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Dividend stocks are a better investment than income properties: BMO economist

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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Continuing a theme from earlier this month, BMO senior economist Robert Kavcic compares the yield from fixed income and dividend stocks to an income property,

“The economics of real estate investment get tough on a relative basis given that investors can secure a better yield in dividend stocks, or sit tight in risk-free cash/government bonds. The comparison to dividend stocks is an especially interesting one because both offer long-term capital appreciation potential, and both will see their payouts grow over time at least in-line with inflation. But, dividend investors also benefit from a much lower tax burden; they have access to instant and partial liquidity; and face minimal transaction costs. At the same time, payout risk is generally low compared to rental laws that are tilted heavily in favour of the tenant, along with inefficient backlogs at the Landlord and Tenant Board. Real estate investment should command a risk premium (which it historically has), but current pricing does not offer one”

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Wells Fargo equity analyst Christopher Harvey sees bond yields and Chinese growth as two of the biggest drivers of recent market weakness,

“Rising Rates Still a Near-Term Risk. In early August we noted the market’s increased sensitivity to rates and expected a tougher tape until 10yr went sub-4.05 per cent; since then, the SPX is down 2.9 per cent and the 10yr rose to 4.3 per cent. We estimate that all-in 10yr rates (i.e., UST + IG spread) have another 15 basis points of upside (i.e., risk for equities) before firming… Bear in a China Shop. Given the recent soft Chinese economic data, it is no surprise that firms with the most direct sales exposure to China have (on average) seen the most stock pressure. The 18 non-Info Tech SPX members that disclosed more than 15 per cent of their sales to China have underperformed the benchmark by over 500 basis points month-to-date (down 8.9 per cent vs. down 3.5 per cent). We also found that Info Tech sector companies with more than 20-per-cent sales exposure to China underperformed the S5INFT [S&P 500 Info Tech] index by over 200 basis points month-to-date (down 10.0 per cent vs. down 7.8 per cent)”

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BofA investment strategist Michael Hartnett’s weekly Flow Show report – entertainingly entitled No Mr. Bond, I expect you to die – was typically blunt and informative,

“Tale of the Tape: US 30-year mortgage 7.6 per cent (23-year high), Equity Risk Premium 39 basis points (19-year low), US-China yield spread 150 basis points (16-year high), US real yield 2.0 per cent (14-year high), EM FX popping despite v high real yields; near-term simple … clean thrust in 10-year more than 4.3 per cent, China renminbi higher than 7.3 = risk-off = SPX 4.2k tested; if critical bond/FX levels defended via Jackson Hole…correction postponed. The Price is Right: equity put/call ratio surges to 1.03 (highest since SVB )…a bad sign if stocks can’t hold here; SPX now down 2 per cent in Q3, SOX, NYFANG, [Magnificent 7 stocks] off more than 10 per cent from highs, and fresh upside in yields flips script from “good” to “bad” rise in rates…industrials, discretionary, homebuilders most vulnerable. The Biggest Picture: the ‘Yul Brynner’ of our self-proclaimed ‘Magnificent Seven’ is Microsoft … if ringleader can’t maintain new highs, equity and credit narrative could flip from ‘buy-the-dip’ in H1 to ‘sell-the-rip’ in H2″

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What's the Best Way to Invest in Stocks Without Any Experience? Start With This Index Fund – The Motley Fool Canada

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Perhaps you’ve just moved to Canada, or just turned 18, and can now start a Tax-Free Savings Account.

Maybe you’ve just gotten your first full-time job and are looking at a Registered Retirement Savings Plan to save on taxes.

Or maybe you are thinking about buying a home and using the First Home Savings Account. Either way, you might be wondering how to start investing.

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Understandably, it can be hard to know what to buy when you’re new to investing. Here’s my favourite index fund that makes it easy for anyone, even if you have no experience with investing, to get started.

Why an index fund?

Your main goal should be to grow your wealth steadily over time, aiming to keep up with the market rather than trying to outdo it. It’s crucial that your investments are well-diversified, which means spreading them across different areas:

  • 11 sectors: Your investments should cover a range of sectors, such as technology, healthcare, finance, consumer goods, and energy. This ensures you’re not putting all your eggs in one basket, as different sectors react differently to market changes.
  • Geographical regions: A mix of investments from the U.S., developed countries (like Germany, Australia, and Japan), and emerging markets (such as China, India, and Brazil) can help balance your portfolio. Different regions may grow at different rates, offering a safeguard against local downturns.
  • Market caps: Including companies of various sizes, from large caps (big, stable companies) to mid-caps (medium-sized companies with growth potential) and small caps (smaller companies with higher growth and risk potential), helps ensure your portfolio captures a broad range of investment opportunities.
  • Weighting: Market cap weighting in an index fund means larger companies have a bigger impact on your investment’s performance, aligning your results more closely with the broader market trends.

Attempting to manually pick stocks that meet all these criteria can be time-consuming and costly. An index fund simplifies this process, offering a diversified portfolio with just one investment.

My favourite index fund

If you’re just starting out, I suggest Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC) for beginners. It’s an exchange-traded fund (ETF), which means you can purchase its shares just like you would with any company’s stock through your brokerage app.

When you invest in VXC, your money goes into a mix of four Vanguard ETFs, giving you broad exposure to stocks from the U.S., developed markets outside the U.S., and emerging markets. Altogether, this fund provides access to more than 11,400 global stocks, offering a wide range of investment opportunities.

What’s really appealing about VXC is its cost-effectiveness. The management expense ratio (MER) is only 0.22% annually. To put it into perspective, investing $10,000 in VXC would result in yearly fees of approximately $22.

