Search

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 advice on how you to find the best investments for your portfolio. Each Investor Toolkit update gives you a fundamental piece of investment strategy, and shows you how you can put it into practice right away. Tip of the week: “While insider trading can sometimes be a useful indicator for investors, there are also occasions when it can be misleading.”...

These two Japanese automakers reported higher U.S. sales in 2013, thanks to new models and pent-up demand after the 2008-2009 recession. Meanwhile, the low Japanese yen is increasing the value of their overseas sales....

In the latest issue of The Successful Investor, we analyzed each of Canada’s big five banks. All of the banks have now reported earnings, except for Bank of Nova Scotia, which reports its first-quarter earnings tomorrow, March 4....

MCCOY CORP. $5.83 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780-453-8451; www.mccoyglobal.com; Shares outstanding: 27.4 million; Market cap: $161.1 million; Dividend yield: 3.4%) operates through two divisions: Mobile Solutions and Energy Products and Services.

Energy Products and Services sells or rents gear for oil and gas drilling and pipe handling. It also provides repair and maintenance services for drilling equipment.

Mobile Solutions builds heavy-duty trailers for U.S. and Canadian clients in the oil and gas, wind energy, infrastructure and construction industries.
...

WAJAX CORP. $37.46 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.7 million; Market cap: $627.2 million; Dividend yield: 6.4%) sells and services cranes, forklifts and other heavy equipment. It also provides related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions).

The company’s customers are in the natural resource, construction, manufacturing and transportation industries.

In the three months ended December 31, 2013, Wajax’s revenue rose 7.3%, to $391.7 million from $364.9 million a year earlier. The gain mostly came from stronger sales of equipment for forestry, construction and power generation.
...

SASOL LTD. (ADR) $52.96 (New York symbol SSL; TSINetwork Rating: Extra Risk) (082- 883-9697; www.sasol.com; ADRs outstanding: 649.9 million; Market cap: $36.6 billion; Dividend yield: 2.8%) is the world’s largest producer of fuel from coal at its facility in Secunda, South Africa. It also makes synthetic fuels from natural gas at plants in Qatar and Nigeria.

In addition, Sasol has substantial chemical production interests and produces oil and gas in Africa. It’s also South Africa’s thirdlargest coal producer.

In Sasol’s 2014 fiscal first half, which ended December 31, 2013, its revenue rose 23.1%, to 98.3 billion South African rand (1 rand = $0.10 U.S.) from 79.9 billion rand in the first half of fiscal 2013.
...

BROADRIDGE FINANCIAL SOLUTIONS $37.15 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 119.4 million; Market cap: $4.4 billion; Dividend yield: 2.3%) has bought Emerald Connect, a private firm that helps financial advisors promote their services. Emerald helps its clients set up websites, publish newsletters, conduct seminars and manage direct mail and online marketing campaigns.

Broadridge plans to merge Emerald with its Forefield subsidiary, which sells online courses and related services to financial professionals.

The company paid $60 million for Emerald, which is equal to 1.9 times the $31.2 million, or $0.25 a share, it earned in the latest quarter.
...

CAMECO CORP. $26.90 (Toronto symbol CCO; TSINetwork Rating: Extra Risk) (306-956-6200; www.cameco.com; Shares outstanding: 395.6 million; Market cap: $10.6 billion; Dividend yield 1.5%) has finally started production at its Cigar Lake mine in northern Saskatchewan.

Construction was several years behind schedule after a series of technical problems, including an underground flood in 2006. The $2.6-billion mine is tapping into one of the world’s largest high-grade uranium deposits.

Cigar Lake is 50% owned by Cameco, 37% by France’s Areva, 8% by Idemitsu Canada Resources Ltd. and 5% by Tepco Resources Inc.
...

AMAZON.COM $373.23 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 459.3 million; Market cap: $172.4 billion; No dividends paid) has raised the price of its Amazon Prime service to $99 a year from $79. This is the first price hike since the company launched Prime in 2005.

The fee gets customers two-day shipping on all their purchases. U.S. members also get two additional free services: Amazon Instant Video, which boasts 180,000 titles, and the Kindle Owners’ Lending Library, which lets users borrow a free book each month from the thousands of titles Kindle offers.

It’s uncertain how many—or if any—Prime members will cancel after the price increase. But while the company hasn’t said how many Prime subscribers it has, the number is likely over 20 million. So the hike could increase its annual revenue by up to $400 million. Amazon had revenue of $74.5 billion in 2013.
...

DOMINO’S PIZZA $78.27 (New York symbol DPZ; TSINetwork Rating: Average) (734-930- 3030; www.dominos.com; Shares outstanding: 55.7 million; Market cap: $4.4 billion; Dividend yield: 1.3%) reported earnings of $0.78 a share in the three months ended December 29, 2013. That’s up 21.9% from $0.64 a year earlier.

