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In Tuesday’s newsletter I wrote about the human brain’s inherent ability to lie to investors about their motives and, as the Tilray Inc. marijuana mania underscores, the question “Why do I invest?” is frequently a good catalyst for these kind of delusional rationalizations.

No prudent investor would consider a stock like Tilray, with a market capitalization of US$22-billion and trailing revenue (not profit, revenue) of US$17-million , it doesn’t matter how big the marijuana business eventually becomes. The one possible exception are investors who understand the stock is way over-valued, and are buying a small starter position with the intention of adding to it as the price declines.

On the other hand, the rush to buy marijuana stocks is entirely understandable. Anyone who says they aren’t excited to own a stock that was up 650 per cent in a month at one point is either lying or dead inside.

There’s also political motivation for many to own marijuana stocks – those who oppose the apparently arbitrary prohibition on marijuana and want to help the cause by investing in the sector – and also medical reasons for other investors.

When asked “Why do I invest?," the most common answer would be some form of “to increase my future wealth and standard of living.” “I invest for entertainment and excitement” would not come up at all on any survey. Yet people do. All the time. I certainly have.

There will always be temptations to chase hot sectors but investors should keep potential risks – valuations or otherwise – and their long-term financial future in mind when adding any investment to their portfolio. All other considerations should be secondary.

-- Scott Barlow, Globe and Mail market strategist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.

Stocks to ponder

Tilray Inc. (TLRY-Q). Shares in Tilray Inc., the most valuable marijuana company in the world, swung dramatically Wednesday as fervour in the cannabis sector reached new heights, raising fresh questions about skyrocketing valuations in the nascent industry. On Thursday, the stock slipped about 19 per cent. At one point in Wednesday’s session, investors looked at the cannabis producer from Nanaimo, B.C., with two licensed Canadian facilities and US$28-million in sales, and saw a company that was worth more than Rogers Communications Inc. Tilray’s wild day of trading, perhaps the craziest session ever for a Canadian company of any stripe, saw the shares nearly double to US$300 – adding $18-billion in market capitalization in a matter of hours – before then losing half their value after multiple trading halts. David Milstead explains (for subscribers).

Canopy Rivers Inc. (RIV-X). Its shares surged as the stock went public Thursday amid a pot trading frenzy. Bruce Linton couldn’t have dreamed of a better time to take another cannabis company public. On Thursday, the co-chief executive of industry giant Canopy Growth Corp. is listing shares of its sister firm Canopy Rivers Inc. on the TSX Venture Exchange amid a trading craze in pot stocks that has lifted valuations across the space for weeks. Mr. Linton, who’s also the acting CEO of Rivers, is hoping fans of Growth, whose Canadian shares are up 110 per cent since mid-August, will flood into Rivers. Christina Pellegrini reports (for subscribers).

Fortis Inc. (FTS-T). With dividend stocks, John Heinzl likes predictability. The more stable the business is, the better. That’s one of the main reasons he’s a fan of Fortis Inc. The gas and electric utility operator – whose shares he owns personally and in his model Yield Hog Dividend Growth Portfolio – isn’t going to deliver massive returns. But it’s not the sort of stock that will crater on bad news, either. For investors seeking modest earnings and dividend growth – and a relatively high degree of income safety – Fortis is an attractive pick, particularly now that the share price is well off its highs. As Darryl McCoubrey, a Veritas Investment Research analyst who rates Fortis a “buy," said in a recent note: “Boring can be beautiful.” (For subscribers).

The Rundown

A simple stock-picking strategy that has trounced the market year after year

It’s easy to find simple stock-picking strategies that have outperformed the market for decades. One of the very simplest was highlighted way back in 1973 and has continued to trounce the market since then. Norman Rothery explains (for subscribers).

CIBC latest Canadian bank to face trailer-fee lawsuit

Canadian Imperial Bank of Commerce is the latest Big Six lender to receive a proposed class-action suit against its investment-management arm, alleging investors in its funds paid millions of dollars for advice they did not receive. Ontario-based law firms Siskinds LLP and Bates Barristers PC have filed a $200-million action against CIBC and CIBC Trust Corp. This is the third Canadian bank the two law firms have filed against. Earlier this year, they proposed a similar class action against 1832 Asset Management LP, Bank of Nova Scotia’s investment arm, and TD Asset Management Inc., the trustee and manager of TD Mutual Funds. Clare O’Hara reports (for subscribers).

