Precision looks south for growth

PRECISION DRILLING TRUST $21 (Toronto symbol PD.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 125.8 million; Market cap: $2.6 billion; SI Rating: Extra risk) earned $2.73 a unit in 2007, down 40.1% from $4.56 in 2006. Cash flow per share fell 35.4%, to $3.34 from $5.17, while revenue fell 28.6%, to $1.0 billion from $1.4 billion. Weaker natural gas prices and higher royalty payments in Alberta hurt demand for its drilling rigs. Precision plans to keep expanding in the United States, which now accounts for roughly 8% of its revenue. Precision’s new rigs are more efficient than regular models, and should help Precision win contracts away from U.S. operators of older rigs. The trust also plans to expand internationally in 2008. Precision pays regular monthly distributions of $0.13 a unit. That gives the units a current yield of 7.4%. Precision Drilling Trust is a buy for aggressive investors.

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Pat McKeough

A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.

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Updating Imperial Oil Ltd., Molson Coors Canada Inc., Canada Bread Co. Ltd., and TransAlta Corp.

IMPERIAL OIL LTD. $55 (Toronto symbol IMO) continues to ration gasoline deliveries to its 532 Esso gas stations in Western Canada due to problems at its refinery in Edmonton. The company is importing and buying fuel from other suppliers as it repairs the plant. It’s unlikely the problem will have a material impact on its earnings. Best Buy. MOLSON COORS CANADA INC. $52 (Toronto symbol TPX.B) moved down after the company said it will delay further share buybacks or dividend increases until after it determines the costs of its deal to merge its operations in the U.S. with those of rival brewer SABMiller plc. However, cost savings from the merger will help the company cope with rising prices for barley and hops. Buy. CANADA BREAD CO. LTD. $71 (Toronto symbol CBY) now accounts for over 95% of the market cap of parent company MAPLE LEAF FOODS INC. $13. Canada Bread is now a hold. For new buying, we recommend Maple Leaf Foods....

Precision looks south for growth

SNC hikes dividend despite profit drop

SNC-Lavalin Group Inc. $46 (Toronto symbol SNC Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $6.9 billion; SI Rating: Average) earned $0.45 a share (total $69.1 million) in 2007, down 49.4% from $0.89 a share ($136.6 million) in 2006. The 2007 results included a $267.3 million pre-tax operating loss at its power division due to delays in constructing a new power plant in Brampton, Ont. Revenue rose 28.8% to $6.7 billion from $5.2 billion. SNC has also increased its quarterly dividend by a third, from $0.09 a share to $0.12. The new annual rate of $0.48 yields 1.0%. However, the stock is expensive at 29.1 times its forecast 2008 earnings of $1.58 a share, particularly for a cyclical company. SNC-Lavalin is a hold.

Two grocery retailers — 1 buy & 1 hold

Fierce price competition in Ontario has hurt earnings growth at Loblaw and Metro in the past year. While both are doing a good job controlling costs, we see only one a buy right now. LOBLAW COMPANIES LTD. $28 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 274.2 million; Market cap: $7.7 billion; SI Rating: Above average) is Canada’s largest grocery store operator, with over 1,000 company-owned and franchised stores. Major banners include Loblaw, No Frills, Provigo and Real Canadian Superstore. George Weston Ltd. owns 61% of Loblaw’s stock. Loblaw is currently restructuring its operations, as it de-emphasizes general merchandise and focuses on food. This includes overhauling its supply chain and computerized inventory systems to improve in-store availability and product freshness. The company also aims to make better use of its size to secure lower purchase prices from its suppliers....

Leading market share makes Indigo a buy

Indigo Books & Music Inc. $13 (Toronto symbol IDG Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 24.8 million; Market cap: $322.4 million; SI Rating: Speculative) is Canada’s largest book retailer. It operates 88 superstores under the Chapters, Indigo and the World’s Biggest Bookstore banners, plus 161 small format stores. Indigo also sells products over the Internet. The company has expanded into gifts, educational children’s toys and electronic products in the past few years to cut its reliance on books. It focuses on high-end merchandise to avoid directly competing with discount retailers such as Wal-Mart. In its third fiscal quarter ended December 29, 2007, Indigo’s earnings rose 20.0%, to $49.2 million from $41.0 million a year earlier, but that’s mostly due to a one-time $7.6 million non-cash tax recovery. The year-earlier quarter included a $1.6 million pre-tax writedown. Earnings per share rose 19.8%, to $1.94 from $1.62. The last quarter of the year includes Christmas and is the company’s busiest period. Indigo generally loses money in the other three quarters....

