Search

TRANSCANADA CORP. $55.25 (Toronto symbol TRP; Shares outstanding: 708.6 million; Market cap: $39.1 billion; TSINetwork Rating: Above Average; Dividend yield: 3.8%; www.transcanada.com) operates 68,500 kilometres of natural gas pipelines and over 11,800 megawatts of power generation in Canada and the U.S.

In the three months ended December 31, 2014, TransCanada’s revenue rose 12.1%, to $2.6 billion from $2.3 billion a year earlier. Excluding one-time items, earnings per share rose 24.1%, to $0.72 from $0.58.

The company completed $7.0 billion worth of growth projects in 2014. It plans to complete $46 billion of additional projects secured by long-term contracts by 2020 (an amount greater than its current $39.1-billion market cap).

...

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday.

This week we had a question from an Inner Circle member about a Canadian seafood company whose stock has risen in recent months. Clearwater Seafoods has enjoyed strong financial results while benefiting from a positive outlook for seafood markets. Pat examines the factors behind the company’s strong showing. He also assesses Clearwater’s longer-term outlook in light of both rising global demand and stiff global competition.

Q: Pat: Can you offer any information or advice on the recent price rise and volume of Clearwater Seafoods on the TSX? Thanks.

A: Clearwater Seafoods (symbol CLR on Toronto; www.clearwater.ca) is one of North America’s largest seafood companies and the biggest holder of shellfish licenses and quotas in Canada.

The stock has risen on the company’s strong financial results and a positive outlook for its seafood markets.

...

Every Thursday we bring you one of our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. This week’s U.S. pick comes from our advisory for more aggressive investors, Stock Pickers Digest.

Over 30 billion devices—including things like home thermostats and appliances—will be connected to the Internet by 2020.

That means you’ll be able to control them with a smartphone, set them up to adapt to factors like outside temperatures and have them notify you if, for example, there is smoke or carbon monoxide in your home.

...

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendations on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor. ENBRIDGE INC. (Toronto symbol ENB; www.enbridge.com) gets 90% of its revenue from pipelines that pump oil and natural gas from Western Canada to Eastern Canada and the U.S. The remaining 10% mainly comes from distributing gas to 2.1 million consumers in Ontario, Quebec, New Brunswick and New York State. Since 2008, Enbridge has spent $20 billion on 39 new pipelines and other projects. Thanks to these investments, the company’s revenue soared 164.1%, from $12.5 billion in 2009 to $32.9 billion in 2013. Its revenue probably increased to $37.7 billion in 2014....

Every Monday we feature “A Stock to Sell” as our daily post. With every stock or investment we recommend as a sell, we give you a full explanation of why we advise against investing in it at this time.

Extendicare Inc. (symbol EXE on Toronto; www.extendicare.com) is one of North America’s largest retirement- and nursing-home operators. Its 259 long- and short-term senior-care facilities can house 28,401 residents.

The stock fell sharply in November 2014, from over $8, when Extendicare announced an agreement to sell most of its U.S. business for $870 million U.S. in a deal with two investment firms, Formation Capital and an affiliate of Safanad Inc.

These operations generated $868.9 million U.S. of revenue in the first nine months of 2014—more than half of Extendicare’s $1.6-billion U.S. total in that period.

The company will keep 10 nursing homes in the U.S. for now, but it intends to sell them. It will also hold on to two other U.S. businesses: Virtual Care Provider, which supplies computer support and consulting to long-term care providers, and Laurier Indemnity, which insures against liability risks.

...

MANITOBA TELECOM $24.73 (Toronto symbol MBT; Shares outstanding: 78.1 million; Market cap: $1.9 billion; TSINetwork Rating: Average; Dividend yield: 6.9%; www.mts.ca) earned $0.31 a share in the three months ended December 31, 2014. That’s a big improvement over the year-earlier quarter, when writedowns and other unusual charges led to a loss of $1.25 a share. Overall revenue fell 0.9%, to $404.8 million from $408.5 million. The company is now conducting a strategic review to spur long-term profit growth. This could lead to asset sales or other moves, including cutting its $1.70-a-share dividend, which yields 6.9%....

IMPERIAL OIL $47.96 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $41.2 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.imperialoil.ca) expects to spend $4.0 billion on capital projects in 2015, down 29.8% from $5.7 billion in 2014. Most of that will go toward expanding its 71%-owned Kearl oil sands project, as well as its Cold Lake oil sands property. These two projects will last decades, so the recent drop in oil prices will have little impact on their long-term prospects. Imperial Oil is a buy.

