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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. IGM Financial is in a strong position to profit as baby boomers sign up for retirement planning services. The company also trades at a low multiple to its earnings and will probably raise its dividend in 2015. IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual fund firm. Power Financial owns 58.7% of IGM, along with 67.0% of Great-West....

Every Monday we now 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. EL POLLO LOCO (symbol LOCO on Nasdaq; www.elpolloloco.com), specializes in Mexican-style grilled chicken. El Pollo Loco means “the crazy chicken” in Spanish. The company fire-grills citrus-marinated chicken in front of its customers. El Pollo Loco first sold shares to the public and began trading on the Nasdaq exchange on Friday, July 25, 2014. The quick-serve restaurant chain raised $100 million in an initial public offering (IPO) of 7.1 million shares priced at $15 each....

PENGROWTH ENERGY CORP. $6.70 (www.pengrowth.com) plans to build a 15-kilometre pipeline that will pump diluted bitumen from its new Lindbergh oil sands project in Alberta to a larger pipeline operated by Husky Energy (Toronto symbol HSE). That will make it easier for Pengrowth to sell this oil to customers in Canada and the U.S. when Lindbergh starts operating next year.
The company will spend $20 million on the new pipeline.

In the second quarter of 2014, the company spent $124.1 million on Lindbergh’s first phase (the total cost is $630 million). As a
result, its cash flow fell 16.8%, to $121.4 million, or $0.23 a share, from $146.0 million, or $0.28, a year earlier. However, Lindbergh will add 12,500 barrels to its overall daily production, which totaled 73,823 barrels in the latest quarter. Natural gas accounts for 60% of Pengrowth’s production, so Lindbergh will cut its exposure to weak gas prices. That will also let it keep paying monthly dividends of $0.04 a share, for an annualized yield of 7.2%. Buy.

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TECK RESOURCES LTD. $25 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.2 million; Market cap: $14.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.6%; TSINetwork Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Its six coal mines (five in B.C. and one in Alberta) have lifespans from six to 70 years.

The company sells most of its coal to customers in Asia. In 2013, coal accounted for 43% of Teck’s revenue and 41% of its earnings.

Teck also produces copper (30%, 41%), which manufacturers use to make electrical wire, auto parts and components for electronic devices. As well, Teck is a major supplier of zinc (27%, 18%), which prevents rusting when added to steel.

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BANK OF NOVA SCOTIA $72 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $86.4 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.scotiabank.com) has completed the sale of most of its shares in mutual fund company CI Financial (Toronto symbol CIX). That cut its stake to 7.7% from 36.8%.

The bank now expects to report an after-tax gain of $550 million on the sale, up from its earlier estimate of $400 million. That will help with its plan to buy back 1% of its outstanding shares by the end of May 2015.

Bank of Nova Scotia is a buy.

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BLACKBERRY LTD. $10 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 527.0 million; Market cap: $5.3 billion; Price-to-sales ratio: 1.1; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) has won approval from the U.S. Defense Information Systems Agency for changes to its server software. These upgrades will let employees of businesses that work with the U.S. Department of Defense use non-BlackBerry devices, including the Apple iPhone and phones powered by Google’s Android software.

Adapting its mobile data systems to securely handle competing phones should help BlackBerry hang to its big government and corporate clients.

BlackBerry is still a hold.

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ENCANA CORP. $23 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.0 million; Market cap: $17.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.encana.com) reported that its cash flow fell 1.4% in the quarter ended June 30, 2014, to $656 million, or $0.89 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, its cash flow was $665 million, or $0.90 a share. Earnings per share declined 32.4%, to $0.23 from $0.34.

These declines are mainly because the company continues to sell less-important assets as part of its plan to focus on six core properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), Tuscaloosa Marine Shale (Louisiana) and Eagle Ford (Texas).

These areas contain large amounts of oil and natural gas liquids, such as butane and propane. These commodities supplied 14% of Encana’s output in the latest quarter, up from 9% a year ago. That cuts its exposure to weak gas prices.