Sales gained 5.0%, to $566.5 million from $539.7 million. Same-store sales rose 7.0% internationally and 3.7% in the U.S. The company continues to pay down its long-term debt, which is now $1.5 billion, or a manageable 34% of its market cap.

The outlook for Domino’s is positive, but the stock has jumped over 57% for us in the last year. It now trades at a high 28.0 times its forecast 2014 earnings of $2.80 a share.
...

STANTEC INC. $68.12 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.6 million; Market cap: $3.1 billion; Dividend yield: 1.1%) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including transportation, construction, and oil and gas.

In the quarter ended December 31, 2013, revenue rose 15.7%, to $451.3 million from $390.1 million a year earlier. Acquisitions were one reason for the gain. Stantec is also working on many new projects, such as major pipelines and the huge Westside Subway Transit Corridor in southern California.

Earnings gained 14.8%, to $35.7 million, or $0.77 a share, from $31.1 million, or $0.68.
...

DOREL INDUSTRIES $38.76 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.4%) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.

In the three months ended December 31, 2013, Dorel’s sales rose 1.8%, to $633.5 million from $622.6 million a year earlier (all figures except share price and market cap in U.S. dollars). Higher sales at the recreational and home-furnishing segments offset lower demand for juvenile products.

Excluding one-time items, earnings per share fell 34.8%, to $0.60 from $0.92. The company’s bicycle sales rose in the latest quarter, but its competitors discounted their bikes heavily, forcing Dorel to sharply cut its prices—and its profit margins with them.
...

DEVON ENERGY CORP. $63.46 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235-3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $25.9 billion; Dividend yield: 1.5%) continues to sell assets to focus on its fast-growing U.S. properties.

Devon is selling some of its Canadian properties to Canadian Natural Resources (symbol CNQ on Toronto) for $2.8 billion.

The company will use the cash to fund last year’s $6-billion purchase of oilproducing properties in Texas’s Eagle Ford shale formation. It also plans to further expand its U.S. operations.
...

ZARGON OIL & GAS $8.61 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 30.1 million; Market cap: $259.1 million; Dividend yield: 8.4%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 64% oil and 36% gas.

In the quarter ended December 31, 2013, Zargon produced 7,276 barrels of oil equivalent a day, down 5.8% from 7,634 a year earlier. That’s because it sold some less-important properties and cut back on natural gas drilling in response to lower gas prices.

That lower output more than offset slightly higher oil and gas prices in the latest quarter, dropping the company’s cash flow per share by 27.3%, to $0.40 from $0.55. Zargon expects cash flow of $1.66 a share in 2014. The stock trades at 5.2 times that estimate.
...

BIRCHCLIFF ENERGY $10.35 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 144.0 million; Market cap: $1.5 billion; No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 81% of its output is gas. The remaining 19% is oil.

In the three months ended December 31, 2013, Birchcliff’s production rose 6.5%, to 28,391 barrels of oil equivalent per day (including gas) from 26,655 barrels a year earlier. Cash flow per share gained 25.0%, to $0.35 from $0.28, on the increased production and higher gas prices.

In 2012, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is letting the company bring the additional gas it is producing to market.
...

DUNDEE REIT $28.39 (Toronto symbol D.UN; TSINetwork Rating: Extra Risk) (416- 365-3535; www.dundeereit.com; Units outstanding: 103.4 million; Market cap: $3.0 billion; Dividend yield: 7.9%) owns and manages 24.6 million square feet of office and retail space.

In the quarter ended December 31, 2013, Dundee REIT’s revenue rose 8.6%, to $208.4 million from $192.0 million a year earlier. The trust bought $592.5 million worth of new buildings comprising 1.7 million feet of leasable area. That was the reason for most of the revenue increase.

Cash flow gained 15.4%, to $67.0 million from $58.1 million. However, Dundee issued new units to pay for the acquired properties, so its cash flow per unit rose 8.8%, to $0.62 from $0.57, on more units outstanding.
...

THE CHURCHILL CORP. $10.47 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.9 million; Market cap: $260.5 million; Dividend yield: 4.6%) provides building-construction, commercial and industrial electrical contracting, earthmoving and industrial insulation services to government and private sector clients, mainly in Western Canada.

In the three months ended December 31, 2013, Churchill earned $3.3 million, or $0.13 a share. That’s a big improvement from a loss of $62.8 million, or $2.56 a share, a year earlier. The year-ago results include a one-time writedown of $64.6 million.

