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AURICO GOLD $5.05 (Toronto symbol AUQ; TSINetwork Rating: Speculative) (604-681-2802; www.auricogold.com; Shares outstanding: 247.1 million; Market cap: $1.3 billion; Dividend yield: 3.3%) operates the El Chanate gold mine in Mexico, which produced 71,864 ounces in 2013.

The company’s Young-Davidson gold mine in Northern Ontario reached full production in 2013, with total output of 120,738 ounces. The mine’s output should rise to over 152,000 ounces this year.

AuRico hasn’t yet released its financial results for 2013, but in the three months ended September 30, its revenue rose 36.5%, to $54.3 million from $39.8 million a year earlier. Cash flow jumped to $0.09 a share from nil. Higher gold production offset lower prices.
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BIRCHCLIFF ENERGY $8.40 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 142.9 million; Market cap: $1.2 billion; No dividends paid) jumped recently after it announced that it ended 2013 with record production of 30,000 barrels of oil equivalent a day (including natural gas).

Since then, the company’s output has risen to 32,100 barrels a day, mainly because it bought a partner’s 30% stake in one of its wells in Alberta’s Pouce Coupe area for $56 million.

The company plans to spend $275 million on exploration and development this year. That could let it end 2014 with production as high as 39,500 barrels of oil equivalent per day.
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ZARGON OIL & GAS $8.36 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 30.1 million; Market cap: $246.7 million; Dividend yield: 8.6%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. Its production is 64% oil and 36% gas.

In the quarter ended September 30, 2013, Zargon produced 7,560 barrels of oil equivalent a day, down 1.0% 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.

However, higher oil and gas prices in the latest quarter more than offset the lower output, raising the company’s cash flow per share by 14.6%, to $0.55 from $0.48.
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BELLATRIX EXPLORATION $8.59 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266- 8670; www.bellatrixexploration.com; Shares outstanding: 170.5 million; Market cap: $1.5 billion; No dividends paid) produces natural gas (70% of output) and oil (30%) in Alberta, B.C. and Saskatchewan.

Bellatrix closed its $756-million cash-and-stock purchase of Angle Energy in early December 2013. The deal added 500 drilling targets to Bellatrix’s inventory, bringing its total to over 2,000, and doubled its undeveloped land base to over 400,000 acres.

In addition, Angle produces 10,500 barrels of oil equivalent a day (58% oil and 42% gas) in Alberta. That let Bellatrix end 2013 with record production of 38,000 barrels a day. Several new wells about to enter production will boost that figure to 40,000.
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RUBY TUESDAY, INC. $5.58 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 61.4 million; Market cap: $342.8 million; No dividends paid) reports that its revenue fell 8.0% in its fiscal 2014 second quarter, which ended December 3, 2013, to $276.2 million from $300.1 million a year earlier.

That’s mostly because of continued weak consumer spending and intense competition in the casual-dining business. In the latest quarter, Ruby Tuesday lost $25.9 million, or $0.43 a share, compared to a loss of $2.9 million, or $0.05.

The company is now moving its restaurants back to a bar-and-grill atmosphere, revamping the menu and launching a major new marketing campaign. Ruby Tuesday is also closing some underperforming restaurants.
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TEMPUR SEALY $48.85 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempursealy.com; Shares outstanding: 60.5 million; Market cap: $2.9 billion; No dividends paid) completed its $1.3- billion purchase of rival Sealy in March 2013. This was a major acquisition for Tempur Sealy (formerly Tempur-Pedic), but it has let the company diversify into traditional spring-coil beds.

The purchase is also helping Tempur Sealy offset rising competition in its current business; the company makes and distributes mattresses and neck pillows made of its Tempur material, which conforms to the body to provide support and alleviate pressure points. Competitors Simmons Bedding and Serta have both successfully launched memory-foam mattresses that directly compete with Tempur Sealy’s products.

In the quarter ended September 30, 2013, revenue jumped to $735.5 million from $347.9 million a year earlier. The gain included $389.9 million from Sealy. Excluding one-time items, earnings per share rose 4.3%, to $0.73 from $0.70.
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WYNDHAM WORLDWIDE $75.00 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 130.3 million; Market cap: $9.7 billion; Dividend yield: 1.6%) is one of the world’s largest hospitality companies, with 7,410 franchised hotels worldwide.

Wyndham also manages vacation resorts, rental properties, luxury clubs and time-shares. The company now has over 106,000 vacation-rental properties in 100 countries.

In the three months ended September 30, 2013, Wyndham’s revenue rose 12.8%, to $1.43 billion from $1.27 billion a year earlier. The company gets most of its revenue from vacation rather than business travel, and vacation bookings rose in the latest quarter. That helped raise its occupancy rate by 1.9%.
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CHIPOTLE MEXICAN GRILL $515.95 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $16.0 billion; No dividends paid) is considering expanding its new fast-casual pizza restaurant concept, which operates much like its burrito outlets— making pizza quickly, individually tailored and with higher-quality ingredients.