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AGRIUM INC. $99 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 143.7 million; Market cap: $14.2 billion; Price-to-sales ratio: 0.9; Dividend yield 3.3%; TSINetwork Rating: Average; www.agrium.com) has suspended operations at its Vanscoy, Saskatchewan, potash mine because the main hoist system failed. Agrium will use the shutdown to speed up its plan to increase the mine’s capacity.

The company expects the outage to cost $40 million (all amounts except share price and market cap in U.S. dollars).

To put that in context, Agrium earned $625 million, or $4.34 a share, in the second quarter of 2014. That’s down 16.0% from $744 million, or $5.00 a share, a year earlier. Record earnings from Agrium’s retail stores, which sell fertilizers and seeds to farmers in North America, South America and Australia, offset lower bulk fertilizer prices.

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SNC-LAVALIN GROUP INC. $56 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.3 million; Market cap: $8.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.snclavalin.com) has agreed to sell its 21% stake in Astoria I, a private partnership that operates a gas-fired power plant in New York City.

The company did not say how much it would receive. However, it recently sold most of its interest in Astoria II, which operates a second power plant on the same site, for $87.6 million. To put that in context, SNC earned $32.1 million, or $0.21 a share, in the three months ended June 30, 2014. The sale cut SNC’s stake in Astoria II from 18.5% to 6.2%.

These sales are part of SNC’s new plan to focus on engineering projects in areas with stronger growth potential, such as mining, water treatment and oil and gas.

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MAPLE LEAF FOODS INC. $20 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 141.9 million; Market cap: $2.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 0.8%; TSINetwork Rating: Average; www.mapleleaf.ca) ships only a small portion of its pork products to Russia, so that country’s recent ban on food imports from Canada will have little effect on its sales and earnings.

Pork prices have moved up recently, because a virus has cut hog supplies. As a result, consumers have shifted to beef and other meats. However, the Russian pork ban could cut prices in Canada, which would help spur demand for Maple Leaf’s products.

Meanwhile, Maple Leaf’s sales rose 9.6% in the three months ended June 30, 2014, to $831.8 million from $759.3 million a year earlier, as higher selling prices offset lower volumes. The company continues to restructure, including closing older plants. Its loss narrowed to $0.13 a share from $0.25.

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EMERA INC. $34 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 142.6 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Average; www.emera.com) is Nova Scotia’s main power supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean.

Emera is currently building the Maritime Link, which will transmit electricity from the island of Newfoundland to Nova Scotia through an undersea cable. The power will come from a new hydroelectric project on Labrador’s Churchill River. The company will spend $1.6 billion on Maritime Link, which should begin operating in 2017.

Separately, Emera will pay $390 million for a 34.9% stake in a new utility that will transmit power from Churchill River to Newfoundland.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $39 and CU.X [class B voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 262.8 million; Market cap: $10.2 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www. canadianutilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see page 84) owns 53.2% of the company.

Canadian Utilities continues to invest in projects that will make Alberta’s electricity grid more reliable. For example, it is building 355 kilometres of new transmission lines and substations in the province’s southeast. So far, the company has spent $1.3 billion on this $1.8-billion project. It should begin operating in early 2015.

In all, Canadian Utilities expects to spend $5.5 billion on upgrades to its power lines and pipelines in Alberta between 2014 and 2016. These improvements will help it take advantage of rising electricity demand from oil sands projects.

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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $48 and ACO.Y [class II voting] $48; Income Portfolio, Utilities sector; Shares outstanding: 115.3 million; Market cap: $5.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.atco.com) holds 53.2% of Canadian Utilities (see page 85). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energyexploration firms; Canadian Utilities owns the remaining 24.5%.

The company recently agreed to sell its information technology subsidiaries in Canada and Australia. These businesses provide computer support, billing, payment processing and related services to ATCO’s other subsidiaries, as well as outside clients.

The buyer, Wipro Ltd., will pay $210 million when the sale closes later this year. In addition, Wipro will provide computer support and related services to ATCO under a new 10-year contract.

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BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 778.3 million; Market cap: $37.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT INC. $31 (Toronto symbol BA; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 227.8 million; Market cap: $7.1 billion; Price-to-sales ratio: 2.6; Dividend yield: 6.1%; TSINetwork Rating: Average; www.bellaliant.ca) that it doesn’t already own.

