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SAPUTO INC. $47 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 194.3 million; Market cap: $9.1 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.8%; TSINetwork Rating: Average; www.saputo.com) recently agreed to a friendly takeover of Warrnambool Cheese and Butter Factory, one of Australia’s largest producers of milk, cheese, butter and other dairy products. However, hostile offers from Australian dairy firms have forced Saputo to increase its original bid by 31%.

Australian competition regulators have now blocked Saputo from increasing its 9.6% stake in Warrnambool for the next two months. That will give them time to determine whether these rival bidders, if successful, would gain an overwhelming share of Australia’s dairy market.

Saputo is still a hold....

BOMBARDIER INC. (Toronto symbols BBD.A $4.52 and BBD.B $4.50; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $8.1 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www.bombardier.com) has won an order for five of its new CSeries passenger jets from Iraqi Airways. This client also has options to buy 11 additional planes.

The company now has 182 firm orders for the CSeries. If buyers exercised their options for 237 more planes, these orders would total roughly $32 billion U.S. Bombardier expects to begin deliveries by the end of 2014.

Bombardier B stock is a buy....

AGRIUM INC. $95 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 144.5 million; Market cap: $13.7 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.4%; TSINetwork Rating: Average; www.agrium.com) gets two-thirds of its revenue—but just a third of its earnings—from its retail stores, which sell seeds, fertilizers and other products to farmers. It also makes nitrogen-based fertilizer.

Agrium’s retail division is shielding it from volatile fertilizer prices. In the third quarter of 2013, overall sales rose 1.3%, to $2.9 billion from $2.8 billion a year ago (all amounts except share price and market cap in U.S. dollars). A 15.0% retail sales gain offset a 23.7% fertilizer sales drop. Earnings per share fell 37.5%, to $0.50 from $0.80, due to unplanned outages at its nitrogen plants.

Weak fertilizer prices will probably cut Agrium’s 2013 earnings by 20.4%, to $7.60 a share from $9.55 in 2012. The stock trades at 11.8 times that estimate. The $3.00 dividend yields 3.4%.
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POTASH CORP. OF SASKATCHEWAN $33 (Toronto symbol POT $33 Aggressive Growth Portfolio, Resources sector; Shares outstanding: 863.2 million; Market cap: $28.5 billion; Price-to-sales ratio: 3.6; Dividend yield: 4.5%; TSINetwork Rating: Average; www.potashcorp.com) operates five potash mines in Saskatchewan and one in New Brunswick that account for 20% of global capacity. The company also makes fertilizers from nitrogen and phosphate.

Potash Corp. continues to suffer from last July’s breakup of a marketing alliance between producers in Russia and Belarus. The resulting uncertainty has prompted big clients like China and India to delay signing new potash supply deals because they feel prices will keep falling. In the third quarter of 2013, Potash Corp. sold its potash for $307 U.S. a tonne, down 28.4% from $429 U.S. a year earlier.

In response, the company is slowing production and cutting 18% of its workforce. Potash Corp. expects to pay $70 million in severance costs and related charges (all amounts except share price and market cap in U.S. dollars).
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CANADIAN NATIONAL RAILWAY CO. $58 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 836.0 million; Market cap: $48.5 billion; Price-to-sales ratio: 4.6; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest railway. Its 32,350- kilometre network stretches across the country and through the U.S. Midwest to the Gulf of Mexico.

Manufacturers are shipping more goods by rail, thanks to the improving North American economy. At the same time, a lack of pipeline capacity is prompting oil producers to ship more of their product by train.

As a result, CN’s earnings rose 9.0% in the three months ended September 30, 2013, to $724 million from $664 million a year earlier. Due to fewer shares outstanding, earnings per share gained 13.2%, to $0.86 from $0.76 (all per-share amounts adjusted for a 2-for-1 stock split in December 2013).
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BLACKBERRY LTD. $6.29 (Toronto symbol BB; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 524.6 million; Market cap: $3.3 billion; Price-to-sales ratio: 0.3; No dividends paid; TSINetwork Rating: Speculative; www.blackberry.com) has sold $1 billion U.S. of convertible debentures to a group of private investors. These buyers also have an option to buy up to $250 million U.S. in additional debentures. If all investors convert their holdings, the total number of shares outstanding would rise by 19.2%.

The cash will help the smartphone maker complete its restructuring, which includes cutting 40% of its workforce.

The company will also shift its focus away from consumers to business and government clients, who rely on its networks to send encrypted mobile email messages and other sensitive data.
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ANDREW PELLER LTD. $14 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.3 million; Market cap: $200.2 million; Price-to-sales ratio: 0.7; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.andrewpeller.com) is Canada’s second-largest producer of wines, after Vincor International. The company has wineries in Nova Scotia, Ontario and British Columbia.

In the second quarter of its 2014 fiscal year, which ended September 30, 2013, Peller’s sales rose 5.7%, to $77.2 million from $73.1 million a year earlier. However, strong price competition in Western Canada and higher costs for wine and juice purchased from international suppliers cut Peller’s earnings by 17.3%, to $3.5 million from $4.3 million. Per-share earnings fell 19.4%, to $0.25 from $0.31.

However, if you disregard unusual items, such as losses on hedging contracts that Peller uses to lock in foreign exchange rates, earnings would have risen 11.2%.
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SHAWCOR LTD. $40 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 59.4 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.3%; TSINetwork Rating: Average; www.shawcor.com) gets 90% of its revenue by making sealants and coatings that keep oil and natural gas pipelines from rusting. The remaining 10% comes from manufacturing industrial products, such as electrical wire and protective sheaths.