In May 2013, Chipotle partnered with Pizzeria Locale to open an outlet in Denver. This location’s oven bakes the pizzas in less than two minutes; individual 11-inch pies cost around $6.50, and the restaurant also serves red or white Italian wine.

Pizza is a fast-growing food choice, especially among younger consumers. The first Pizzeria Locale is a success, and Chipotle may add one or two more in Denver.
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ADOBE SYSTEMS INC. $61.77 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 499.9 million; Market cap: $30.7 billion; No dividends paid) makes a range of software that lets computer users create, edit and share documents in the popular PDF format. As well, graphic designers use its software to create print publications and web pages.

Adobe earned $164.6 million, or $0.32 a share, in its fiscal 2013 fourth quarter, which ended November 29, 2013. That’s down 46.5% from $307.9 million, or $0.61 a share, a year earlier. Revenue fell 9.7%, to $1.04 billion from $1.15 billion.

Last year, the company starting selling its Creative Cloud package of photo-editing and desktoppublishing programs as a subscription instead of a onetime purchase. Adobe added 402,000 Creative Cloud subscribers during the quarter, to bring its total to 1.44 million. That beat its goal of 1.25 million.
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SYMANTEC CORP. $23.62 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 696.0 million; Market cap: $16.2 billion; Dividend yield: 2.5%) sells computer security technology, including anti-virus and emailfiltering software, to businesses and consumers. It also offers data-archiving software.

In Symantec’s fiscal 2014 second quarter, which ended September 27, 2013, its earnings rose 11.6%, to $355 million, or $0.50 a share. A year earlier, it earned $318 million, or $0.45.

Savings from Symantec’s new restructuring plan were behind the gains. This initiative includes laying off 30% to 40% of its managers and simplifying its product lines.
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WESTJET $26.99 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 129.4 million; Market cap: $3.5 billion; Dividend yield: 1.5%) was our #1 pick for 2013 at $22.29.

The stock dipped as low as $19.65 in July, but it went on to rise to an all-time high of $28.99. It’s now up 21.1%.

The company has a modern, fuel-efficient fleet and a low cost structure. Its new Canadian regional airline, WestJet Encore, adds growth prospects.
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ALIMENTATION COUCHE-TARD $81.60 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard. com; Shares outstanding: 179.4 million; Market cap: $15.4 billion; Dividend yield: 0.5%) was our #1 pick for 2012 at $30.55. Its shares are now up a whopping 167.1%.

The company continues to introduce more-profitable products at its North American stores, including improved fresh and takeout food. There is lots of potential to sell similar items through the Statoil chain in Norway, which it bought in June 2012.

Alimentation Couche-Tard is still a buy.
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GOODYEAR TIRE & RUBBER CO. $24.42 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 246.9 million; Market cap: $6.0 billion; Dividend yield: 0.8%) is the world’s largest tire maker, with 52 plants in 22 countries.

In the quarter ended September 30, 2013, the sluggish global economy cut Goodyear’s sales by 5.0%, to $5.0 billion from $5.3 billion a year earlier. North American sales fell 9.1%, to $2.2 billion from $2.4 billion. Sales also declined 9.2% in Asia. That offset a slight increase in Europe and a 1.3% rise in Latin America.

However, earnings per share climbed sharply, to $0.68 from $0.45. The higher profits came from the company’s North American operations, which sold more replacement tires (they’re more profitable than new factory-installed car tires), and cut its costs.
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Our investment advice is that your in-the-limelight holdings are the ones you need to watch most closely. When investor expectations are high, it pays to be skeptical and wary.

Pat McKeough responds to many requests from members of his Inner Circle for specific stock picks 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. Last week we had a question from an Inner Circle members about one of the rare pharmaceutical stocks in Canada. Valeant Pharmaceuticals was purchased in 2010 by Biovail, then Canada’s largest pharmaceutical firm, and the new company adopted the Valeant name. The company has an aggressive policy of growing by acquisition—it made over a dozen in 2012 alone—and Pat examines several of its recent acquisitions and assesses the overall risks and rewards of this growth strategy. ...

PEYTO EXPLORATION & DEVELOPMENT CORP. $31.51 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $4.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.1%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 56,343 barrels of oil equivalent is 89% gas and 11% oil.

In the quarter ended September 30, 2013, Peyto’s cash flow rose 24.1%, to $0.67 a share from $0.54 a year earlier. That’s because Peyto raised its production by 22.4%. Gas prices also gained 16.0%, to an average of $2.97 per thousand cubic feet from $2.56, while oil prices rose 17.8%, to $89.46 a barrel from $75.88.

