Investment industry associations are calling on the federal government to tackle key issues such as sustainability, tax fairness and caring for Canada’s growing aging population as Ottawa readies to deliver its next federal budget on March 30.
In keeping with the House of Commons Standing Committee on Finance’s request for submissions on the theme of “Climate Emergency: The Required Transition to a Low Carbon Economy,” the Investment Industry Association of Canada (IIAC) has focused on climate-friendly investing this year.
The association’s pre-budget submission recommends that the federal government work with the provinces, territories and the private sector to “map out the necessary investments, financing requirements and sources of financing to meet Canada’s climate objectives” and emissions reduction goals for 2030.
The IIAC recommends using a combination of public and private capital to fund the creation of energy-efficient infrastructure; improving the efficiency and functioning of Canada’s green bond market; and returning revenue from carbon pricing back to consumers in the form of reduced tax rates for citizens and businesses.
But the first step to achieving any of these goals is to establish consensus about environmentally-minded investing among Canadians, says Ian Russell, the IIAC’s president and chief executive officer.
“[The government needs to] flesh out commonly understood definitions in terms of what do we mean by ‘green’? What do we mean by ‘sustainable’? How do we actually measure the progress of meeting these objectives?” Mr. Russell says. “You need definitions around it to make it effective. You want to encourage investors to participate in these projects, and so the way you do that is to [have] some kind of a measure or methodology.”
That applies to developing widespread public understanding of “what qualifies as a green bond,” the IIAC’s submission states. Mr. Russell says that “building or encouraging a more vigorous market for green bonds” while Canada strives to make the transition away from fossil fuels may require tax incentives, like reimbursing first-time issuers for setup costs for issuing green bonds and offering “super tax deductions” for contributions to registered retirement savings plans (RRSPs) designated to “climate-conscious products” such as green bonds.
“There should be a set of provisions within the budget to encourage the growth and expansion of these kinds of bonds,” he says.
Strengthening Canadians’ retirement savings is another priority for key investment industry organizations. As the aging population continues to grow, the Portfolio Management Association of Canada (PMAC), which represents 280 investment-management firms that have more than $2.8-trillion in assets under management, is striving for “tax fairness and levelling what is currently an uneven playing field between different types of investors,” its pre-budget submission states.
Specifically, Canadians whose defined-contribution pension plan assets are invested in pooled funds such as target-date funds are subject to higher tax rates on the non-registered portions of their investments than those who invest in mutual funds or segregated funds. And according to Melissa Ghislanzoni, association general counsel at PMAC, “there’s no policy rationale supporting that different treatment.”
As such, the organization’s pre-budget submission calls on Ottawa to adjust this rule and others that it says are “out-of-date [and] have not kept pace with their international counterparts, or with the evolution occurring in the investment fund industry.”
Meanwhile, the Conference for Advanced Life Underwriting (CALU) is setting its sights on the removal of provisions in the Income Tax Act that prevent small business owners from selling shares of their companies to younger generations of their family.
Section 84.1 of the act subjects private corporations to higher tax rates on the sale of shares to family members than to arm’s-length purchasers. While federal Finance Minister Bill Morneau indicated in 2017 that Ottawa would work with “family businesses, including farming and finishing businesses” to improve the efficiency of handing companies down to the next generations, CALU hopes to extend the same effort to a wider range of small businesses.
Its pre-budget submission deems these penalties “unfair” given that the agricultural industry employs just more than 1 per cent of all employees in the small business sector, Statistics Canada data show.
“This is a bit puzzling because, from a tax fairness and from a tax policy standpoint, … why would you offer that only to a subset of Canadians?” says Guy Legault, CALU’s president and CEO.
The organization is also asking Ottawa to develop a national seniors’ strategy that looks at the impact of the aging population, reduce costs for prescription drugs through pan-Canadian partnerships with governments and insurers and establish a standard list of prescriptions to remain universally covered by both private and public insurance plans.
Specifically, Mr. Legault says funding long-term care for a growing population of seniors is “going to be quite a burden on the next generation. … This is a conversation that has to start now.”
Metal Tiger PLC has a diverse investment portfolio and a track record of success – Proactive Investors USA & Canada
What Metal Tiger does
Metal Tiger is an AIM-listed firm that invests in mining projects and companies.
Its equities division invests in companies listed on London’s junior market AIM, the Australian Stock Exchange and the Toronto Stock Exchange.
The direct projects division focuses on the development of key projects in Botswana, Spain and Thailand.
What it owns
The company owns 62.2% of Kalahari Metals Ltd, which owns the Ngami and Okavango copper projects in Botswana.
It also owns 3.69% Sandfire Resources (ASX:SFR), which acquired former partner MOD Resources.
It also holds a 19.9% stake in Cobre, which manages the Perrinvale copper project in central Western Australia.