Bell Aliant investors have three options: $31.00 in cash; 0.6371 of a BCE share; or $7.75 in cash plus 0.4778 of a BCE share. BCE will cap the cash portion at 25% of the total payout.

We recommend the all-stock option. That way, you can defer capital gains taxes on the BCE shares you get. However, if adding more shares would push up your BCE holdings to more than, say, 10% of your portfolio, you should select the all-cash option.

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HOME CAPITAL GROUP INC. $55 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.1 million; Market cap; $3.9 billion; Price-to-sales ratio: 4.0; Dividend yield: 1.3%; TSINetwork Rating: Average; www. homecapital.com) gets 90% of its revenue by offering mortgages to borrowers who don’t meet the stricter standards of larger, traditional lenders, like banks. Clients include self-employed people and recent immigrants with limited credit histories.

The remaining 10% of its revenue mainly comes from credit cards and other loans to consumers and businesses.

Today’s low interest rates continue to fuel strong real estate sales, particularly in cities like Toronto and Vancouver. However, a rate increase would undoubtedly slow sales—and mortgage demand. A sudden drop in home prices could also force some borrowers to stop repaying their loans.

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$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ GREAT-WEST LIFECO INC. $32 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 998.9 million; Market cap: $32.0 billion; Price-to-sales ratio: 1.1; Dividend Yield: 3.8%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s secondlargest insurance company after Manulife Financial (Toronto symbol MFC). It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.0% of Great-West.

As of June 30, 2014, the company had $804.6 billion of assets under administration, up 6.1% from the start of the year.

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MANITOBA TELECOM $30.63 (Toronto symbol MBT; Shares outstanding: 77.4 million; Market cap: $2.4 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.mts.ca) jumped to just over $33 in response to BCE’s plan to buy 100% of Bell Aliant (see box on page 57). Investors believed Manitoba Telecom could also become a takeover target.

However, as part of the company’s 1997 privatization, the Manitoba government limits any single shareholder’s ownership to 20%. The shares have since moved down to where they were before BCE’s announcement.

Manitoba Telecom is still a hold.

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TORSTAR $7.59 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $608.2 million; TSINetwork Rating: Average; Dividend yield: 6.9%; www.torstar.com) reports that in the quarter ended June 30, 2014, revenue fell 7.4%, to $225.6 million from $243.6 million. Earnings per share fell 4.8%, to $0.20 from $0.21.

Torstar is still deciding what to do with the $455 million in cash from the sale of its Harlequin book-publishing subsidiary.

The company will use some of the funds to pay down its $180.8-million debt. But with sales and earnings still weakening as the slow economy hurts advertising revenue at its newspapers, it’s unlikely to reinvest much of the remaining cash in its newspaper operations. Instead, Torstar will probably focus on businesses with more growth potential, including web sites it owns, or perhaps new acquisitions.

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GEORGE WESTON LTD. $87.68 (Toronto symbol WN; Shares outstanding: 128.1 million; Market cap: $11.2 billion; TSINetwork Rating: Above Average; Dividend yield: 1.9%) makes a number of products through Weston Foods. Its businesses include fresh and frozen bakery and cookie operations in Canada and facilities that make frozen bakery items, biscuits, cookies, cones and wafers in the U.S. Weston also owns 46% of Loblaw (see left).

In the quarter ended June 14, 2014, Weston’s revenue rose 36.0%, to $10.6 billion from $7.8 billion a year earlier. Excluding Shoppers Drug Mart’s contribution to Loblaw’s sales, Weston’s revenue rose 2.5%.

Without one-time items, earnings per share gained 16.7%, to $1.26 from $1.08. A bigger contribution from Loblaw offset weaker results at Weston Foods due to higher commodity prices and plant start-up costs.

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LOBLAW COMPANIES $53.05 (Toronto symbol L; Shares outstanding: 413.9 million; Market cap: $21.9 billion; TSINetwork Rating: Above Average; Dividend yield: 1.9%; www.loblaw.ca) is Canada’s largest food retailer, with about 1,200 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills.

