Search

L BRANDS INC. $68 (New York symbol LB; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 292.4 million; Market cap: $19.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.0%; TSINetwork Rating: Average; www.lb.com) owns 1,113 Victoria’s Secret lingerie stores and 1,640 Bath & Body Works personal care products outlets. Smaller chains include 153 La Senza (lingerie) locations in Canada and 29 Henri Bendel (jewellery) stores in the U.S.

L Brands is removing some clothing and slowerselling items like cosmetics from its Victoria’s Secret online store. However, to clear the discontinued goods, L Brands has cut their prices. That could squeeze its profit margins in the next few months.

Meanwhile, the company earned $188.4 million in its fiscal 2015 second quarter, which ended August 2, 2014. That’s up 5.3% from $178.9 million a year earlier. Per-share earnings rose 3.3%, to $0.63 from $0.61, on more shares outstanding.

...

MACY’S INC. $60 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 353.1 million; Market cap: $21.2 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.1%; TSINetwork Rating: Average; www.macysinc.com) operates 840 Macy’s and Bloomingdale’s department stores in 45 states.

The company is benefiting from its strategy of tailoring its merchandise to local tastes. It’s also doing a good job of blending its online business with its stores.

For example, shoppers can now buy goods on the company’s website and pick them up at any Macy’s location. The company has also brought in new radio frequency identification tags that help it keep track of merchandise and avoid product shortages.

...

ADOBE SYSTEMS INC. $69 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 497.4 million; Market cap: $34.3 billion; Price-to-sales ratio: 8.5; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) earned $140.6 million in its fiscal 2014 third quarter, which ended August 29, 2014. That’s down 14.5% from $164.4 million a year earlier. Per-share earnings declined 12.5%, to $0.28 from $0.32, on fewer shares outstanding. Revenue rose 1.0%, to $1.01 billion from $995.1 million.

The company continues to shift away from selling software as a one-time purchase and toward a subscription model. It now gets 63% of its revenue from recurring subscriptions.

Adobe ended the latest quarter with 2.8 million subscribers to its Creative Cloud package of photo editing and desktop publishing programs, up 21.8% from a year earlier. Adobe Marketing Cloud, a package of software aimed at improving online marketing efforts and website performance, saw its revenue rise 13.8%.

...

SYMANTEC CORP. $24 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 690.3 million; Market cap: $16.6 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.5%; TSINetwork Rating: Average; www.symantec.com) sells antivirus software and other computer security services.

Home Depot (New York symbol HD) recently hired Symantec and another firm to help investigate a major data breach. Online intruders secretly installed software on Home Depot’s systems that let them steal about 56 million credit card numbers and related data, but not personal identification numbers for debit cards.

Symantec has been trying to expand in the fast-growing cyber-security software/services market, and this contract will give it a lot of industry credibility.

...

TIM HORTONS INC. $80 (New York symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 132.8 million; Market cap: $10.6 billion; Price-to-sales ratio: 3.7; Dividend yield: 1.5%; TSINetwork Rating: Average; www.timhortons.com) still plans to go ahead with its deal to merge with Miami-based Burger King Worldwide (New York symbol BKW), even though the U.S. government is now clamping down on “tax inversion” deals like this.

The combined firm will be based in Oakville, Ontario, which will let it take advantage of Canada’s 15% corporate tax rate, compared to 35% in U.S.

Under the new rules, it is now more difficult for the foreign parent firm to shift funds between subsidiaries.

...

GOOGLE INC. (Nasdaq symbols GOOG $588 (class C: nonvoting) and GOOGL $598 (class A: one vote per share); Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 676.4 million; Market cap: $397.7 billion; Price-to-sales ratio: 6.1; No dividends paid; TSINetwork Rating: Above Average; www.google.com) operates the world’s leading Internet search service. The company has about 70% of this market, mainly because its innovative technology helps users quickly find the information they’re seeking. The U.S. supplies 45% of Google’s revenue.

The company gets about 95% of its revenue by selling advertising on its websites. It mainly does this with its AdWords program.

Using AdWords, advertisers bid on certain search words or phrases. The company then charges advertisers when users click on their ads.

...

Pat McKeough responds to many requests from members of his Inner Circle for specific stock advice, 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 a report on one of the stocks profiled in 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 “Our Top U.S. Stocks” on Thursday. Recently we had a question from an Inner Circle member on an industrial firm that serves a diverse clientele. Ingersoll Rand, an Irish-based company that trades on the New York exchange, has one segment devoted to Climate Control and another to Industrial Technologies. Pat examines Ingersoll’s different businesses and looks at its prospects in light of a spinoff the company executed last year and an acquisition it has just agreed to make. Q: Hello: What is your opinion of Ingersoll-Rand? Thank you....