It also holds a stake in Pan Asia Metals, which is expected to IPO in due course.
How it’s doing
How’s it doing?
Metal Tiger recently participated in a financing for Australian company Southern Gold. The fundraising was adjusted in response to the coronavirus crisis, but Metal Tiger nonetheless followed its money to go to 17.1%
In December, Metal Tiger reported that Kalahari Metals had completed six holes for a total of 1,656 metres. These successfully proved the existence of the of D’Kar and Ngwako Pan formations that are prospective for both copper and silver.
Hole OCP06 intersected two wide zones, totalling 85 metres, with visible copper-sulphide mineralisation.
What the boss says: Michael McNeilly, chief executive
“We are very encouraged to report the intersection of wide zones of copper mineralisation from diamond drilling at KML’s Okavango Copper Project, on the Kalahari Copper Belt, in Botswana.
“Whilst we are still awaiting core assays the presence of trace copper sulphides, over a total interval of approximately 85m, may represent a mineralised halo to potentially higher-grade copper mineralisation nearby.”
- The company’s 30% stake in the T3 copper project was sold to MOD Resources Limited (LON:MOD) (ASX:MOD) in 2018 and MOD was in turn acquired by Sandfire in 2019
- Metal Tiger now holds just over six million Sandfire shares
- Kalahari holds interests in 12 highly prospective exploration licences in the Kalahari Copper Belt
- Drilling on the Kalahari portfolio has encountered significant copper mineralisation
Have $1,000? Here's My Single Best Investment Idea for April – Motley Fool
It’s a truly wild time to be an investor. Since the stock market peaked on Feb. 19, 2020, the benchmark S&P 500 has:
- Logged 10 of its 13 biggest single-session point declines in history.
- Recorded its seven largest single-day point gains of all time.
- Screamed into bear market territory twice as fast as any previous bear market.
- Pushed lower by 30% in 22 trading days, which is about 10 times faster than it typically takes bear markets to lose 30%.
- Recorded its largest single-session percentage loss since 1987, and its biggest single-day percentage gain since 2008.
In other words, volatility has been the name of the game, with the spread of the coronavirus disease 2019 (COVID-19) squarely to blame.
Investing during bear markets is always a smart move
As of Saturday, March 28, there were almost 658,000 cases confirmed worldwide, with over 30,400 deaths attributed to COVID-19, per Johns Hopkins University. The number of worldwide cases has doubled in a week. With stringent mitigation measures firmly in place in many developed countries, economic activity has ground to a crawl, with equity markets around the world paying the price.
However, there’s always light at the end of the tunnel in even the most dismal situations when it comes to investing. That’s because each and every stock market correction and bear market, no matter how steep or prolonged, has eventually been completely erased by a bull-market rally. This means that if you invest in high-quality businesses and hang on for the long run, thereby allowing your investment thesis to play out, you should come out a winner.
While we can’t predict when the coronavirus crash will end or if we’ve already hit the bottom, we can say with a fairly highly degree of confidence that the stock market will be higher in the future. This means now is the time to take advantage of depressed stock valuations.
The question, of course, is which top stocks to buy?
My single best investment idea for April
Although I’ve personally bought 12 new stocks during the coronavirus crash, as well as added to a handful of existing positions, one stock stands out head and shoulders above the rest. If you have $1,000 in disposable income to invest right now (i.e., not money you need to pay bills or for emergencies), then you should consider buying into what I view as my single best investment idea for April: Intuitive Surgical (NASDAQ:ISRG).
Intuitive Surgical is a manufacturer of surgical-assisted robotic systems. These systems help trained surgeons perform various types of soft tissue surgeries with finite precision, leading to potentially faster recovery times for patients.
As recently as last Monday, March 23, Intuitive Surgical’s share price had lost over 40% of its value from its very recent all-time high. Like many companies wading through the uncertainty of the coronavirus pandemic, Intuitive Surgical warned Wall Street that this outbreak would have an adverse impact on its financial results. With many elective procedures being cancelled and pushed further down the road, this will, undoubtedly, hurt the company’s very near-term growth potential.
However, COVID-19 is not going to be a long-term concrete weight on the global economy. Eventually, treatment options will be found and/or an antiviral discovered, and the corporate world will return to normal. When this happens, Intuitive Surgical’s numerous competitive advantages will shine through.
Three no-brainer reasons you need to own Intuitive Surgical’s stock
The first clear-cut advantage can be seen in the company’s sheer number of installed systems. Intuitive Surgical ended 2019 with 5,582 systems installed worldwide, up nearly 600 from the end of 2018. None of its competitors are anywhere close to having this many precision surgical systems installed around the world. When coupled with a lofty price tag of $0.5 million to $2.5 million for the da Vinci surgical system, and the training provided to surgeons, there’s virtually no chance of client churn or lost business to a competitor.