In March 2014, the company completed the acquisition of the 1,250-store Shoppers Drug Mart chain. Loblaw paid $12.3 billion; $6.6 billion in cash and $5.7 billion in Loblaw common shares.

Loblaw’s parent company, George Weston Ltd. (see below), helped it pay for Shoppers by purchasing $500 million of new Loblaw shares. Due to the extra shares outstanding, Weston now owns 46% of Loblaw, down from 63% before the acquisition.

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ENBRIDGE INC. $53.46 (Toronto symbol ENB; Shares outstanding: 834.8 million; Market cap: $45.2 billion; TSINetwork Rating: Above Average; Dividendyield: 2.6%; www.enbridge.com) recently won Ottawa’s approval for its Northern Gateway pipeline.

The project faces strong opposition from environmentalists and First Nations. As well, the Supreme Court recently issued a ruling that makes it easier for aboriginal groups to claim title to their traditional lands.

However, Enbridge does not expect the ruling to block Northern Gateway. There are no land claims along the pipeline’s route, and the company has signed equity-sharing deals with 26 First Nations.

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INNERGEX RENEWABLE ENERGY $10.66 (Toronto symbol INE; Shares outstanding: 100.1 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield 5.6%; www.innergex.com) operates 25 hydroelectric plants, six wind farms and one solar power facility in Quebec, Ontario, B.C. and Idaho. Innergex gets 73% of its power from hydroelectric plants. Wind supplies 26%, and solar generates 1%.

In contrast to Brookfield Renewable, Innergex is growing slowly, mostly by building its own hydroelectric and wind facilities, rather than through acquisitions. Right now, it is developing or building five projects.

But like Brookfield, Innergex makes sure it has firm long-term power-purchase contracts in place before it starts building new facilities.

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $31.75 (Toronto symbol BEP.UN; Units outstanding: 265.2 million; Market cap: $8.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.5%; www.brpfund.com) owns 196 hydroelectric generating stations, 11 wind farms and two natural-gas-fired plants. In all, it has 6,500 megawatts of generating capacity.

Roughly 31% of that capacity is in Canada, with another 52% in the U.S. and 17% in Brazil.

In the quarter ended June 30, 2014, revenue fell 2.1%, to $474 million from $484 million a year earlier. However, cash flow gained 5.9%, to $198 million, or $0.74 a share, from $187 million, or $0.71. The increase was due to the contribution of new acquisitions.

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CANADIAN PACIFIC $202.20 (Toronto symbol CP; Shares outstanding: 175.1 million; Market cap: $35.7 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.cpr.ca) reports that its earnings jumped 47.2% in the three months ended June 30, 2014, to $371 million, or $2.11 a share. A year earlier, the company earned $252 million, or $1.43 a share.

The higher earnings mainly resulted from CP’s plan to improve its efficiency with new locomotives, better tracks and software that optimizes train loads and speeds. Revenue rose 12.3%, to $1.7 billion from $1.5 billion.

The company’s operating ratio improved to 65.1% from 71.9% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) CP now feels it can cut its full-year operating ratio to 63% or lower in 2014.

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MARKET VECTORS VIETNAM ETF $21.48 (New York symbol VNM; buy or sell through brokers) holds shares of Vietnamese companies or foreign firms that get a significant amount of their revenue from Vietnam.

The ETF’s top holdings are Saigon Thuong Tin Commercial Bank, 7.8%; Bank for Foreign Trade of Vietnam, 7.4%; Masan Group (food, resources and banking conglomerate), 7.3%; Vincom Corp. (real estate), 6.3%; PetroVietnam Fertilizer & Chemical, 5.7%; Baoviet Holdings (finance and insurance), 5.6%; and PetroVietnam Technical Services (oilfield services), 5.4%.

Market Vectors Vietnam ETF’s industry breakdown is as follows: Financials, 35.8%; Energy, 23.4%; Industrials, 12.6%; Consumer Staples, 11.6%; Consumer Discretionary, 8.3%; Materials, 5.7%; and Utilities, 1.3%. Its expense ratio is 0.72%.

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