ENCANA CORP. $15.20 (Toronto symbol ECA; Shares outstanding: 741.1 million; Market cap: $11.6 billion; TSINetwork Rating: Average; Dividend yield: 2.3%; www.encana.com) produced 416,700 barrels a day (74% gas, 26% oil) in the three months ended December 31, 2014. That’s down 20.4% from 523,400 barrels a year earlier. As well, Encana’s realized gas prices, which include the benefit of hedging contracts, fell 4.1%, while oil prices declined 0.9%. As a result, the company’s cash flow per share fell 44.0%, to $0.51 from $0.91. Encana plans to spend $2.0 billion to $2.2 billion on new projects and upgrades in 2015, down from its earlier forecast of $2.7 billion. Even so, that’s more than its projected cash flow of $1.4 billion to $1.6 billion....

ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $17.39 (New York symbol ESR; buy or sell through brokers) has 65.6% of its assets invested in Russia, followed by Poland at 27.2%; Czech Republic, 3.6%; and Hungary, 3.2%. The fund’s top holdings are Gazprom (Russia: gas utility), 13.4%; Lukoil (Russia: oil), 11.2%; Magnit PJSC (Russia: retailing), 5.7%; Sberbank (Russia: bank), 5.3%; MMC Norilsk Nickel (Russia: mining), 4.5%; and Novatek (Russia: natural gas), 3.5%. The iShares MSCI Emerging Markets Eastern Europe Index Fund’s expense ratio is 0.67%....

ISHARES MSCI BRAZIL INDEX FUND $33.26 (New York symbol EWZ; buy or sell through brokers) is an ETF that is designed to track the Brazilian stock market. Its top holdings are Cia Itau Unibanco Holding (banking), 10.3%; AmBev SA (beer and beverages), 8.6%; Banco Brandesco SA, 8.0%; Petrobras (oil and gas), 6.3%; Vale do Rio Doce (mining), 5.6%; BRF SA (food), 4.6%; and Cielo SA (payment processing), 3.4%. The ETF was launched on July 10, 2000. It has a 0.62% expense ratio....

ISHARES MSCI CHILE INVESTABLE MARKET INDEX FUND $40.95 (New York symbol ECH; buy or sell through brokers) is an ETF that aims to track the MSCI Chile Investable Market Index, which consists of stocks that mainly trade on the Santiago Stock Exchange. The fund’s top holdings are S.A.C.I. Falabella (retail), 10.6%; Enersis SA (electricity), 9.6%; Empresas Copec SA (conglomerate), 7.9%; Empresa Nacional de Electricidad (electricity), 7.2%; LATAM Airlines, 5.0%; Banco Santander Chile (banking), 4.9%; Empresas CMPC (pulp and paper), 4.9%; Banco de Chile, 4.4%; Cencosud SA (retailer), 4.2%; and Quimica y Minera de Chile (mining), 4.1%. The fund’s industry breakdown is: Utilities, 28.3%; Financials, 18.1%; Materials, 11.8%; Consumer Discretionary, 11.4%; Consumer Staples, 9.3%; Industrials, 8.2%; Energy, 7.7%; Telecommunications, 2.2%; and Information Technology, 2.2%....

ISHARES MSCI GERMANY FUND $29.42 (New York symbol EWG; buy or sell through brokers) tracks the stocks in the MSCI Germany Index. This index aims to replicate 85% of the market capitalization of the German stock market. The remaining 15% is unavailable for investment, partly due to limitations on foreign ownership. The ETF’s top holdings are Bayer (diversified chemicals), 9.9%; Daimler (autos), 7.5%; BASF (chemicals), 7.3%; Siemens (engineering conglomerate), 7.9%; Allianz (insurance), 8.2%; SAP (software), 5.3%; Deutsche Telekom, 4.7%; Deutsche Bank AG, 3.7%; BMW AG, 3.4%; and Volkswagen AG, 3.1%....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on buying stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “U.S. Stock Picks” on Thursday. This week an Inner Circle member asked about a company whose rental trucks are a familiar sight on North American highways. Ryder System makes the bulk of its revenue leasing truck fleets under long-term deals. It extends its service to helping clients manage warehousing and distribution. The company has also entered into a venture with a clean energy firm to develop a truck to run on compressed natural gas, potentially a money-saver when gasoline prices are higher. Pat examines the company’s financial situation and assesses its growth prospects. ...

Every Thursday we bring you one of our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster.

