Search

ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $40.21 (New York symbol FXI; buy or sell through brokers) is an exchange traded fund that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest, most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on New York.

The fund’s top holdings are Tencent Holdings, 10.2%; China Construction Bank, 8.4%; China Mobile, 8.3%; Industrial & Commercial Bank, 6.9%; Bank of China, 5.4%; China Overseas Land & Investment, 4.3%; China Life, 4.0%; Ping An Insurance, 4.0%; China Shenhua Energy, 3.9%; PetroChina, 4.2%; China Merchants Bank, 3.7%; and CNOOC Ltd., 3.7%.

The fund’s holdings give it the following industry breakdown: Financials, 54.1%; Telecommunications, 14.4%; Oil and Gas, 12.1%; Technology, 10.1%; Basic Materials, 4.0%; Industrials, 1.8%; and Consumer Goods, 1.7%. Its expense ratio is 0.73%.

...

PENN WEST $8.14 (Toronto symbol PWT; Shares outstanding: 492.6 million; Market cap: $4.0 billion; TSINetwork Rating: Average; Divd. yield: 6.9%; www.pennwest.com) appointed former Suncor CEO Rick George as chairman in May 2013 to bring in much-needed measures to shore up its finances and boost its value.

The company’s shares traded at $10 when George took over, down from a peak of $47 in 2006. The shares moved up to as high as $13.50 last year, but had moved back down to $10 in mid-July 2014. That’s when they dropped a further 19%, to today’s price, after the company announced it was re-examining its
accounting practices going back several years.

...

CENOVUS ENERGY $33.41 (Toronto symbol CVE; Shares outstanding: 756.9 million; Market cap: $25.3 billion; TSINetwork Rating: Average; Dividend yield: 3.2%; www.cenovus.com) gets 40% of its output from its Alberta oil sands projects. Conventional oil and gas supplies 60%.

U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects.

In the quarter ended June 30, 2014, cash flow per share jumped 36.5%, to $1.57 from $1.15 a year ago.

...

ENCANA CORP. $22.86 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $16.9 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) is one of North America’s largest natural gas producers.

Encana continues to benefit from its new plan to focus on six main properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), the Tuscaloosa Marine Shale (Louisiana) and Texas’s Eagle Ford oil shale.

These fields produce oil and natural gas liquids (NGLs), such as butane and propane, and should last decades. That cuts Encana’s natural gas exposure.

...

IMPERIAL OIL $54.20 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $45.9 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) recently opened the first phase of its massive Kearl oil sands project in Alberta, and the second phase should start up next year. This project will help the company double its production, to 600,000 barrels a day, by 2020.

Oil sands projects are harder to operate than conventional properties, and they need high oil prices to earn a profit. However, Imperial’s refineries help shield it from a drop in oil prices because they pay less for the crude they need.

The stock trades at a moderate 12.2 times Imperial’s likely 2014 earnings of $4.45 a share.

...

ISHARES DEX UNIVERSE BOND INDEX FUND $31.05 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through brokers) mirrors the performance of the DEX Universe Bond Index. The 821 bonds in the portfolio have an average term-to-maturity of 10.13 years. The fund’s MER is 0.33%.

The bonds in the index are 68.2% government and 31.8% corporate.

The fund yields 3.1%, compared to the Short-Term Bond Fund’s 2.6%. Its yield-to-maturity is 2.37%, 0.79% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.

...

ISHARES DEX SHORT-TERM BOND INDEX FUND $28.63 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index.

This index consists of a wide range of investmentgrade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 386 bonds with an average term to maturity of 2.98 years. The bonds in the index are 60.7% government and 39.3% corporate. The fund’s MER is 0.28%.

iShares DEX Short-Term Bond Index Fund yields 2.6%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.

...

BCE INC. $48.88 (Toronto symbol BCE; Shares outstanding: 777.3 million; Market cap: $38.0 billion; TSINetwork Rating: Above Average; Dividend yield: 5.1%; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT $30.88 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $7.0 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.bellaliant.ca) that it doesn’t already own. The deal should close by November 30, 2014.

Merging the two firms will make it easier for BCE to expand its high-speed wireless and Fibe TV networks in Atlantic Canada.

Bell Aliant shareholders will have three options when they tender their shares: $31.00 in cash; 0.6371 of a BCE share (worth $31.14 at today’s price for BCE); or $7.75 in cash plus 0.4778 of a BCE share ($31.10).

...

TRANSCANADA CORP. $54.00 (Toronto symbol TRP; Shares outstanding: 708.0 million; Market cap: $38.2 billion; TSINetwork Rating: Above Average; Dividend yield: 3.6%; 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 June 30, 2014, TransCanada’s revenue rose 11.2%, to $2.2 billion from $2.0 billion a year earlier. Excluding one-time items, earnings per share fell 7.8%, to $0.47 from $0.51. That was mostly due to maintenance outages at its Bruce Power plant in Ontario and weaker power prices in Alberta.