Secondly, this is the perfect example of a razor-and-blades business model. In this instance, the razor is the pricey da Vinci surgical system. Even though these systems generated $1.35 billion in sales for the company last year, they don’t generate beefy margins given how complicated they are to manufacture.
The bulk of the company’s margins and growth are derived from its blades, which include the instruments and accessories sold with each procedure, as well as the servicing needed to keep these systems in perfect working order. Last year, $3.13 billion was derived from the combination of high-margin instrument, accessories, and service sales. As the number of da Vinci systems installed grows worldwide, the percentage of total sales being generated from these higher-margin revenue sources will climb. Or, put in another context, Intuitive Surgical’s profit growth should continually outpace its double-digit sales growth.
Third and finally, Intuitive Surgical is still only scratching the surface on what its da Vinci system is capable of. The company is already a leader in gynecology and urology surgeries, but still offers a long runway to acquire market share in thoracic, colorectal, and general soft tissue surgeries. Since we’ve established that no surgical system developer has the geographic reach or rapport with the medical community as Intuitive Surgical, it’s only a matter of time before its systems are more widely used in place of traditional laparoscopic procedures.
If you have $1,000 to invest right now, I’d suggest putting it to work in Intuitive Surgical.
Optimize Your Investment Strategy During Market Volatility – The Motley Fool Canada
While the world faces the health, social, and economic effects of COVID-19, it can be difficult to implement your investment strategy. This is the most severe market volatility that many investors, veterans, and novices alike have ever experienced. Overall, it can feel pretty daunting to be an investor. I’d like to address a few ideas that can help you stay balanced and focused in this volatile time.
Step back and chill out
During crisis times, attempt to stay as neutral as possible. Every day, we are inundated with hundreds of new virus-related headlines. It can be overwhelming and disheartening. A steady stream of bad news can result in reactionary “fight-or-flight” behaviours. Stress-induced fight-or-flight reactions are quick and spur of the moment. People do not operate in their best cognitive, emotional, relational, and intellectual capacity when they are fearful and reactive. A great example is the global run on toilet paper, water bottles, and canned goods.
Fight-or-flight reactions are not the best way to think, live, or invest. If you feel your stress levels rise, take a break from your news feed. Instead enjoy the extra time with your loved ones, take a walk, be thankful, think positively, and choose to believe in a better future.
When considering your investment strategy, you need the peace of mind to operate at your highest level of cognitive and intellectual capacity. The stock market will likely experience volatility for some time to come. It can be easy to find your emotions riding along with the ups and downs of the market. Unfortunately, for many investors, it means they end up selling on a down day and buying on an up day. Selling out of panic often means you are selling at the wrong time. Make sure the investing decisions you make are well thought out, rational, and focused on the long term.
Make a plan
Take time to make a plan. Begin by evaluating your financial situation and investment strategy. Do you have a budget? Do you have enough savings to live off for a three- to six-month period if you needed to? What are your short- and long-term financial goals? Do you have the financial capacity to invest right now?
Then make a concerted effort to get organized. Evaluate your financial position, plan for the future, and get feedback about your plans/goals from people you trust (like your financial advisor).
Take your time
Should you have some expendable capital to invest, don’t spend it all on the next market dip. Rather, create a list of your top favourite companies. Make sure you deem them worthy to hold for a long time (five years or more). Look for companies with defensive qualities, such as large capitalizations, cash-rich balance sheets, extra liquidity, and the ability to operate now and in the future. These are companies that can become foundational for your investment portfolio. Some examples could be Brookfield Asset Management, CP Rail, Algonquin Power, BCE, or CAP REIT. Focus particularly on quality and avoid the urge to trade stocks during periods of volatility.
The COVID-19 crisis will likely play out over a number of months, if not a year. There will be continued opportunities to “buy the dips.” Consider the approach of Motley Fool co-founder, David Gardner. He suggests taking a measured approach by consistently investing a set amount every month. Gradually buy a third of a position and then add to that position later. By doing this, you slowly average your cost base.
Nobody can time a market bottom. Developing positions over time allows you to spread out your overall risk profile and enables more financial flexibility. It is best to take a nimble approach in times of crisis. If your financial circumstances were to drastically change, you can quickly pull back your investing allocation, and hopefully you will still have some safety cash to rely on.
The Foolish takeaway
The point is to avoid making fear-based, reactionary decisions. Don’t let anxiety and panic be the levers that operate your investment strategy. Be calm, develop discipline, create good habits, and methodically invest with a 10, 20, or 30-year time horizon. Looking back, you will surely remember the principals that helped you achieve your long-term financial dreams.
Many investors fear market crashes. However, long-term investors should embrace this crash, because bear markets can potentially allow you to make millions. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
Fool contributor Robin Brown owns shares of Brookfield Asset Management. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.
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