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Thursday, June 9, 2011

Canfor Pulp Products Inc. (CFX) can be a good replacement to the chaotic Sino-Forest Corp. (TRE)

This has absolutely nothing to do with Sino-Forest Corp. (TRE), but I will always remember what a financial planner working for Manulife Financial once told me about business located in China. That was in 2007, when I invested in segregated funds for my RRSP. Back at the time, I didn’t want to handle any investment risks and despite my young age (I was 27 back than), I decided to invest like a senior, I invested in some Manulife Financial segregates funds, in the following: Maritime Life International Equity Fund (Templeton), Manulife Simplicity Growth Portfolio, Maritime Life CI Harbour Seg Fund, Maritime Life Fidelity True North Seg Fund and Manulife GIF MLIA B World Invest.

We had that conversation after I mention to her that mutual funds invested in Chinese companies that were performing well. At the time, I was closely following a BMO Bank of Montreal mutual fund: the BMO Greater China Class. The fund was performing extremely well and I was impressed by the BMO Greater China Class.

Following what, the financial planner told me that it was because in China, the regulations were not the same when it comes to financial statements and that there was a lot of business fraud in China. Also, all investments made in Chinese companies needed to be handle with a lot of care. Those words never leave me because I was absolutely fascinated by China economy of the time. I still have the same fascination. But I do not invest in anything related to China for the reason that the regulation is not the same. It’s already risky enough to invest, why should you add another risk by investing overseas? That’s why I am mostly Canadian oriented when it come to investment.

Anyhow, today, a very sad story came out about a company that I never really notice before: Sino-Forest Corp. (TRE). Despite investing in stocks, I am in a way very conservative in my investments. I am not very attract to the big shinny names who are extremely well-rank by analysts. Personally, the only analysts I trust are Derek Foster (the guy who stop working) and SP Brunner (a well established blogger). I never lost anything by following those 2. Brunner is quite modest, saying in her stock reviews that they are not stock recommendations but hey, when you read her hot stuff about K-Bro Linen Inc. (KBL), per example, is that really anything else that would do than just invest in the company after reading her review? :0)

Anyhow, until recently, Sino-Forest Corp. (TRE) was performing extremely well, its value had gone from a 5$ to a 20$+ very quickly. It was the darling of everyone... Until someone of the name of Carson Block arrived in the show. Carson Block is a good looking 35 years, gangsters rap fan and a trained lawyer (got the portrait?) who declared that Sino-Forest Corp. (TRE) does not have real trees and that the company is not operating a real business. That might be true, but investors will have to do a trip in China to see for themselves if Carson Block declarations are true of false, because Sino-Forest Corp. (TRE) operates in China only... That Sino-Forest Corp. (TRE) operates a real business or not has any incident for me. I am not an investor of Sino-Forest Corp. (TRE). So why do I care?

Well, this incident surrounding Sino-Forest Corp. (TRE) shows the importance of diversification inside a portfolio. On the stock market, everything and anything can happen. I received bad comments in different occasions, saying that my portfolio is too complex, too bizarre, too diversify. Investing is not necessarily easy and in the investment game, diversification is your best friend.

I once got a French comment post here in this blog saying that investing in 10 companies should be enough. I never respond to the comment, but my way to see investment is this: enough is never enough. My investment portfolio will never be perfect; it will never be diversified enough. I always have in mind another guy, also good looking lol, Jean-François Tardif, ex hedge fund manager who, while being on top of his game, was managing more than 50 companies inside his hedge fund.

Ok, a hedge fund is a fund of millions of dollars, but it doesn’t change the fact that to be successful, diversification is needed. And I think that for a small portfolio like mine, the more it’s diversify, the better my chances are to increase my net worth. That’s personally the way I think.

Now, why should investors risk their hard earned money in companies like Sino-Forest Corp. (TRE) when they can get something so much better in Canfor Pulp Products Inc. (CFX), a BC based company?

I had been holding CFX for a little while. My investment grow of more than 400$ in just a couple of months. Canfor Pulp Products Inc. (CFX) is in the same sector as of Sino-Forest Corp. (TRE). Both companies have interest in engineered-wood products. Sino-Forest Corp. (TRE) does not pay any dividend. On May 20, 2011, I celebrated Canfor Pulp Products Inc. (CFX) first dividend distribution as a corporation.

Not that I want to say here that Sino-Forest Corp. (TRE) is not a good investment, but there always a way to get the best for your bucks right here in Canada. Inside my investment portfolio, Canfor Pulp Products Inc. (CFX) had been among my top performers. Investors need to get to know CFX the way I did to appreciate the power of the stock.

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