The company completed $6.1 billion worth of growth projects in 2013 and another $1.7 billion in the first half of this year. It plans to complete $36 billion of additional projects secured by long-term contracts by 2018 (an amount almost equal to its current $38.2-billion market cap). That includes $3.0 billion more for Keystone XL.

...

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 we had a question from an Inner Circle member about one of the lesser-known tech stocks that makes it money by supplying an essential component to the giants of the industry. InvenSense makes chips that track motion, and its clients include such well-known names as Amazon. Samsung and Google. Now it appears that Apple will become a key customer. Pat examines the details of the projected deal with Apple and its impact on the company’s prospects. Q: Hi Pat: I was wondering, what are your thoughts on InvenSense? Thanks....

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. MOTOROLA SOLUTIONS INC. (New York symbol MSI; www.motorolasolutions.com) took its current form on January 4, 2011, when the old Motorola Inc. spun off its struggling cellphone business, Motorola Mobility, as a separate firm. The remaining operations became Motorola Solutions after the breakup. The company makes specialized communications equipment, such as radios for police and fire vehicles. Government clients account for about 70% of its revenue....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice on a wide range of topics, including strategies for international stock markets. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “Foreign investments can give your portfolio greater strength and diversity and we recommend three ways you can do this with less risk.” We believe most investors could benefit from holding some foreign investments in their portfolios for added diversification. And growing markets like China and India have positive long-term outlooks. Their populations are generally younger than those in North America, and rising incomes are helping more of them advance into the middle class....

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. HOME CAPITAL GROUP INC. (Toronto symbol HCG; 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....

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. DUNDEE CORP. (Toronto symbol DC.A; www.dundeecorp.com) owns businesses in the wealth management, real estate, natural resource and agriculture industries. The company lost $92.6 million, or $1.88 a share, in 2013. That’s a big drop from the $25.2 million, or $0.29 a share, it earned in 2012. Revenue fell 6.3%, to $200.7 million from $214.2 million....

SHAWCOR LTD. $59 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 60.2 million; Market cap: $3.6 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.0%; TSINetwork Rating: Average; www.shawcor.com) recently completed a big pipeline-coating job at a liquefied natural gas project in Australia. As a result, its revenue fell 3.5% in the second quarter of 2014, to $441.4 million from $457.3 million a year earlier. Earnings per share declined 12.2%, to $0.79 from $0.90. However, new contracts have increased ShawCor’s order backlog. On June 30, 2014, it stood at $684 million, up 10.9% from the start of the year. ShawCor is also bidding on over $1 billion worth of new contracts and should win many of them. ShawCor is a buy.

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 an acquisition by the largest of Canada’s copper stocks. First Quantum Minerals became the leading Canadian copper producer with its 2013 acquisition of Inmet Mining. Now it is making a major acquisition in Argentina. Pat assesses the company’s projected production from the Taca Taca deposit, as well as the considerable political risk of doing business in financially troubled Argentina. Q: Hi Pat: I’d like to know what you think of First Quantum Minerals. They are in the process of acquiring Lumina Copper, which I own. As always, thank you for your valuable input....

AMERICAN EXPRESS CO. $89 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $89.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.2%; TSINetwork Rating: Average; www. americanexpress.comtarget=”_blank”) 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 preset spending limit and must be paid in full each month; and traditional credit cards, which let users carry a balance.

High-quality clientele cuts risk

...

PROCTER & GAMBLE CO. $83 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $224.1 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.pg.comtarget=”_blank”) plans to sell just over half of its brands over the next two years.

That will let the company focus on its 70 to 80 most popular products, which together account for over 90% of its sales. These include 25 global brands, such as Head & Shoulders shampoo, Gillette razors, Tide detergent and Pampers diapers, that each generate over $1 billion in annual sales.

Meanwhile, Procter’s sales rose 0.6% in its 2014 fiscal year, which ended June 30, 2014, to $83.1 billion from $82.6 billion in fiscal 2013. Higher sales volumes (up 3%) and selling prices (up 1%) offset the negative impacts of currency exchange rates (down 2%) and low-margin products (down 1%). Before writedowns and unusual items, earnings rose 5.0%, to $4.22 a share from $4.02.

...

FAIR ISAAC CORP. $57 (New York symbol FICO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 32.2 million; Market cap: $1.8 billion; Price-to-sales ratio: 2.7; Dividend yield: 0.1%; TSINetwork Rating: Average; www.fico.com) makes FICO Scores, a computer program that helps businesses make better decisions about customer creditworthiness.

