Investment Theory

Investment Theory

Modern Investment Theory or Modern Portfolio Theory can become quite complex; however, the basic theory of investing revolves around a couple of key concepts: capital is a scarce resource, and return is a variable of risk. In other words, money available for investment is not infinite so people are willing to pay to borrow it and generally, the greater the risk associated with an investment, the greater the potential rewards.

The goal of portfolio theory is to diversify your investments in a way that will maximize your returns while minimizing the risks associated with those returns. This is done by investing in a number of different investment vehicles as well as investing in a number of uncorrelated/unrelated industries.

For example,
40% Fixed Income (bonds, debentures, commercial paper), 40% equities (stocks), 15% cash (GICs, term deposits, savings account), 5% derivatives (options, futures)

Further, within these fields your investments should be diversified through unrelated sectors:
Resource, Financial, Technology, Health Care, Industrial, etc.

This is not an exhaustive list but a very basic outline. Each individual is faced with a unique set of qualities that will effect how much they should invest in certain sectors and how much they should invest in each type of security.

Let's Talk Equity

Let's Talk Equity

When discussing Equities in North America we are really focusing on stocks. Owning a stock will provide you with partial ownership of whatever company that stock is attached to and will entitle you to certain rights with regard to that company; however, the exact details of the rights given will depend on the type of stock.

There are many different forms of stock that trade in the equity markets but there are two basic types: common shares, and preferred shares.

Common shares are the most abundant and commonly held form of stock—hence the name. Generally, common stock has voting rights in corporate decisions, and may receive dividends when declared by the company.

Preferred shares are the second most abundant. These shares have priority over common stock in the distribution of dividends and also take a priority claim to assets if a company faces liquidation due to bankruptcy. However, these shares usually have no voting authority and may be restricted to a stated dividend amount. Essentially, this could mean that if an extra dividend is declared, the preferred shareholders may not participate.

How is stock issued?

The basic method of stock issue results when a company files a prospectus with the local securities commission. Once approved, an initial public offering (IPO) is granted and the company will sell the stock to the public. Usually, the IPO is sold either totally or partially to the underwriters (companies or persons that advise the company on the offer) and these underwriters may sell directly to the public or hold the stock. Most of the time, the underwriting firms are offered the stock at a small discount to compensate them for risks that they may have taken on and compensate them for advising on the issue. This places the stock in the primary market (the market of first sale).

Once the initially sale has occurred, all subsequent sales will occur in the secondary market. This market is what we know as the stock exchanges: NYSE, Nasdaq, TSX, CVE, etc.

Buying stock on the exchanges is very simple these days. The only requirement is that you have an account opened with a brokerage firm whether it is with a bank subsidiary, financial institution or online brokerage.

Top 6 Stock Picks: Oil and Gas

Top 6 Oil and Gas Stock Plays:


Top 6 Stock Picks: Oil and Gas

1) Cyries Energy: Formed in July, 2004 as a result of the merger between CEQUEL Energy Inc. and Progress Energy. The company is a high-growth junior exploration company and operates in the greater Peach River Arch Area of Alberta and targets medium-depth, multi-zone prospects mainly. Management currently owns about 19% of the shares.

Rating: Strong Buy

For more information about this company visit http://www.andrewjohns.ca/EN/main/299/317/866/researchfocus_cys.html where you will have access to some of the latest research reports for free.

2) Duvernay Oil Corp: Trades a premium cash flow multiples compared to its direct competitors. This company is a high-growth intermediate company that focuses on drilling multi-zone wells targeting Triassic and Cretaceous sandstones in northeast BC and northwest Alberta. Management controls about 20% of the stock.

Rating: Strong Buy

For more information about this company visit http://www.andrewjohns.ca/EN/main/299/317/866/researchfocus_ddv.html where you will have access to some of the latest research reports for free.

3) ProEx Energy: Just like Cyries Energy, ProEx formed in July 2004 from the merger of Progress Energy and CEQUEL Energy. ProEx Energy operates mainly in northeastern British Columbia and is focused on full-cycle exploration and development. Management controls roughly 30% of the stock.

Rating: Strong Buy

For more information about this company take a look on Google Finance under ticker: PXE.TO

4) Suncor Energy: Suncor is a large Canadian integrated Energy company operating in the Oil Sands of Alberta and Saskatchewan. The company is focused on Oil Sands, Natural Gas, Energy Marketing and Refining. This company has experienced a great upward price trend linked to its ability to grow.

Rating: Buy

For more information about this company visit http://www.andrewjohns.ca/EN/main/299/317/866/researchfocus_su.html where you will find recent research reports by Raymond James Financial free of charge.

5) Talisman Energy: Talisman Energy is an independent Canadian based oil and gas company involved in exploration, development, production, transportation and marketing of crude oil, natural gas and natural gas liquids. This company operates throughout North America, the UK, Europe, South East Asia, and North Africa.

Rating: Buy

For more information about this company visit http://www.andrewjohns.ca/EN/main/299/317/866/researchfocus_tlm.html where you will find Research Reports by Raymond James Financial Free of charge.

6) TriStar Oil & Gas: Was formed in 2006 form the merger of StraPoint Energy Trust and Acclaim Energy Trust The company is focused on acquiring producing properties and drilling to exploit the undeveloped land. TriStar operates in Alberta and Saskatchewan.

Rating: Buy

For more information about this company visit google finance and search TOG.TO



You should not buy any of these stocks without first consulting a financial professional to determine whether the risks associated with each would be beneficial or resonable for your own portfolio.