Ellen Roseman's Canada

I like scenery as much as anyone. But I don’t think about the landscape when I think about being Canadian on Canada Day.

I think about the people and their attitudes, often called the collective soul of Canadians — polite, courteous, civil and restrained. It’s what makes Canada the peaceful country it is and a beacon of hope for emigrants around the world.

But often, I find my fellow citizens too complacent, too trusting of authority, too willing to believe that every problem has a legislated solution.

Why do so many people sign long-term contracts for car leases or phone plans without reading the fine print or asking about the consequences if they have to cancel early?

Why do they trust the promises of door-to-door sellers pushing fixed-price energy deals or telemarketers offering lower credit card interest rates?

Why don’t they shop for financial advisers as carefully as they shop for plumbers, gardeners and roofers?

Why do they start and end their quest for financial products at their bank branch?

I’m exasperated to see people let go of their common sense when confronted by persuasive sales pitches or seductive marketing campaigns. And I’m trying to figure out why it happens.

Perhaps it’s the sense of entitlement you get in a country with strong social supports, leading you to assume there are strong laws to enshrine consumer and investor rights.

If only it were so.

Canada’s division of power between provincial and federal governments has resulted in fragmented legislation and enforcement.

Too often, government regulators hand over power to self-regulatory bodies funded by the industries they’re supposed to police.

Canada’s politicians pay little attention to consumer and investor issues until they erupt into protest marches, front-page news stories and questions they can’t duck in Parliament or provincial legislatures.

Years can go by without a controversy that forces legislators to act.

Remember the furor about Rogers making customers pay for bundled cable TV channels unless they said they didn’t want them? The story comes up a lot when you talk about consumer activism.

But it happened 15 years ago. And there’s still no law against negative-option billing by federally-regulated telcos and banks.

I want Canadians to stop assuming that large corporations and salespeople have their best interests at heart. I want them to put more emphasis on self-protection and less reliance on government to come to their aid.

That’s my Canada Day wish.

Robot stock selector finds its way in a tough market

As bad as the year has been for investors tagging along with the stock markets, it was still possible to make money.

You just had to be selective, and buy stocks that paid dividends.

Ten Canadian stocks we selected using a robotic or automated filtering technique would have earned us about $92,000 in six months, if we had only had a million dollars and the courage to invest it on the eve of 2010.

Holding all of the stocks tracked by the Standard & Poor’s/TSX composite index would have cost us about $25,400, plus brokerage fees.

Toronto’s index fell by 3.85 per cent in six months, although dividends limited losses to 2.54 per cent.

Meanwhile, seven of our 10 stocks rose in value, including drug maker Biovail Corp. by 39.7 per cent.

This has been a period of uncertainty regarding growth in the global economy, anxiety about mounting government debt and a flight to the perceived safety of gold and U.S. government bonds.

Most other major stock markets have fallen more than Canada’s after the exceptionally strong gains last year.

Yet many stocks did continue to rise in value. Our Robot Portfolio selection technique, popularized in earlier news columns by Boston money manager John Dorfman, seems to have drilled through to find some hidden value.

We cannot say this always works, however. Earlier portfolios gained 30 per cent gain in 2006, and 68.5 per cent in 2009. But we lost 5 per cent in 2007 and 40 per cent in 2008, a worse performance than the markets as a whole. Our average gain over four years was only 5.7 per cent a year, ignoring trading fees and taxes.

Each time we chose 10 companies with 10 different specialties. All had a market value of at least $500 million, more shareholder equity than debt, at least a penny of profit per share in the latest four quarters reported and a low share price relative to earnings.

Our biggest winner this year, Biovail, shot up in price on news it had agreed to merge with Valeant Pharmaceuticals International Inc., a California maker of generic drugs and treatments for chronic illnesses. The combined companies will have operations in several countries, but with a workforce nearly 20 per cent smaller.

A big gain of 27.6 per cent was posted by Western Coal Corp., which mines coal in British Columbia and West Virginia for makers of metal and generators of electricity. It has seen a decline in revenues, but every analyst tracked by Bloomberg rates the stock a buy.

Shares of Telus Corp., the telephone company, produced a 20.9 per cent gain. It turned in a slightly higher profit in its latest quarter, even though revenues were flat, new competitors are challenging its share of the cellular telephone market and analysts differ on whether to buy the stock.

Yellow Pages Income Fund, another company facing challenges and a lack of enthusiasm from analysts, defied the odds and turned in an 18.3 per cent investment return. It recently expanded by acquiring Canadian Phone Directories Holdings Inc.

Natural gas extractor Peyto Energy Trust provided a 9.1 per cent gain, while cheque printer Davis + Henderson Income Trust added 3.4 per cent and power generator and natural gas distributor ATCO Ltd. added 4.3 per cent.

Capstone Mining Corp., which mines copper, silver and zinc, and operates in Canada and Mexico, was the biggest disappointment, posting a 23.1 per cent investment loss. Fairfax Financial Holdings Ltd. provided a 2.4 per cent investment loss, while Precision Drilling lost us 7.7 per cent.

We will see at the end of the year whether our overall gain holds up. In the meantime, you should know we are providing the information as a matter of interest only. We are not offering investment advice.