Last year I invested heavily into 2 engineering firms. Most of that money went into SNC-Lavalin (SNC.TO) which is in Canada but with projects all over the world. The other is a large German company called Siemens (SI:NYSE.) I chose SNC because of it’s strong balance sheet, large market cap (over $5 billion,) and its long track record of being in business for over 100 years. My other choice was Siemens because of its massive sales which resulted in over €6 billion in profit last year, it’s relatively low P/E ratio of 10, and I happen to like using their products. I don’t actually know how they pronounce Siemens in Germany, but it’s probably not the same way I make it sound like in English
Unfortunately earlier this month a couple of SNC executives left the company and then there were news reports about them conducting unethical business practices in Libya. Then yesterday SNC said its net income for 2011 will probably be 18% lower than a previous forecast. Part of this comes from an unexplained $35 million in expenses which they didn’t even know about. So right when they released this news yesterday, in literally a single day, my SNC stocks fell by 20% （ ﾟ Дﾟ）!!!
Either SNC will continue to spiral down or this minor setback is the perfect opportunity to buy some more. Judging by what those helpful financial analysts are saying, nobody knows yet what’s going to happen. SNC currently has a dividend yield over 2% and I bought it for the long run, so I don’t plan to sell it any time soon. They are 1 of the 10 largest engineering firms in the world and I hope they can make a comeback one day. Siemens on the other hand is doing pretty well, up 4% so far this year.
Today’s Lesson: Even large, blue-chip companies can have dramatic downswings and you can lose 20% of your money in one day. Buy an index fund if you can’t stomach this kind of volatility.
Switching topics now, my recent Stock to Cash giveaway contest ended today. Everyone made a great effort. I’m sure you all had some complicated formulas to calculate your predictions. But in the end there can only be one winner. Matthew came close. Just 28 cents off the mark which puts him in 2nd place. But the winner of the contest is R.
So congratulations Mr/Ms R!!! I have emailed you about how to claim your cash prize of $14.03 CAD. You have until the end of day on March 7th to get back to me. Thanks to everyone who participated. Since only 11 people entered, each person’s chance of winning was actually pretty good, for a giveaway contest. Maybe next time more people will join in.
Hey this is a leap year. They say strange things can happen on February the 29th. We got a few centimeters (1 inch) of snow in Vancouver today which is unusual for late February, but I didn’t see anything else out of the ordinary.