Why medical technology is one of the most promising sectors for big long-term returns

The latest version of the Apple Watch is unlikely to ever significantly affect the company’s profit margins, but the new health-related features do highlight an enormous investor opportunity in medical technology stocks. Stephanie Demko, Citigroup’s senior analyst in the health care technology sector, sees an estimated US$70-billion in new revenue for the industry if it merely implements technology to the extent the rest of the economy already does. Scott Barlow takes a look at the medical technology sector (for subscribers).

Ottawa should consider this simple solution for curing retirement anxiety

Ottawa could radically simplify Canadian retirement planning with a few simple, low-cost changes to the tax code. The potential winners would include everyone who worries about running out of money in their old age. All that is required, according to a new C.D. Howe Institute report, is minor tinkering with existing tax regulations. The changes would open the door to “longevity insurance” – a financial product that would buffer people against the high cost of living to 90 or beyond. Ian McGugan explains (for subscribers).

Why REITs can be a surprisingly safe bet to beat the heat of rising rates

Bond yields are rising again, ending a three-month lull and putting yield-sensitive investments such as real estate investment trusts back in the spotlight. How will REITs perform if bond yields explore new highs? The backdrop is certainly chilling for investors who have stuffed their portfolios with dividend-generating stocks. But since May, when bond yields retreated from their highs and then fell off the radar screens of many investors, REITs have roared back to life. They are now up more than 11 per cent this year (including dividends), which is far better than the 1.8 per cent total return for the S&P/TSX Composite Index over the same period. These gains have come even as the yield on the U.S. 10-year Treasury bond returned above 3 per cent on Tuesday, to 3.05 per cent. David Berman reports (for subscribers).

Six bargain dividend stocks worth checking out

Buying beaten-up dividend stocks can be a rewarding strategy: Investors get paid while waiting for their share prices to gain momentum. Some dividend payers have taken a hit recently amid rising interest rates. Others have been hurt by rising or falling commodity prices. And some names have sold off due to political uncertainty or company-specific concerns, such as rising debt. The Globe’s Shirley Won asked three dividend fund managers for their top picks from the bargain bin.

Better-than-expected gains for my high-yield portfolio have slowed. It’s time to make an adjustment

Gordon Pape launched his High-Yield Portfolio for his Income Investor newsletter in March 2012. It is intended for readers who want above-average cash flow and can handle a higher level of risk. It invests entirely in stocks, so it is best suited for non-registered accounts where any capital losses can be deducted from taxable capital gains. Also, a high percentage of the payments will receive favourable tax treatment as eligible dividends or return of capital. But it’s results have slowed partly due to the drag from Pizza Pizza. He outlines his latest changes (for subscribers).

Top Links (for subscribers)

U.S. pours the pressure onto Canada’s NAFTA negotiating team

“The great bull market is dead” - Merrill Lynch

Others (for subscribers)

Thursday’s Insider Report: CEO trades over $3.7-million worth of stock

Wednesday’s analyst upgrades and downgrades

Wednesday’s Insider Report: Three marijuana stocks that insiders are selling

Others (for everyone)

Tilray options on fire as cannabis-stock frenzy grips market

Shares in several major forestry companies fall as U.S. housing stats show potential slowing demand

Number Crunchers (for subscribers)

Fifteen U.S. stocks with decreasing debt and strong cash flow

Twenty solid TSX stocks showing recent share-price momentum

Ask Globe Investor

Question: I have a TFSA question. If I put $5,000 in my TFSA and bought stock that doubled in price to $10,000 and then took out the $10,000 from the TFSA, can I put $10,000 back in without a penalty? Even though the original contribution was $5,000?

Answer: Yes, as long as you don’t do so in the same calendar year. The $10,000 withdrawal will be added to your contribution room in the year following.

--Gordon Pape

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