CINTAS CORP. (Nasdaq symbol CTAS; www.cintas.com) provides a range of products and services to over one million businesses, mainly in North America.

The company gets 71% of its revenue by renting uniforms that it makes and cleans. This business also rents a variety of related products, such as mats, towels, mops and cleaning supplies. Cintas gets a further 10% of its revenue by selling uniforms.

In addition, the company sells first aid kits, fire extinguishers, sprinklers and emergency-exit lights (11%). It also shreds corporate documents (8%). In April 2014, it merged its shredding operations with Shred-it International. In exchange, Cintas received 42% of the combined company, which uses the Shred-it brand, plus $180 million in cash.

Cintas used the proceeds from the deal to pay a special dividend of $0.85 a share. It also increased its regular annual dividend by 10.4%, to $0.85 a share from $0.77. The new rate yields 1.1%. The company has now raised the payout annually for the past 31 years.

...

AT&T INC. $34 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 5.2 billion; Market cap: $176.8 billion; Price-to-sales ratio: 1.3; Dividend yield: 5.5%; TSINetwork Rating: Average; www.att.com) is the largest wireless provider in the U.S., with 120.6 million subscribers. Wireless accounts for 55% of AT&T’s revenue and 75% of its earnings.

The remaining 45% of revenue and 25% of earnings comes from its wireline division, which sells phone services, television packages and high-speed Internet access to 34.4 million customers.

Shift to wireless fuelled sales

...

MOTOROLA SOLUTIONS INC. $68 (New York symbol MSI; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 219.8 million; Market cap: $14.9 billion; Priceto- sales ratio: 2.5; Dividend yield: 2.0%; TSINetwork Rating: Average; www.motorolasolutions.com) recently sold its enterprise division for $3.45 billion. This business makes a variety of electronics, such as bar-code scanners and kiosks, for corporate clients.

The company now focuses on specialized communications equipment, such as radios for police and fire vehicles. Its sales fell 5.6%, to $5.9 billion in 2014 from $6.2 billion in 2013, due to weaker demand in North America and Asia. Earnings per share dropped 33.2%, to $2.58 from $3.86.

The stock has risen recently on speculation that Motorola Solutions is considering selling itself. However, it could drop suddenly if a suitable offer fails to materialize.

...

NORDSTROM INC. $81 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 190.1 million; Market cap: $15.4 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.8%; TSINetwork Rating: Average; www.nordstrom.com) has raised its quarterly dividend by 12.1%, to $0.37 a share from $0.33. The new annual rate of $1.48 yields 1.8%.

The company sells upscale clothing and shoes, so it’s less vulnerable to changes in the overall economy. Still, it should benefit as low gasoline prices give consumers more cash for other goods. Meanwhile, the high U.S. dollar cuts the cost of goods it imports from overseas.

Nordstrom is a buy.

...

DIEBOLD INC. $36 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $2.3 billion; Priceto- sales ratio: 0.8; Dividend yield: 3.2%; TSINetwork Rating: Average; www.diebold.com) is a leading maker of automated teller machines. It also makes safes, vaults and building-security systems.

Thanks to a major cost-cutting plan, Diebold’s earnings rose 27.2%, to $1.73 a share in 2014 from $1.36 in 2013. Revenue rose 6.8%, to $3.05 billion from $2.86 billion.

Diebold gets 55% of its revenue from outside of North America, so the high U.S. dollar will probably cause its revenue to fall about 5% in 2015.

...

PFIZER INC. $35 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 6.3 billion; Market cap: $220.5 billion; Price-to-sales ratio: 4.4; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pfizer.com) has received approval from the U.S. Food and Drug Administration for new breast cancer drug palbociclib. Pfizer will market this treatment under the Ibrance brand.

Ibrance will probably contribute $4 billion to the company’s annual revenue by 2020; last year, Pfizer’s revenue was $49.6 billion.

The company spends a high 17% of its revenue on research. This hurts its short-term earnings but lets it develop innovative drugs like Ibrance. New treatments like these help Pfizer offset sales of other drugs that have lost their patent protection, like Lipitor (cholesterol) and Celebrex (arthritis).

...

CEDAR FAIR L.P. $56 (New York symbol FUN; Income Portfolio, Consumer sector; Units outstanding: 55.9 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.8; Dividend yield: 5.4%; TSINetwork Rating: Average; www.cedarfair.com) owns 11 amusement parks, three outdoor water parks, one indoor water park and five hotels.

