Meet the new retail investors flooding the market
Three months after one of the worst stock market crashes in history, the foundation of the investment industry has shifted. The COVID-19 crash decimated portfolios, but it also brought an unprecedented influx of new retail investors into the game. In Canada alone, more than 500,000 new discount online brokerage accounts were opened in the first quarter of 2020, according to Investor Economics, three times the regular pace.
So, who are these new investors? Those who spoke to the Financial Post range in age from their teens to their 50s. Some are playing with portfolios worth only a few thousand dollars, while at least one has seven figures in his sights. They’re grocery store workers, plumbers, public servants and embryologists.
Their level of investing knowledge varies widely, but they all invested in stocks with a similar goal: To make money amid the market carnage. Here are their stories.
THE TECH HEAD Best move: Bought Tesla Inc. at US$450 and sold at US$855.
A slow trigger finger already burned Jeff Adams twice in his life and he wasn’t going to let it happen again. The Georgetown, Ont., investor still remembers holding the first iphone in the mid 2000s and thinking it was transformative. At the time, Apple Inc. was trading for less than US$20. He thought about investing but convinced himself it was already too late. Apple Inc. is now a US$364 stock. The same happened when he bought a Tesla car in 2016. He thought the car was unlike anything he had ever driven and wanted to invest, but never did. He’s always had an eye for tech, but “there was always this little hesitation on when the right time (to buy stock) was going to be.” And so when the market crashed in March, Adams finally jumped in.
After almost doubling his investment in Tesla in a few weeks, Adams says he sold his shares and made $20,000.
“As we sit here now, it wasn’t such a great decision,” Adams said, referencing the stock’s climb over US$1,000. “I’m just happy I didn’t let it bypass me again.”
THE HUSTLER Best move: Bought Electra Meccanica Vehicles Corp. at US$1.62 and sold at US$2.35.
Josh Hanson thinks of himself as a hustler because he looks to make money wherever he can. He has a job in Calgary as an apprentice plumber, a part-time job in sales and now a third one in trading. “I want financial freedom and I have a hunger for extra money,” he said.
Almost immediately after opening an account with an online brokerage, Hanson found himself quarantined at home for two weeks because of a sore throat. He took the opportunity to cram. He read Benjamin Graham’s The Intelligent Investor, researched innumerable companies and at one point was following 300 tickers.
Eventually, Hanson settled on small caps and penny stocks in the biotech, oil and manufacturing sectors. He was looking for swing trades because he had a goal to make money every single day as if trading was his nine-to-five.
“I find these penny stocks have enough volatility in them that you can kind of find a low entry point and make decent returns off that.”
He has little more than $3,000 in his portfolio, but wants to grow it to $20,000 by year’s end. The goal is to one day be sitting on a beach and trading stocks for a living.
THE WAITRESS Best move: Bought Brookfield Property Partners at $11.65 and holding at $13.63.
The stocks app on Holly Pyndiura’s iphone has entered what she calls her circuit of apps. Whenever she picks up her phone and finishes cycling through Facebook and Instagram, her thumb will immediately guide her to her watchlist. That app was all-but ignored before March, when Pyndiura was laid off from her job as a waitress in Hamilton.
She opened an account with an online brokerage and added $5,000. In April, she used $2,000 and started buying positions in conservative ETFS made up of Canadian dividend stocks, mostly financials.
With $3,000 worth of dry powder to deploy, Pyndiura is still playing it safe. She’s been hesitant and she admits it has cost her. A prospective investment into Canadian Tire Corporation slipped through her fingers because she didn’t want to buy at $95, $100 or $110. She won’t risk going into U.S. stocks such Apple or Tesla that have shares that are “too high-priced.” Despite this, she says she’s up 30 per cent and that’s already 12 times more than what she was earning in interest through her bank. “I would rather have less returns than no returns at all,” she said.
THE ONE WHO OWNS TOO MUCH CINEPLEX Best move: Bought Toronto-dominion Bank at $55.03 and holding at $60.59.
If his friend could pick up stocks and start trading during lockdown, then Bradley Ferns thought he could do the same. Before then, stocks were a bit too scary for him, he said, and he had stuck to buying mutual funds. That fear still got the best of him, even when he decided to finally take the plunge. After opening an online brokerage account, Ferns, who lives in Scarborough, Ont., only bought one share of Air Canada to see how it would trade for a few days.
“It was a learning curve, even seeing it go up a little bit and you’re making a few pennies at that point,” said Ferns, who now wishes he had bought more so he could’ve benefitted more from the bounce.
His portfolio has grown from $500 to $10,000. He’s implemented the classic barbell approach — on one side, he has TD, Enbridge and Telus and on the other he has Cineplex Inc., his largest holding. He was once up $2,300 but at the time of the interview, he was only $500 in the green because Cineplex had fallen from about $13 to $10.50. It’s now trading below $8.50.
THE HIGH ROLLER Best move: Bought Shopify Inc. at $492 and holding at $1,295.
Matt Warwick missed the opportunity to buy the dip during the 2008 financial crisis and wasn’t about to allow a second opportunity pass him by.
Some investors with fewer funds at their disposal might think that Warwick’s call was risky, but he said it was a calculated one. He did his research and knew that historically, the markets have always rebounded. The stocks he selected, meanwhile were of strong companies that sold off to no fault of their own.
