Search

There are many things to look for when evaluating a stock—and one of the most important is hidden assets

The more complicated features there are in an exchange-traded fund (ETF), the more the managers can charge in fees and the more hidden risks you face when investing in ETFs.

Switching brokers unwisely when your broker retires can lead to lining your new broker’s pocket

We look at the world leader in methanol, Canadian growth stock Methanex, which has a good long-term outlook but concerns in the near term.

We take a close look at a private REIT to show the importance of looking beyond marketing hype

Imperial Oil continues to face low oil prices, but its diversified operations make it our top energy stock for conservative investors.

With smart, low-risk acquisition strategies, blue chip insurance firms Great-West Lifeco and Sun Life Financial are positioned for growth.

CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 269.3 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.0%; TSINetwork Rating: Average; www.cae.com) earned $47.7 million in its fiscal 2016 second quarter, which ended September 30, 2015, up 13.6% from $42.0 million a year earlier. Earnings per share rose at a slower pace of 12.5%, to $0.18 from $0.16, on more shares outstanding. Revenue gained 16.5%, to $616.8 million from $529.4 million. About 90% of the company’s revenue comes from foreign customers, so it’s benefiting from the lower Canadian dollar. Sales of flight simulators and pilot-training services to airlines (59% of total revenue) jumped 23.4%. CAE sold 16 simulators during the quarter and expects its full-year total to be near the 41 it sold in fiscal 2015....

GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 993.2 million; Market cap: $34.8 billion; Price-to-sales ratio: 1.0; Dividend Yield: 3.7%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s second-largest insurance company, after Manulife Financial (Toronto symbol MFC). It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.2% of Great-West. As of September 30, 2015, the company had $1.15 trillion of assets under administration, up 12.9% from a year earlier. Great-West gets 45% of its earnings from Canada, where it operates under well-known labels like Great-West Life, Canada Life and Freedom 55....

IGM FINANCIAL INC. $38 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 245.8 million; Market cap: $9.3 billion; Price-to-sales ratio: 3.1; Dividend yield: 5.9%; TSINetwork Rating: Above Average; www. igmfinancial.com) is Canada’s largest independent mutual fund provider. Power Financial owns 59.8% of IGM. The company has two main divisions. Investors Group offers mutual funds and other services, such as portfolio management, through 5,200 affiliated advisors. This business forms close relationships with clients, which helps it retain them. In the past year, its redemption rate for long-term funds was 8.4%, well below the industry average of 15.6%. The other division, Mackenzie Financial, sells funds through independent brokers....

HOME CAPITAL GROUP INC. $33 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.2 million; Market cap; $2.3 billion; Price-to-sales ratio: 3.9; Dividend yield: 2.7%; TSINetwork Rating: Average; www. homecapital.com) is a mortgage lender that serves borrowers who don’t meet the stricter standards of larger, traditional lenders, like banks. The company offers most of its loans through 4,000 independent mortgage brokers. In July 2015, it cut ties with 45 of them after it uncovered inaccurate information on loan applications. Specifically, these brokers falsified borrowers’ annual incomes but not their credit scores and property values....

BLACKBERRY LTD. $9.84 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 524.2 million; Market cap: $5.2 billion; Price-to-sales ratio: 2.1; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) has launched its first-ever smartphone powered by Google’s Android software....

BANK OF NOVA SCOTIA $61 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $73.2 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.scotiabank.com) has extended its Scene loyalty card program with Cineplex Entertainment (Toronto symbol CGX) for an additional 10 years, to October 31, 2025....

MANITOBA TELECOM SERVICES INC. $29 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 78.9 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.5%; TSINetwork Rating: Average; www.mtsallstream.com) has expanded its recent restructuring plan, under which it is cutting 25% of its Allstream subsidiary’s workforce and lowering this business’s capital spending by 20% to 30%....

MAPLE LEAF FOODS INC. $21 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 136.6 million; Market cap: $2.9 billion; Price-to-sales ratio: 0.9; Dividend yield: 1.5%; TSINetwork Rating: Average; www.mapleleaf.ca) will soon complete a multi-year restructuring that mainly involves closing older meat-processing plants and shifting their operations to newer facilities....

FORTIS INC. $38 (www.fortisinc.com) paid $4.5 billion for UNS Energy in August 2014. This business operates power plants and distributes electricity and gas to 658,000 clients in Arizona. In the three months ended September 30, 2015, UNS increased Fortis’s earnings by 116.4%, to $145 million from $67 million a year earlier....

NVIDIA CORP. $21 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 543.5 million; Market cap: $11.4 billion; Price-to- sales ratio: 2.6; Dividend yield: 1.6%; TSINetwork Rating: Average; www.nvidia.com) is a leading designer of 3D-capable video chips, which make video games run more smoothly and appear more lifelike. The company outsources most of its production to Asian chipmakers.

In its fiscal 2015 third quarter, which ended October 26, 2014, Nvidia’s revenue rose 16.3%, to a record $1.2 billion from $1.1 billion a year earlier. Earnings jumped 43.3%, to $220.4 million from $153.8 million. The company spent $810.0 million on share buybacks in the past nine months. As a result, its earnings per share rose 50.0%, to $0.39 from $0.26.

Nvidia spends around 30% of its revenue on research, which is helping it expand into new areas, particularly chips for mobile devices. Its new Tegra chips now power Google’s new Nexus 9 tablet and Chromebook laptop computer. The company also recently launched its own tablet, called Shield, specifically for video game enthusiasts.