Cedar Fair reported record revenue of $1.16 billion in 2014, up 2.2% from $1.13 billion in 2013. If you exclude the sale of a water park in 2013, attendance was flat. However, spending per guest rose 3%, while out-of-park spending (hotels adjacent to its parks) gained 2%. Higher labour costs and spending on new attractions cut its earnings by 4.1%, to $1.86 a unit from $1.94.

The partnership recently raised its quarterly distribution by 7.1%, to $0.75 from $0.70. The new annual rate of $3.00 yields 5.4%.

...

BUCKEYE PARTNERS L.P. $77 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 127.0 million; Market cap: $9.8 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.9%; TSINetwork Rating: Average; www.buckeye.com) operates over 9,600 kilometres of pipelines in the northeastern and midwestern U.S. Its network pumps gasoline, jet fuel and other petroleum products. The partnership also owns oil and gas storage terminals.

Buckeye continues to expand by acquisition. In December 2013, it paid Hess Corp. (New York symbol HES) $850 million for 19 oil-storage terminals on the U.S. east coast and one on the Caribbean island of St. Lucia. It now has over 120 terminals.

In September 2014, it paid $860 million for 80% of a new firm that operates several oil-processing plants on the U.S. Gulf Coast. The deal included a deepwater oil-transfer terminal in Corpus Christi, Texas, as well as storage tanks and pipelines.

...

MOLSON COORS BREWING CO. $76 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 193.0 million; Market cap: $14.7 billion; Price-to-sales ratio: 3.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www.molsoncoors.com) reported that its worldwide beer volumes fell 1.3% in 2014. Its revenue also declined 1.4%, to $4.1 billion from $4.2 billion in 2013. If you disregard unfavourable currency exchange rates, revenue gained 0.3%.

The company continues to improve its efficiency. As a result, its earnings rose 5.7%, to $768.5 million from $727.1 million. Per-share earnings gained 4.6%, to $4.13 from $3.95, on more shares outstanding.

Molson Coors’ improving earnings let it cut its long-term debt to $2.3 billion (or 15% of its market cap) from $3.2 billion at the end of 2013. The company has also raised its dividend by 10.8%. The new annual rate of $1.64 yields 2.2%.

...

DIAGEO PLC ADRs $118 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 627.8 million; Market cap: $74.1 billion; Price-to-sales ratio: 4.7; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.diageo.com) is the world’s largest premium alcoholic beverage company. Its major brands include Guinness stout, Smirnoff vodka, Johnnie Walker whisky and Captain Morgan rum.

The company recently agreed to acquire the 50% of Don Julio tequila that it doesn’t already own from Casa Cuervo in exchange for its Bushmills Irish whisky business. Diageo will also get $408 million when it completes the deal later this year.

Gaining full control over Don Julio is part of Diageo’s plan to use premium brands to expand in emerging markets. It will use the cash to pay down its debt, which totalled 8.5 billion British pounds (1 pound = $1.93 Canadian) on December 31, 2014.

...

T. ROWE PRICE GROUP INC. $84 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 260.7 million; Market cap: $21.9 billion; Price-to-sales ratio: 5.5; Dividend yield: 2.5%; TSINetwork Rating: Average; www.troweprice .com) sells mutual funds and wealth management services.

In 2014, the company earned $1.23 billion, or $4.55 a share. That’s up 17.4% from $1.05 billion, or $3.90 a share, in 2013. Revenue gained 14.3%, to $4.0 billion from $3.5 billion.

On December 31, 2014, the company had a record $746.8 billion of assets under management, up 7.9% from $692.4 billion at the end of 2013. About 93% of that increase came from higher stock prices. The company’s fee income varies with the value of the assets it manages, so it gains from rising stock markets. Higher mutual fund sales (net of redemptions) supplied the remaining 7%.

...

VISA INC. $273 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 616.0 million; Market cap: $168.2 billion; Price-to-sales ratio: 13.2; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network, through which it processes credit, debit, prepaid and commercial transactions.

In its fiscal 2015 first quarter, which ended December 31, 2014, Visa’s earnings rose 11.5%, to $1.6 billion from $1.4 billion a year earlier. Per-share earnings gained 15.0%, to $2.53 from $2.20, on fewer shares outstanding.

Revenue rose 7.2%, to $3.4 billion from $3.2 billion. The company gets half of its revenue from outside the U.S. Without the negative impact of currency exchange rates, revenue gained 9%. Visa processed 17.6 billion transactions in the quarter, up 10.1% from a year earlier.

...