However, VXC purposely omits Canadian stocks. I think this is a good trait, as you can complement it with a few Canadian stock picks to scratch that itch. Consider making VXC, say, 90% of your portfolio while selecting a few blue-chip Canadian dividend stocks (and the Fool has some excellent suggestions down below!)

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A Once-in-a-Generation Investment Opportunity: 1 Top Artificial Intelligence (AI) Stock to Buy Hand Over Fist in April … – Yahoo Finance

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The excitement around artificial intelligence (AI) is fueling the markets to new heights. Both the S&P 500 and Nasdaq Composite have eclipsed new records in just the first few months of the year.

Much of these gains are thanks to the “Magnificent Seven” — a catchy moniker used to describe the world’s largest companies including Microsoft, Apple, Nvidia, Alphabet, Amazon, Tesla, and Meta Platforms. But savvy investors understand that there are plenty of other opportunities in the AI realm besides megacap tech.

One company that’s emerging as a leader is big data analytics software company Palantir Technologies (NYSE: PLTR). 2023 was a breakout year for the company as it released its fourth major product: the Palantir Artificial Intelligence Platform (AIP).

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AIP’s smashing success helped accelerate Palantir’s revenue and profits — and investors took notice. But with shares up nearly 180% in the last year, is it too late to buy the company’s stock?

Wedbush Securities analyst Dan Ives thinks the stock has much more room to grow. His price target of $35 per share implies roughly 59% upside from the company’s current trading levels, as of market close on April 10.

Read on to discover why scooping up shares in Palantir could be a lucrative opportunity right now.

The rise of the Palantir Artificial Intelligence Platform

For many years, Palantir sold three core software products: Apollo, Gotham, and Foundry. But last April, it quietly announced its foray into artificial intelligence (AI) following the release of AIP. But AIP’s launch was largely overshadowed by the moves big tech was making — including investments in ChatGPT developer OpenAI and its competitors.

In order to spread the word about AIP, Palantir resorted to a creative lead generation strategy. Namely, the company began hosting immersive seminars called “boot camps.” During these sessions, prospective customers were able to demo Palantir’s various software platforms. The idea behind this was to show off Palantir’s tech chops in a tangible way while simultaneously helping business leaders identify and form a use case surrounding artificial intelligence (AI).

Since the beginning of this campaign, Palantir has hosted over 850 boot camps. Moreover, AIP customers have publicly demonstrated how the product is being used to uncover new insights across myriad applications.

While AIP has only been commercially available for about a year, its initial success is encouraging. Palantir increased its customer count by 35% year over year in 2023 and is making progress in the private sector. During the fourth quarter alone, the company grew its U.S. commercial revenue operation by a sizzling 70%.

Data analysts working in an office

Image source: Getty Images

The journey is just getting started

Sure, accelerating revenue is always nice to see. For Palantir, it’s particularly meaningful because the company has gotten some pushback from Wall Street skeptics over the years — many of whom see the company as too reliant on lumpy government deals with the U.S. Military and its Western allies.

However, AIP is proving that Palantir has legitimate tech capabilities that are attracting customers from a whole host of industries outside of the public sector. Considering big tech’s pulse within the overall AI landscape, Palantir is proving that it can compete with the biggest companies.

I see 2023 as the first chapter in a long story in the AI narrative for the company. It’s moving fast, and other behemoths in tech are eager to work with Palantir AIP. It’s well-positioned to continue generating robust revenue growth while maintaining a healthy profitability profile and strong balance sheet.

A premium valuation that’s well worth the price

The chart below illustrates Palantir benchmarked against a cohort of other leading AI software-as-a-service (SaaS) businesses on a price-to-sales (P/S) basis. At a P/S of 23.1, Palantir is the most expensive stock among this peer set, based on that metric.

PLTR PS Ratio ChartPLTR PS Ratio Chart

Palantir’s valuation multiples expanded dramatically following its jaw-dropping fourth-quarter earnings report in February. Since then, the stock has experienced some momentum and is only now starting to take a breather.

Further, it’s not just revenue growth that’s impressive for Palantir. The company’s entire financial picture is strong. The success of the boot camps has allowed Palantir to keep expenses in sales and marketing relatively low. As such, the company is consistently profitable — unlike many of its competitors.

In 2023, Palantir expanded its operating margin by 6%. This dropped right to the bottom line, as the company generated $730 million of free cash flow in 2023 — up more than threefold year over year.

With shares trading at such a premium compared to the competition, investors may be tempted to sell and book some profits. But I’d encourage investors to zoom out and look at the bigger picture.

While AIP has served as a catalyst for Palantir’s business and played an influential role in the excitement pushing the stock higher, the company’s shares are still down 40% from their all-time highs. Now is a terrific time to scoop up shares, as Palantir continues taking advantage of the long-term secular themes in AI.

Using dollar-cost averaging is a prudent strategy to initiate a position or add to an existing one. With so much potential upside, it’s hard to glance over Palantir.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $540,321!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of April 8, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Datadog, Meta Platforms, Microsoft, MongoDB, Nvidia, Oracle, Palantir Technologies, Salesforce, ServiceNow, Snowflake, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

A Once-in-a-Generation Investment Opportunity: 1 Top Artificial Intelligence (AI) Stock to Buy Hand Over Fist in April Before It Surges 55%, According to 1 Wall Street Analyst was originally published by The Motley Fool

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Ireland to See Growth on Exports and Investment, Ibec Says – Bloomberg

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Ireland is set to see growth this year, according to business group Ibec, as falling inflation and expected rate cuts give its economy a boost.

Gross domestic product is expected to grow 2% in 2024 and 3.4% in 2025, the group forecast in its first quarterly economic outlook report of the year, thanks to a higher rise in exports and investment on the back of an improving global environment.

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