...

KRAFT HEINZ CO. $75 (www.kraftheinzcompany.com) earned $0.44 a share in the third quarter of 2015, down 4.3% from $0.46 a year earlier. Sales fell 9.0%, to $6.4 billion from $7.0 billion. If you exclude exchange rates and businesses it sold since the July 2015 merger of Kraft Foods Group and H.J....

BUCKEYE PARTNERS L.P. $67 (www.buckeye.com) is seeing strong demand for its oil-storage terminals as many producers store their crude instead of selling it at today’s depressed prices. However, lower prices are hurting revenue at Buckeye’s wholesaling business, which sells refined fuels, such as gasoline, home heating oil and propane....

UNITED TECHNOLOGIES CORP. $97 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 887.0 million; Market cap: $86.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.utc.com) has four main businesses: Climate, Controls & Security (30% of revenue, 32% of earnings) makes heating and air conditioning equipment under the Carrier brand, as well as burglar alarms and fire-safety products; Aerospace Systems (25%, 24%) makes enginecontrol systems and other parts for aircraft; Pratt & Whitney (23%, 17%) manufactures aircraft engines; and Otis (22%, 27%) makes elevators.

Major takeover paid off

The company’s revenue rose 7.1%, from $54.3 billion in 2010 to $58.2 billion in 2011. In 2012, it paid $18.3 billion for North Carolina-based Goodrich Corp., which makes aircraft parts (such as landing gear, wheels and brakes) and maintains and fixes planes. However, it also sold smaller businesses, so its revenue fell 0.8%, to $57.7 billion, in 2012.

...

DIEBOLD INC. $34 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.0 million; Market cap: $2.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.4%; TSINetwork Rating: Average; www.diebold.com) is buying German ATM maker Wincor Nixdorf AG for $1.8 billion (80% in cash and 20% in stock).

The combined firm will be the world’s largest maker of ATMs, with 35% of the market and $5.2 billion in annual revenue. Diebold aims to close the deal in mid-2016.

The company plans to borrow $2.8 billion to pay for Wincor, which will increase its total debt to around $3.5 billion. However, it should save $160 million a year by eliminating overlapping operations, which will help it pay down this debt. It will also cut its dividend rate by 67%, from $1.15 to $0.38, which would yield 1.1%.

...

SHERWIN-WILLIAMS CO. $276 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 93.1 million; Market cap: $25.7 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.0%; TSINetwork Rating: Above Average; www.sherwin-williams.com) reported $3.15 billion of sales in the three months ended September 30, 2015, unchanged from a year earlier. Consumers bought more paint, offsetting lower sales to industrial clients and weakness in Latin America. Excluding exchange rates, sales gained 3.7%.

Earnings rose 14.8%, to $374.5 million from $326.2 million. Per-share profits gained 18.5%, to $3.97 from $3.35, on fewer shares outstanding. For all of 2015, the company expects to earn $10.75 to $11.00 a share. However, the stock is expensive at 25.4 times the midpoint of that range.

Sherwin-Williams is a hold.

...

MONSANTO CO. $96 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 439.8 million; Market cap: $42.2 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.monsanto.com) plans to cut 12% of its workforce over the next two years. That’s because low prices for corn, soybeans and wheat are prompting farmers to buy fewer of its genetically modified seeds and other agricultural products.

The company now expects the cuts to save it $500 million annually by fiscal 2018 (fiscal years end August 31), up from its earlier target of $300 million. Monsanto earned $2.8 billion, or $5.73 a share, in fiscal 2015.

Monsanto is still a buy.

...

KEYSIGHT TECHNOLOGIES INC. $31 (New York symbol KEYS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.0 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.8; No dividends paid; TSINetwork Rating: Average; www.keysight.com) reported a 2.6% revenue decline in its 2015 fiscal year, which ended October 31, 2015, to $2.86 billion from $2.93 billion in 2014. Excluding exchange rates, revenue rose 1%.

Before unusual items, earnings fell 15.0%, to $432 million from $508 million. Due to more shares outstanding, per-share earnings fell 17.1%, to $2.52 from $3.04. That’s partly because Keysight raised its research spending by 7.2%, to $387 million (or 13.6% of revenue) from $361 million (or 12.3%).

The company aims to shift away from manufacturing testing equipment for electronic devices to more profitable businesses like software and services. However, its short-term outlook is weak, which is why the stock trades at just 12.0 times the $2.59 a share Keysight will probably earn in fiscal 2016.

...

SNAP-ON INC. $171 (New York symbol SNA; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 58.1 million; Market cap: $9.9 billion; Price-to-sales ratio: 2.7; Dividend yield: 1.4%; TSINetwork Rating: Average; www.snapon.com) makes tools for auto mechanics and sells them through a fleet of franchised vans that visit garages. It also makes specialized tools for industrial customers.

Snap-On continues to expand beyond the U.S., which supplies 65% of its revenue. In August 2015, it paid $13.1 million for Ecotechnic, an Italian maker of equipment for maintaining vehicle air conditioning systems. The purchase should add roughly $13 million to Snap-On’s annual revenue.

The company is also seeing strong demand for its tools and other products. In the three months ended October 3, 2015, its revenue gained 1.9%, to $821.5 million from $806.3 million a year earlier. Excluding exchange rates and acquisitions, sales gained 7.3%. Earnings per share rose 12.5%, to $1.98 from $1.76.

...