Revenue increased 2.5%, to $297.0 million from $289.9 million. Churchill has worked through most of the less-profitable contracts it took on as part of its acquisitions, or that it negotiated when its markets were more competitive in 2009 and 2010.
...

RUSSEL METALS $30.34 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 61.0 million; Market cap: $1.9 billion; Dividend yield: 4.4%) is one of North America’s largest metal distributors. It serves 39,000 clients at 53 locations in Canada and 12 in the U.S.

In the quarter ended December 31, 2013, Russel’s revenue rose 5.9%, to $811.1 million from $765.9 million a year earlier. Sales at the company’s metalservices business rose 4%, as higher demand offset lower selling prices. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12%.

Earnings gained 13.4%, to $22.8 million from $20.1 million. Per-share earnings rose 8.8%, to $0.37 from $0.34, on more shares outstanding.
...

SHERRITT INTERNATIONAL $3.64 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.1 billion; Yield: 1.1%) has cut its dividend to $0.01 a share from $0.043. It now yields 1.1%.

In the quarter ended December 31, 2013, Sherritt’s revenue fell 16.7%, to $108.6 million from $130.3 million a year earlier. It lost $0.13 a share, compared to a loss of $0.01.

Sherritt’s long-term debt is $2.1 billion, or a high 2.3 times its market cap. But after the upcoming sale of its coal business, it will hold cash of $1.5 billion, or $5.05 a share.
...

YAMANA GOLD $10.77 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416-815-0220; www.- yamana.com; Shares outstanding: 753.3 million; Market cap: $8.1 billion; Dividend yield: 1.5%) owns eight operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina and has a number of other properties in advanced stages of development.

In the three months ended December 31, 2013, Yamana’s revenue fell 33.2%, to $420.7 million from $629.5 million a year earlier (all figures except share price and market cap in U.S. dollars).

Gold production declined 6.0%, to 303,768 ounces from 322,990. Prices for gold, copper and silver also fell. (Copper and silver are significant by-products of the company’s gold mining.) Yamana’s cash flow per share declined 45.0%, to $0.22 from $0.40.
...

NEW GOLD $6.24 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold- .com; Shares outstanding: 503.3 million; Market cap: $3.1 billion; No dividends paid) has four mines: the Mesquite project in the U.S., Cerro San Pedro in Mexico, the Peak mine in Australia and the New Afton mine in B.C.

New Gold also owns 30% of the El Morro copper/ gold project in Chile, 100% of the Blackwater property in B.C. and 100% of Ontario’s Rainy River project.

In the three months ended December 31, 2013, New Gold’s cash flow per share fell 17.4%, to $0.19 from $0.23 a year earlier. Prices of gold, copper and silver fell, as did production from Cerro San Pedro, which is scheduled to close next year.
...

LEON’S FURNITURE $15.75 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $1.1 billion; Div. yield: 2.5%) has steadily opened new stores, growing from 27 stores in 2003, to 75 today.

But the company more than quadrupled in size overnight with the March 28, 2013 purchase of its main rival, The Brick, for $700 million. The Brick operates 234 outlets across Canada. Leon’s and The Brick will continue to operate as separate chains.

As a result of the acquisition, Leon’s sales jumped to $523.0 million in the three months ended December 31, 2013, from $188.5 million a year earlier. Earnings rose 61.5%, to $26.0 million, or $0.37 a share, from $16.1 million, or $0.23.
...

ALIMENTATION COUCHE-TARD $91.36 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard. com; Shares outstanding: 179.4 million; Market cap: $17.3 billion; Dividend yield: 0.4%) grew from just 630 stores in Quebec in 1998 to 1,612 in 1999, mostly through the purchase of Silcorp Ltd. and its 980 Mac’s and Becker’s stores in Ontario and western Canada. Couche-Tard then continued to expand through profitable acquisitions, including buying 2,290 stores in the U.S. in 2003 from ConocoPhillips.

The company made another big acquisition in June 2012 with the $2.7-billion purchase of Norway’s Statoil Fuel & Retail chain of gas stations (all figures except share price in U.S. dollars).

In Europe, Couche-Tard now operates 2,263 outlets across Scandinavia (Norway, Sweden and Denmark), Poland, the Baltic states (Estonia, Latvia and Lithuania) and Russia. That’s in addition to its 6,221 stores throughout North America operating under the Couche- Tard and Circle K banners.
...

Pat McKeough responds to many requests from members of his Inner Circle for specific advice and 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. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

Natural gas prices rebounded recently after almost three years of depressed prices. In those years, warm winters cut into gas used for heating, and that’s a major part of total gas use. As a result, gas in storage grew and prices stagnated. A glut of shale gas due to improved drilling technology also held prices down....