The best way to buy Amazon shares has a Canadian twist. Plus, why caution is necessary with oil stocks

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You will hardly recognize the version of Amazon.Com Inc. Trades on the Canadian NEO Exchange.

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Only 30,863 shares changed hands the day before this week, and the bid-ask spread was four cents late in the day. On the Nasdaq, the home exchange for Amazon (AMZN-Q), volume totaled 1.8 million shares and the bid-ask spread was just one US cent. Which exchange should you use to buy Amazon for your portfolio? There are two good arguments for the NEO-listed version.

Amazon is one of 10 US-listed stocks that you can now buy in the currency-hedged version on the NEO exchange in the form of Canadian Depository Receipts, or CDRs. The availability of CDRs has led some investors to wonder whether they are a better choice than US-listed versions of similar stocks. “I want to buy Amazon for my RRSP,” one reader wrote recently. “Is It Better to Buy Stocks or New Canadian Depository Receipts?”

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Here are two good reasons to consider (AMZN-NE). One, you are very likely to save money on foreign exchange costs. Converting Canadian Dollar to US currency and vice versa is a profit center for the brokers. With a CDR, you get an institutional exchange rate that will cost less.

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There is a low-cost strategy for exchanging money between the Canadian and US dollars called the Norbert’s Gambit. If you want to buy US currency, you would buy an interlisted stock in Canadian dollars and then sell it for US dollars. Buying CDRs is a clean, quick, simple option to cut foreign exchange costs when Canadians buy US stocks.

Another advantage of CDRs is their access to small investors. AMZN-NEO closed Tuesday at $20.39, while AMZN-Q closed around $4,040 in Canadian dollars.

It is far easier to fit a stock that trades for about $20 per share into a smaller portfolio that costs more than $4,000. In a $50,000 portfolio, a stock of AMZN-Q would have a fairly aggressive weighting of 8 percent, which would double with a nice, round board lot of 100 AMZN-NEO shares.

The higher bid-ask spread for AMZN-NEO – the difference between what investors are willing to pay as buyers and those willing to accept as sellers – would be a turnoff for some investors. But it is an issue that may go away with time. The more investors turn to CDRs, the tighter the spread will be.

Further reading on CDRs, including taxation information.

–Rob Carrick, personal finance columnist

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stock to consider

Mullen Group Limited (MTL-T) Year-to-date, this trucking and logistics services company’s share price is up 27 percent and the average 12-month target price suggests the stock has potential for an additional 20-percent growth. The stock has near-term tailwinds with economic activity fueling freight demand. In addition, energy prices are reaching several-year highs, benefiting the company’s specialty and industrial services segment. Jennifer Downey looks after the investment affairs.

the rundown

Oil is rising — but that’s not a reason to dive into oil stocks

For anyone looking for more than a year or two, oil patches are still a treacherous place. Ian McGugan writes that the industry is facing obstacles that will almost certainly intensify – a point emphasized by the International Energy Agency (IEA) this week.

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Are investors feeling bullish? TD dives into trading data to gauge sentiment

Asking investors how they feel about stocks is a good way to take a look at market sentiment as they navigate rallies, recessions, political uncertainty and monetary policy. But Toronto-Dominion Bank has taken sentiment readings a step further with its newly launched TD Direct Investing Index: Based on queries, it provides a monthly snapshot based on the bank’s comprehensive retail trading data. David Berman tells us more.

Bond markets show growing risk of Fed, BoE policy errors

The US and UK bond markets are ringing economic alarm bells. The yield curve is flattening dramatically in both markets, indicating that traders are pricing in an increased risk of central-bank policy error or an increasingly depressed outlook for long-term growth. Or both. Reuters’ Jamie McGyver reports.

Other (for customers)

Highest-yielding stocks on the TSX, plus risk data

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Friday’s Analyst Upgrades and Downgrades

Thursday’s Analyst Upgrades and Downgrades

Number Cruncher: These five lithium producers deliver sustainable dividends

Number Cruncher: 15 stocks beyond the index that offer growth at a fair price

Kathy Wood’s ARK Invest weighs in on the new bitcoin futures ETF

Granthshala consultant

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Why key aspects of customer-focused improvements may be dead on arrival

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Ask the Granthshala Investor

Question: I am considering to enroll some of my dividend shares in Dividend Reinvestment Plans (DRIPs), especially in cases where the DRIP includes a discount on the value of shares received in the scheme. Do you know of any reliable, up-to-date sources of information on DRIP exemptions?

answer: You may also access the list of DRIPs and their respective discounts, if any, from third-party websites such as . can find on dripprimer.ca And canadianinvestor.com. But consider these sites as a starting point for further research, as DRIP exemptions come and go and the information may not be current.

Some companies have recently dropped their DRIP exemptions. bank of montreal and Toronto-Dominion Bank For example, both announced a 2 percent discount in the spring of 2020 to bolster their balance sheets during the early stages of the pandemic. However, now that both banks have built strong capital levels, the exemption no longer applies. Some other companies that have offered discounts in the past, such as Superior Plus Corp (SPB-T), have suspended their DRIPs altogether.

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The good news is that dozens of other companies still offer DRIP discounts, such as Fortis Inc. (FTS-T), and a 5 percent savings offered by Algonquin Power & Utilities Corp. (AQNU-n).

One way to confirm whether the exemption is currently in effect is to read the company’s latest dividend announcement, which will often mention the terms of its DRIP program. If you cannot find the information on the company’s website or elsewhere, contact its Investor Relations department or transfer agent.

There are a few things to keep in mind if you’re considering getting a drip.

First, the safest way to get the discount is by enrolling in a traditional DRIP operated by the company’s transfer agent. However, there are usually costs involved in registering the shares in your own name, which is a necessary step in the nomination process. You have to balance these costs against the savings from the DRIP exemption. You can avoid such costs by signing up for your broker’s “synthetic” DRIP program instead, but first ask your broker if it respects companies’ DRIP discounts. Not all brokers do.

Second, and perhaps most important, don’t let the DRIP discount tail distract the investment dog. If a stock checks all your boxes — its revenue, earnings and dividends are growing, its long-term outlook is favorable and the shares are selling for a fair price — consider any DRIP discounts as a bonus. On the other hand, if a company’s outlook is uncertain, don’t let a juicy DRIP discount influence your decision to invest. You can live to regret it.

–John Heinzley

what’s in the coming days

Allocate more in equities in your portfolio than expected for this point in your life — but are still reluctant to buy bonds with their current low yields. Nancy Woods has some advice when it comes to rebalancing in today’s market.

China, FAANGs, Turkey and the fear of Christmas is big: the theme of the world market for the coming week

Click here to view the Granthshala Investor Earnings and Economic News Calendar.

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Compiled by Granthshala Investor Staff

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