The company recently repurchased $150.0 million of its shares under a buyback plan that ended in July 2014. Under its new authorization, it can buy back up to $250.0 million of shares. That’s equal to 14% of its market cap. There is no time limit for these buybacks.

Fair Isaac is a hold.

...

ABB LTD. ADRs $23 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $52.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.abb.com) makes transformers, transmission systems and circuit breakers for electrical utilities. The Switzerland-based firm also produces automation systems and robotics that industrial clients use to improve their productivity.

The company has developed new technology that will let its cables transmit up to 2,600 megawatts of electricity. That’s more than double what today’s highvoltage lines can carry. Demand for these new cables should be strong, particularly from operators of offshore wind farms and oil and gas drilling platforms.

ABB is a buy.

...

MCDONALD’S CORP. $95 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 981.9 million; Market cap: $93.3 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.mcdonalds.com) reports that same-store sales at its U.S. outlets fell 3.2% in July 2014 from the same month a year earlier. That’s partly because younger diners are switching to fast-casual dining chains that offer fresher foods. In response, McDonald’s continues to upgrade its menu with healthier options, such as vegetable tortilla wraps.

The company hopes these new menu items are as successful as its improved coffee lineup— since 2009, its coffee sales have jumped 70%. The company now plans to start selling its coffee in supermarkets under the McCafe brand. It will offer a variety of blends and flavours, in bags as well as single-serve pods for home brewing machines.

McDonald’s is a buy.

...

DIAGEO PLC ADRs $119 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 628.1 million; Market cap: $74.7 billion; Price-to-sales ratio: 4.4; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.diageo.com) reported that its sales fell 9.2% in its 2014 fiscal year, which ended June 30, 2014, to 10.3 billion British pounds from 11.3 billion in fiscal 2013 (1 pound=$1.80 Canadian). That’s mainly due to unfavourable currency exchange rates. Earnings per ADR declined 7.3%, to 3.82 pounds from 4.12 (each ADR represents four common shares).

The company recently increased its stake in United Spirits, India’s largest alcoholic-beverage maker, to 54.78% from 28.78%. That should push up Diageo’s fiscal 2015 earnings to 4.64 poundsper ADR. The stock trades at 15.5 times that forecast. However, exchange rate volatility could continue to weigh on the stock price.

Diageo is still a hold.

...

NVIDIA CORP. $19 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 541.9 million; Market cap: $10.3 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.8%; TSINetwork Rating: Average; www.nvidia.com) still gets most of its revenue from graphic chips for computer gaming, but is developing new chips for mobile devices and data centres.

In its fiscal 2015 second quarter, which ended July 27, 2014, Nvidia’s revenue rose 12.9%, to $1.1 billion from $977.2 million a year earlier. Sales of graphic chips (80% of the total) rose 2.3%. However, sales of its Tegra mobile chips jumped 200.0%, because automakers are now using them to power in-car entertainment systems.

Earnings gained 30.1%, to $173.4 million, or $0.30 a share. A year earlier, the company earned $133.3 million, or $0.23 a share. Nvidia spent a high 30.6% of its revenue on research in the latest quarter.

...

TEXAS INSTRUMENTS INC. $48 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $52.8 billion; Price-to-sales ratio: 4.2; Dividend yield: 2.5%; TSINetwork Rating: Average; www.ti.com) used to focus on chips for cellphones, but has shifted to analog chips, which convert inputs like touch, sound and pressure into electronic signals that computers can understand. Manufacturers use these chips in a variety of products, including cars, medical devices and appliances.

In the quarter ended June 30, 2014, the company’s earnings rose 3.5%, to $683 million from $660 million a year earlier. Texas Instruments spent $743 million on share buybacks during the quarter. As a result, earnings per share gained 6.9%, to $0.62 from $0.58.

Revenue rose 8.0%, to $3.3 billion from $3.0 billion. Strong demand for analog and embedded processor chips (which perform mathematical calculations) offset lower sales of other chips and calculators.

...

BRIGGS & STRATTON CORP. $20 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 46.7 million; Market cap: $934.0 million; Priceto-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is buying Allmand Bros., a privately held Nebraska firm that makes portable lighting products and heaters for construction companies and other industrial users. The purchase will cut Briggs’reliance on weather-dependent products, like lawn mower engines and snow blowers.

The company will pay $62 million for Allmand when it completes the purchase in the next few weeks. The acquisition will add $80 million to Briggs’annual sales.

To put these figures in context, the company’s sales fell 0.2% in its 2014 fiscal year, which ended June 30, 2014, to $1.859 billion from $1.862 billion in fiscal 2013. The lack of major storms in 2014 hurt sales of portable power generators. Overall earnings declined 13.4%, to $39.0 million from $45.1 million. Per-share earnings fell 11.8%, to $0.82 from $0.93, on fewer shares outstanding.

...