The company has started up three gas plants since the quarter ended. That has let it activate 25 new wells, pushing up its production from 60,000 barrels a day to 70,000.
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PENN WEST PETROLEUM $9.14 (Toronto symbol PWT; Shares outstanding: 488.1 million; Market cap: $4.4 billion; TSINetwork Rating: A v e r a g e ; D i v i d e n d y i e l d : 6 . 1 % ; www.pennwest.com) is one of Canada’s largest oil and gas producers.

Penn West continues to shore up its finances and take steps to boost its value since appointing Rick George as chairman and Allan Markin as vice-chairman. These moves include cutting staff, selling assets and lowering its dividend.

The company now plans to sell a further $1.5 billion to $2 billion of assets by the end of 2014. It expects to close about $485 million of these deals by the end of this year. The company will use the proceeds to further pay down its debt.
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BCE INC. $46.67 (Toronto symbol BCE; Shares outstanding: 775.9 million; Market cap: $36.2 billion; TSINetwork Rating: Above Average; Dividend yield: 5.0%; www.bce.ca) is selling four of its specialty TV channels: Family Channel, Disney XD and the English and French Disney Junior stations. The buyer is DHX Media (Toronto symbol DHX).

The company acquired these channels as part of its $3.3-billion purchase of Astral Media in July 2013. Selling them will help BCE comply with conditions that regulators imposed as part of that deal.

If regulators approve, BCE will receive $170 million for these four channels. The company aims to complete the sale in 2014.
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ISHARES MSCI CANADA INDEX FUND $28.59 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) holds the stocks in the Morgan Stanley Capital International Canada Index. The fund has a 0.49% MER.

The index’s top holdings are Royal Bank, 7.4%; TD Bank, 6.5%; Bank of Nova Scotia, 5.7%; Suncor Energy, 4.0%; CN Railway, 3.7%; Bank of Montreal, 3.5%; Manulife Financial, 2.7%; Canadian Natural Resources, 2.7%; CIBC, 2.7%; Valeant Pharmaceuticals, 2.7%; and Enbridge, 2.5%.

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POWERSHARES QQQ ETF $85.49 (Nasdaq symbol QQQQ; buy or sell through brokers; www.invescopowershares- .com), formerly called Nasdaq 100 Trust Shares, holds stocks that represent the Nasdaq 100 Index, which consists of the 100 largest shares on the Nasdaq exchange, based on market cap.

The Nasdaq 100 Index contains shares of companies in a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The fund’s expenses are about 0.20% of its assets.

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SPDR DOW JONES INDUSTRIAL AVERAGE ETF $158.76 (New York symbol DIA; buy or sell through brokers; www.spdrs.com) holds the 30 stocks that make up the Dow Jones Industrial Average.

The fund’s top holdings are Visa, IBM, The Goldman Sachs Group, ExxonMobil, Chevron, 3M, McDonald’s, Johnson & Johnson, United Technologies and Boeing. The fund’s expenses are about 0.17% of its assets.

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SPDR S&P 500 ETF $179.73 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. companies that are chosen based on their market cap, liquidity and industry group.

The index’s highest-weighted stocks are Apple, ExxonMobil, Microsoft, Procter & Gamble, Johnson & Johnson, J.P. Morgan Chase, IBM, Chevron, General Electric, Pfizer, Berkshire Hathaway, Google, AT&T and Wells Fargo. The fund’s expenses are just 0.10% of its assets.

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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $23.86 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.55%. It yields 4.1%.

The fund’s top holdings are CIBC, 6.8%; National Bank, 6.4%; Bonterra Energy, 6.4%; TD Bank, 5.9%; Bank of Montreal, 5.7%; Telus, 4.7%; Royal Bank, 4.6%; IGM Financial, 4.5%; Bank of Nova Scotia, 4.3%; and BCE, 4.0%.

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ISHARES S&P/TSX 60 INDEX FUND $19.25 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 8.3%; TD Bank, 7.3%; Bank of Nova Scotia, 6.4%; Suncor Energy, 4.5%; CN Railway, 4.1%; Bank of Montreal, 3.9%; Manulife Financial, 3.1%; Canadian Natural Resources, 3.1%; CIBC, 3.0%; BCE, 3.0%; Enbridge, 3.0%; Valeant Pharmaceuticals, 2.9%; TransCanada Corporation, 2.7%; Potash Corp., 2.4%; CP Rail, 2.1%; Telus, 2.0%; and Cenovus, 1.9%.
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TELUS $37.34 (Toronto symbol T; Shares outstanding: 623.2 million; Market cap: $23.3 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.telus.com) continues to benefit from heavy investments in its wireless networks.

Thanks to rising demand for smartphones and wireless data, Telus’s earnings rose 18.4% in the third quarter of 2013, to $0.58 a share from $0.49. It also increased its dividend by 5.9%. The new annual rate of $1.44 yields 3.9%.

However, Ottawa’s plan to cut wireless roaming fees adds to its risk. As well, the new free trade deal with Europe could open up Canada’s wireless industry to more foreign competition.
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