Every Thursday we bring you “Best U.S. Stocks.” 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, from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. AMERICAN EXPRESS CO. (New York symbol AXP; www.americanexpress.com) started up in 1850 and is now one of the world’s largest issuers of payment cards, with 109.9 million cards outstanding in over 130 countries. Billionaire investor Warren Buffett owns 14.3% of the company. Amex issues two types of cards: charge cards, which have no pre-set spending limit and must be paid in full each month; and traditional credit cards, which let users carry a balance....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of strategy, and shows you how you can put it into practice right away. Today’s tip: “Dividends can produce as much as a third of your total return over long periods.”...

PAYPAL HOLDINGS INC. $34 (Nasdaq symbol PYPL; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $40.8 billion; Price-to-sales ratio: 4.7; No dividends paid; TSINetwork Rating: Above Average; www. paypal.com) stopped processing transactions on U.S. online gambling websites following its 2002 acquisition by eBay.

But now that it’s an independent company again, PayPal is testing its online payment system with four U.S. gaming firms, including Caesar’s Entertainment. Online gambling could become a big source of revenue for PayPal, particularly if more states approve it. Right now, Internet gambling is only legal in Nevada, New Jersey and Delaware.

PayPal is a hold.

...

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation 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. CRESCENT POINT ENERGY CORP. (Toronto symbol CPG; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas. In the three months ended June 30, 2014, Crescent Point’s cash flow rose 26.2%, to $636.7 million from $504.4 million a year earlier....

Every Monday we feature “A Stock to Sell” as our daily post. With every stock we recommend as a sell, we give you a full explanation of why we advise against investing in the stock at this time. Keyera Corp. (symbol KEY on Toronto; www.keyera.com), provides a number of services to the oil and gas industry, including gathering, processing, storage and transportation....

Pat McKeough responds to many requests from members of his Inner Circle for advice on specific 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 a report on one of the stocks profiled in these Q&A sessions. Beginning this week, we give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of our new approach offering you regular and specific buy, hold and sell advice in our daily posts. Every week you’ll get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “Our Top U.S. Stocks” on Thursday. This week an Inner Circle member asked us about one of the Canadian stocks that serves the U.S. housing market. Hardwoods Distribution purchases high-grade lumber and sheet goods from hardwood mills and sells them, largely for home construction. The company has added several U.S. acquisitions in the past two years. Pat looks at Hardwoods business and its balance sheet and assesses its prospects in light of the U.S. housing recovery. Q: Pat: What are your thoughts on Hardwoods Distribution?...

Every Thursday we bring you “Best U.S. Stocks.” 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, from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. We feel the best way to invest in the cyclical oil and gas industry is through well-established producers whose high-quality operations give them plenty of cash flow to replenish their reserves and pay for share buybacks and dividends. CHEVRON CORP. (New York symbol CVX; www.chevron.com) is the second-largest integrated oil company in the U.S. by revenue, after ExxonMobil (New York symbol XOM)....

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation 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. We continue to advise against investing in bonds, because low interest rates hurt their appeal, while rising rates would push down their future value. For stable income and growth, we prefer high-yielding utilities. Their dividends also qualify for the dividend tax credit. ATCO LTD. (Toronto symbols ACO.X [class I non-voting] and ACO.Y [class II voting; www.atco.com) holds 53.2% of Canadian Utilities. It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energy exploration firms; Canadian Utilities owns the remaining 24.5%....

ENERFLEX LTD. $19.28 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 78.5 million; Market cap: $1.5 billion; Dividend yield: 1.6%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators. On June 30, 2014, the company completed the $430 million U.S. acquisition of two businesses owned by privately held Axip Energy Services LP, an international contract compression and processing subsidiary, and a division that provides aftermarket services.

...

Earnings gained 5.8%, to $28.9 million from $27.3 million. Per-share earnings increased 2.8%, to $0.37 from $0.36, on more shares outstanding.

Dividend on the riseThe company’s financial position is strong: its $130.5 million of long-term debt—down from $169.4 million a year ago—represents just 6.2% of its market cap.

Toromont raised its quarterly dividend by 15.4% with the April 2014

TOROMONT INDUSTRIES LTD. $26.75 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 77.1 million; Market cap: $2.1 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.

...

BELLATRIX EXPLORATION $7.43 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 191.1 million; Market cap: $1.4 billion; No dividends paid) is now 7.4% owned by activist investor Orange Capital LLC. That’s up from the initial 5.3% interest that Orange Capital announced on September 4, 2014.

Orange wants Bellatrix to discuss changing the size and composition of its 10-person board of directors. It also wants the company to hire a financial advisor to explore strategic alternatives, including selling its midstream assets (natural gas processing plants and pipeline gathering systems) or an outright sale of the entire firm.

