October 15, 2007: Stocks, real estate, Alberta energy stocks

A few random thoughts as the week begins.

Thank you for the e-mails regarding the sample of my portfolio holdings. I always appreciate comments, both positive and negative. Many seem reluctant to respond "on line" within the blog, and I understand that. I am as well, except for two that I regularly comment upon on site.

For those holding Canadian energy stocks, especially with exposure to the Alberta oil sands region, beware that the Province of Alberta is seriously considering an addition large royalty tax on all profits. Several energy companies working the fields there feel this grab by the Alberta politicians is nothing short of extortion, and have threatened to cut back on exploration and extraction of petroleum products. While the companies are correct - this is simple extortion - I do not think they will curtail operations, as this region holds too much potential profit, and, if they did curtail operations, where would the go? Venezuela? Bolivia? Russia? At least Canada is safe from confiscation by the government. I would be a net buyer of Canadian energy shares, especially Encana (ECA). Oil trusts? Well, not right now. Talisman Energy has opened up large projects in Viet Nam, Malaysia and off the coast of Indonesia. Talisman Energy, with their wonderful energy portfolio, may be the Canadian energy stock with the most potential.

I think Citibank (C) could be purchased if it falls to around 45 as a dividend and company turnaround play. Yes, the management at the top is suspect, but how long are shareholders going to tolerate sub-par performance on the earnings and stock price fronts? The yield provides a nice floor.

The military may need upwards of $45b to retool after the Iraq conflict is ended. As we are now winning the war, some may be tempted to sell defense stocks. Don't. We have plenty of enemies to go around. I like the sector as a whole. Individual stocks I list every week or so. I am confident my information regarding DoD expenditures and contract awards are correct.

Although I have been a buyer of stocks, I have concentrated on those paying a hefty dividend. The market is frothy. I would not quarrel with anyone taking some money off the table, or, at the very least, repositioning assets for yield.

Real estate at the right price is a BUY BUY BUY. I cannot state strongly enough that rental real estate should be in your portfolio, so long as you can stomach tenants.
I have answered many e-mail questions on this topic, and I know that several readers have jumped in and and are very happy they did so. If you are a "flipper", forget it. You will be killed. If you are in investor with rental income in mind over the intermediate to long term (five-thirty years), go for it.