“The risk of any further downside was much less than the potential upside once the market recovered,” Warwick said.
He was right. On Shopify alone, he says he’s made $260,000, which has helped bring the value of his portfolio up to $770,000 in only a few months.
THE GAMBLER Best move: Bought TORC Oil and Gas at $1.50 and sold at $1.84/share.
Vandermeersch started investing around the market crash in March when he read that others were doing so and making money. Why not him? His first move was to put $2,000 into Chorus Aviation Inc., which he sold within a week after the shares rose by double digits. That immediately taught him “there was money to be made” and he proceeded to add $1,000 from his line of credit for more buying power.
He said his goal is to trade in and out of names to lock in even a quick five per cent return, and that he’s up 31 per cent so far using that method. Investors who are too greedy are likely to get a “slap in the face” and while he has thought about limiting his own risk, the temptation to trade can be too much.
“Every time I get out of a good trade… a little part of me is like can’t you just stay with the cash and be happy? And then I go in one more time and I think that’s the addictive side.”
THE DIVIDEND HUNTER
Anonymous, 28, auditor
Best move: Bought Suncor Energy Inc. at $16.01 and still holding at $23.16.
A 28-year-old Toronto man, he’s had an idea for years about what kind of stocks he’d invest in, but has never gotten the opportunity to enter the market because he prioritized paying off student debt from university. With those payments being frozen in March, the 28-year-old jumped at the opportunity to create a portfolio.
But instead of looking to scoop up tech stocks on the cheap or join in on the craze for airlines and cruise lines, he focused on dividends.
Four Canadian banks — Bank of Montreal, Toronto Dominion Bank, National Bank of Canada and Bank of Nova Scotia make up 30 per cent of his portfolio.
“Banks are super-duper safe — more safe than an Apple, Microsoft Inc. or Tesla,” he said. Utility and energy stocks such as Enbridge Inc. and Suncor make up another 20 per cent, he estimated.
The plan is to continue to let the dividends accumulate. Alone, they’re generating more income than a highinterest savings account, but make no mistake, he’s getting growth as well. On a $20,000 portfolio, he says he’s up $4,000.
THE PHOTOGRAPHER Best move: Bought Oncolytics Biotech Inc. at $2.26 and sold at $3.
Scott Alexander had been steadily growing his photography and creative consulting businesses before COVID-19 shut them down. Having lost 30 per cent of his income, Alexander looked to the markets to not only replace what was lost but to allow him to expand those businesses in the future.
“If I can buy $10,000 in gear, then I’m looking at booking another $100,000 to $200,000 worth of weddings or other corporate photography and videography events,” Alexander said. “The investment in my business is more important to me.”
Alexander wants to see movement and he wants to see it now and so he’s been staying clear of any stock that’s trading above $6. When he started investing in April, he put most of his $2,000 portfolio to work in small-cap energy stocks such as Calfrac Well Services Ltd. and Trican Well Service Ltd because of a macro thesis around oil’s importance. He’s since sold those and invested in a handful of lithium stocks as an indirect play on Tesla and the new lithium-ion battery it has in development.
Alexander says he’s up 13 per cent.
THE SCIENTIST Best move: Bought Kosmos Energy Ltd. at US$0.87 and holding at US$1.66.
Margaret Wozniak had no clue what was happening in the stock market before March. She had no financial background or knowledge to speak of. After all, she spent her early life studying science to become an embryologist. One of the first things she’d do after a buying a new phone was to delete the stocks app.
That all changed when Wozniak was furloughed from her job.
A four-day cram session followed. When she started, she didn’t even know she could buy stocks herself. Now, she has a diversified portfolio made up of Royal Bank of Canada, TD, Restaurant Brands International Inc., Suncor and U.S. stocks Cocacola Co. and Visa Inc. She wouldn’t say how much she’s invested, only revealing that she’s placed 80 per cent of her savings in her online brokerage account and is currently up 20 per cent.
“I still don’t think I know what I’m doing, fully, but I’m just lucky things turned out the way they did,” Wozniak said.
THE WHIZ KID Best move: Bought Champignon Brands Inc. at $0.22 and sold at $1.07.
Jayden Smit has been watching the markets since September, when “the end of the pot stock era” caught his eye. Smit wanted to learn to understand the charts and started asking an older friend, who is a daytrader, questions about how to trade. After five months of learning, his friend lent him enough money to begin a portfolio.
Smit’s first move saw him buy into Virgin Galactic Holdings Inc. and double his money before the space exploration company tumbled in March. That made him confident — maybe, too confident — and much of the profit he earned from Virgin was clawed back in a few e-sports investments that didn’t go well.
“I was trying to find good longs,” Smit said. “I realized quickly I’m not an investor, I’m more of a trader. I want to take advantage of the intraday volatility.”
Daytrading is now Smit’s nine-to-five. With the guidance of his friend, he’s watching dozens of tickers and charts, looking for bear flags and breakouts to guide his moves. Since he started, Smit said he’s made close to $10,000, but when the markets close, he’s still putting on a uniform and working evening shifts at a grocery store outside Toronto.
“I could 100 per cent leave my job, but for me I want to show the work ethic,” he said.