Bellatrix has been rapidly expanding over the past year. However, Alberta’s rising gas production has overwhelmed the pipelines that pump it to various processing facilities. This has hurt Bellatrix’s production and cash flow, as well as its share price. But when the bottlenecks are resolved, the company’s cash flow should jump.

...

SYMANTEC CORP. $24.50 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (408-517-8000; www.symantec.com; Shares outstanding: 690.5 million; Market cap: $16.9 billion; Dividend yield: 2.5%) is one of two companies that Home Depot (New York symbol HD) has hired to help investigate its recently discovered data breach.

Stolen Home Depot credit card numbers have turned up for sale on a website called Rescator.cc, which has been linked to a Ukrainian dealer in stolen credit cards.

It’s not yet clear how many customers were affected, but the total could exceed 60 million in Canada and the U.S. Customers at Home Depot’s Mexico stores were not affected, nor were online shoppers at HomeDepot.com. Personal identification numbers (PINs) for debit cards were not taken.

...

DOMINO’S PIZZA $76.57 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.1 million; Market cap: $4.2 billion; Dividend yield: 1.3%) has opened its first store in Norway, in the city of Oslo. It plans to open three more outlets in the city by the end of this year.

The master franchisee for the Norwegian stores is Domino’s Pizza Norway. Its chairman is Birgir Bieltvedt, who is also chairman of Domino’s Pizza Iceland. He previously helped launch Domino’s in Denmark and Germany.

The company now operates in over 70 markets worldwide, and its international stores supply almost half of its sales and a third of its earnings. However, Domino’s still has considerable room to grow overseas.

...

STANTEC INC. $72.86 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.8 million; Market cap: $3.4 billion; Dividend yield: 1.0%) plans to split its shares on a 2-for-1 basis, effective November 14, 2014.

When a company’s share price goes up, it has an incentive to split the stock to make it seem cheaper to investors, who may then buy more. This can make the stock more liquid than if the firm refrained from splits and let its share price go to uncommonly high levels.

Shares of Stantec are up 1,982% since we first recommended the company (then called Stanley Technology Group) at $3.50 in one of our first issues of Stock Pickers Digest in 1998.

...

CARFINCO FINANCIAL GROUP $11.35 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.5 million; Market cap: $299.7 million; Dividend yield: 4.2%) is the subject of a friendly takeover bid from Banco Santander of Spain (ADR symbol SAN on New York). The offer is for $11.25 a share in cash. Carfinco will also pay a special dividend of up to $0.10 a share when the deal closes.

Carfinco is now trading at $11.35, which is equal to the value of the cash and special dividend. Carfinco’s directors and executive officers, who collectively own 12.9% of the company, have agreed to support the deal.

However, Carfinco could attract a rival bid, or significant shareholders, such as mutual funds, could hold out for a higher offer. We’ll say more as the takeover progresses, but for now Carfinco is a hold.

...

WESTJET AIRLINES $33.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Dividend yield: 1.5%) serves 90 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.

In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 13 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.

In the three months ended June 30, 2014, WestJet’s earnings rose 15.9%, to a second-quarter record of $51.8 million from $44.7 million a year earlier. Earnings per share gained 17.6%, to $0.40 from $0.34, on fewer shares outstanding. This was WestJet’s 37th consecutive quarter of profitability.

...

FIRSTSERVICE CORP. $59.35 (Toronto symbol FSV; TSINetwork Rating: Extra Risk) (416-960-9500; www.firstservice.com; Shares outstanding: 36.6 million; Market cap: $2.1 billion; Dividend yield: 0.7%) serves the following areas of the real estate market: commercial real estate, residential property management and property improvement. The company has more than 24,000 employees worldwide.

In the quarter ended June 30, 2014, FirstService’s revenue rose 14.7%, to $660.7 million from $576.1 million a year earlier (all figures except share prices in U.S. dollars). Excluding one-time items, earnings per share were $0.74, up 29.8% from $0.57.

Revenue rose at all three of FirstService’s divisions: Colliers International (commercial real estate), up 22%; FirstService Residential (residential property management), up 9%; and FirstService Brands (property services), up 12%. FirstService Brands operates Paul Davis Restoration, California Closets and CertaPro Painters.

...

STUART OLSON INC. $9.51 (Toronto symbol SOX; TSINetwork Rating: Speculative) (780-454-3667; www.stuartolson.com; Shares outstanding: 24.9 million; Market cap: $270.0 million; Dividend yield: 5.0%) has agreed to sell its Broda Construction division to TriWest Capital Partners and Broda’s senior management for $39 million in cash.

Broda is a heavy construction firm that specializes in soil excavation, civil construction and concrete production.

The sale will let Stuart Olson streamline its operations and focus on its core businesses, including building construction, electrical contracting and industrial insulation.

...