodically dries up in “cyclical” businesses, such as resources and manufacturing. That’s why you need to diversify. Invest in utility, finance and consumer stocks, along with resources and manufacturers.
  2. One point for the ability to profit from secular trends, or two points for the ability to profit from two or more secular trends: These trends outlast ordinary business booms and busts, because they reflect ongoing social change. Free trade and rising environmentalism are just two examples of secular trends.
  3. One point for industry prominence—two points for industry dominance: Companies that are prominent, or dominant, in their industries are especially well positioned to weather economic downturns and other setbacks, and fend off new competitors. Winning stock picks in this category include firms like Torstar Corp. (symbol TS.B on Toronto).

    The company publishes The Toronto Star, which is Canada’s largest daily newspaper by circulation. It also publishes three other daily newspapers and over 100 weeklies, mainly in southern Ontario. The company’s other main business is wholly owned Harlequin Enterprises Ltd., the world’s leading publisher of romance novels.

    Torstar recently received $291.6 million from the sale of its 20% stake in CTVglobemedia to BCE Inc. (Toronto symbol BCE). This business owns CTV Television and other broadcasting businesses. The company will probably use some of the cash to pay down debt. That would cut its interest costs, and free up cash for expanded Internet growth.

Next Wednesday, July 6, 2011, we’ll take an in-depth look at the other five factors and the benefits they offer.

You can get our latest analysis (including our clear buy/sell/hold advice) on dozens of Canadian stocks—including Loblaw and Torstar—in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.

Continue reading Investor Toolkit: How you can make winning stock picks with our TSINetwork ratings: Part 2.

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