Writedowns weigh on Scotiabank

Bank of Nova Scotia $45 (Toronto symbol BNS Conservative Growth Portfolio, Finance sector; Shares outstanding: 985.0 million; Market cap: $44.3 billion; SI Rating: Above average) Bank of Nova Scotia is down from $55 a year ago, mainly due to writedowns of illiquid asset-backed securities. The rising Canadian dollar has also hurt the performance of its international operations, which supply about a third of its earnings. In its first fiscal quarter ended January 31, 2008, earnings fell 18.8% to $0.82 a share (total $835 million) from $1.01 a share ($1.0 billion) a year earlier. The latest quarterly earnings included $238 million in pre-tax writedowns and other charges. Revenue fell 9.7%, to $2.8 billion from $3.1 billion. However, lower interest rates should spur demand for new loans. The bank is also doing a good job controlling non-interest costs. Bank of Nova Scotia is a buy.

Royal expands on both sides of the border

Royal Bank of Canada $47 (Toronto symbol RY Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $61.1 billion; SI Rating: Above average) Royal Bank is expanding its wealth management operations. In Canada, it has agreed to acquire Phillips, Hager & North Investment Management Ltd., which has $69 billion in assets under management. Royal will pay roughly $1.3 billion in stock. In the United States, Royal has agreed to buy banking and investment firm Washington D.C.-based Ferris, Baker Watts, Inc. The bank did not reveal the price, but Ferris has $18.5 billion U.S. in assets under administration. These purchases will increase Royal’s assets under management by roughly 50%. Meanwhile, Royal earned $0.95 a share (total $1.2 billion) in the three months ended January 31, 2008, down 16.7% from $1.14 a share ($1.5 billion) a year earlier. The latest earnings included a $187 million writedown of securities backed by U.S. subprime mortgages. Revenue fell 1.7%, to $5.7 billion from $5.8 billion....

Digital focus a plus for info providers

Fears of a slowing economy and falling advertising revenue have hurt all three of these information providers in the past few months. However, investments in new printing presses and other modern equipment will help keep their costs down. They should also gain from their expanding Internet businesses and lower computing costs. TORSTAR CORP. $17 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.7 million; Market cap: $1.3 billion; SI Rating: Above average) publishes The Toronto Star, Canada’s largest daily newspaper. It also publishes other daily and community newspapers in Southern Ontario. Newspapers supply 70% of Torstar’s profit and revenue. The remaining 30% comes from wholly owned subsidiary Harlequin Enterprises Ltd., which is the world’s largest publisher of romance novels....

How Teck Tempers Your Risk

Teck Cominco operates in the Resources sector, which along with Manufacturing is one of the two most volatile and cyclical of the five main economic sectors (the other three are Finance, Consumer and Utility). Teck compounds its risk by growing through acquisitions. That’s riskier than internal growth because new operations may fail to live up to expectations, particularly in mineral development. However, Teck’s mining expertise and its exposure to a wide variety of minerals tempers that risk. That makes it an attractive choice for conservative investors who want a relatively low-risk mining investment. TECK COMINCO LTD. $43 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 441.9 million; Market cap: $19.0 billion; SI Rating: Average) is the world’s top producer of zinc, which accounts for 35% of Teck’s revenue....

We still like both for income and capital gains

BCE INC. $38 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 805.1 million; Market cap: $30.6 billion; SI Rating: Above average) moved up after a Quebec judge ruled against a lawsuit launched by BCE bondholders who objected to the $42.75 takeover bid it has accepted. The stock is still about 10% below the takeover price, mainly due to the current lack of liquidity in the debt market. Investors fear that the buyers will find it hard to finance the takeover. In addition, the deal still requires regulatory approval. If the takeover fails to go through, BCE’s stock would fall. But we feel BCE is attractive at current prices, for short-term takeover-fueled capital gains, or as a long-term buy for growth and income....

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Blue Chip Stocks

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

Dividend Stocks

Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

What are value stocks?

One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

Growth Stocks

Growth stocks are companies that are likely to have sales and earnings growth well above market average. Frequently they pay few, if any, dividends. Instead they typically reinvest any extra cash flow to promote further growth. Chosen wisely—according to Pat McKeough’s advice—high-quality growth-oriented stocks can be worthwhile additions to most well-diversified portfolios.

ETFs

What are ETFs?

ETF is an acronym for exchange traded fund.. These exchange traded funds are used to track indexes as closely as possible, since investors cannot actually buy an index outright.

How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

Wealth Management

Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.

AI Investing

Artificial intelligence (AI) is essentially the merging of today’s big computing with big data. This has resulted in breakthroughs in everything from creating machines to recognize faces with more accuracy than a human, to the development of chatbots able to collect, organize and simplify all the Internet has to say on any topic.

Spinoffs

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a corporate subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors.

Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Mining Stocks

Mining stocks are investments in companies that produce or explore for minerals. Some of these minerals include uranium, coal, molybdenum (which is used in steelmaking), copper, silver and gold. They are affected by fluctuating commodity prices in addition to their own business and operating risks.

Energy Stocks

What are energy stocks?

Businesses that work in the extraction, refining and delivery of energy sources such as natural gas, oil, uranium and coal, are considered energy stocks.