In April 2013, the company purchased the 49% of Socotherm LaBarge LLC that it did not already own for $30 million, which included assuming its debt. Texas-based Socotherm coats and insulates pipelines for deepwater oil and gas projects. Its clients operate in the Gulf of Mexico and off Africa’s west coast. Recently, ShawCor agreed to sell Socotherm’s half of a joint venture in Brazil for $30 million U.S.

Thanks to the Socotherm purchase and new pipeline-coating contracts in North America and Asia, ShawCor’s revenue rose 34.7% in the three months ended September 30, 2013, to $525.8 million from $390.5 million a year earlier.
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LINAMAR CORP. $41 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $2.7 billion; Price-to-sales ratio: 0.8; Dividend yield: 0.8%; TSINetwork Rating: Extra Risk; www.linamar.com) gets 80% of its revenue by making engines, transmissions and other precisionmachined parts for automakers. The company has plants in North America, Europe and Asia.

The remaining 20% of Linamar’s revenue comes from its self-propelled, scissor-type elevating work platforms, which it sells under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers.

Thanks to rising car demand, the company continues to win new orders from automakers. Rising construction activity has also prompted contractors to order more Skyjack platforms, particularly in fast-growing markets like Brazil.
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FINNING INTERNATIONAL INC. $25 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 172.0 million; Market cap: $4.3 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.finning.com) rents, sells and services heavy equipment made by U.S.-based Caterpillar Inc. (New York symbol CAT). Its main customers are in the oil, mining, forest products and construction industries.

Canada supplies 50% of Finning’s revenue, followed by South America (37%) and the U.K. (13%).

Lower prices for copper and other commodities have weakened equipment demand, particularly in South America and the U.K. However, Canadian sales remain strong. Weak commodity prices are also prompting Finning’s customers to rent more equipment and buy used machinery. As well, they are spending more to make their current gear last longer.
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BELL ALIANT INC. $27 (Toronto symbol BA, Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 229.1 million; Market cap: $6.2 billion; Price-to-sales ratio: 2.2; Dividend yield: 7.0%; TSINetwork Rating: Average; www.bellaliant.ca) sells phone and Internet services to 2.4 million customers in Atlantic Canada and rural Ontario and Quebec.

Like BCE, the company continues to replace copper wires with fibre optic cable. It now has 944,914 high-speed Internet users (up 3.4% from a year earlier) and 163,264 digital TV customers (up 52.0%).

In the three months ended September 30, 2013, Bell Aliant’s revenue fell 0.4%, to $694.9 million from $697.4 million a year earlier. Before one-time items, earnings fell 6.7%, to $0.42 a share from $0.45. However, cash flow (after capital expenditures) jumped 28.0%, to $0.64 a share from $0.50.
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BCE INC. $46 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 775.9 million; Market cap: $35.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest provider of telephone services, with 5.3 million customers in Ontario and Quebec. It also has 2.2 million high-speed Internet customers and 2.2 million TV subscribers. Together, these services supply 47% of the company’s revenue.

BCE also sells wireless services across Canada. Its 7.8 million mobile subscribers provide 29% of its revenue.

In addition, BCE owns 44% of regional phone company Bell Aliant (see page 2). This investment supplies 13% of its revenue. The remaining 11% comes from its Bell Media division, which owns the CTV Television (30 stations), 34 specialty channels, pay-TV services and 107 radio stations.
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AMERICAN EXPRESS CO. (New York symbol AXP, www.americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its charge cards (which have no pre-set spending limit and must be paid in full each month) and credit cards (which can carry a balance)....

In the 18th century, pioneering economist Adam Smith said that the public tends to overvalue when he called “speculative ventures”. That still makes excellent investing advice today....

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. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away....

CAMECO CORP. (Toronto symbol CCO; www.cameco.com) is the world’s largest uranium producer. It supplies 14% of global mine production and has large, high-grade reserves, low-cost operations, significant market share and many mines....

Free Report: Canadian Penny Stocks: What You Need to Know about Handling the Risks and Reaping the Rewards

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 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....

CAE INC. (Toronto symbol CAE; www.cae.com) is the world’s leading maker of flight simulators for commercial airlines, with 70% of the market. It also makes simulators for military clients. The company began training pilots for its customers in 2001 and now has over 100 flight schools in 30 countries....

CANADIAN NATIONAL RAILWAY CO. (Toronto symbol CNR; www.cn.ca) operates Canada’s largest railway. Its 32,350-kilometre network stretches across the country and through the U.S. Midwest to the Gulf of Mexico....

Growth by acquisition can be risky, as newly purchased companies may develop unforeseen problems, especially in an unsettled economy. Today we look at how growth by acquisition is working for two pipeline companies we cover regularly in our advisory on conservative investing, Canadian Wealth Advisor. ...

GENUINE PARTS CO. $82 (www.genpt.com) is buying Edmontonbased Commercial Solutions Inc. This firm distributes industrial products, such as bearings and transmission parts, across Canada. Genuine Parts didn’t say how much it would pay when it completes this purchase in the first quarter of 2014, but the deal will add $100 million to its annual revenue of $13.7 billion....

GENERAL ELECTRIC CO. $27 (www.ge.com) has raised its quarterly dividend by 15.8%, to $0.22 a share from $0.19. The new annual rate of $0.88 yields 3.3%. Buy.

BOEING CO. $135 (www.boeing.com) is seeing stronger demand for its passenger planes as airlines upgrade their aging fleets with more efficient models. As a result, it has increased its dividend by 50.5%. The new annual rate of $2.92 a share yields 2.2%. Boeing also plans to buy back $10 billion worth of its shares, or about 10% of the total outstanding, over the next three years....

AMERICAN EXPRESS CO. $86 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $94.6 billion; Price-to-sales ratio: 2.8; Dividend yield: 1.1%; TSINetwork Rating: Average; www. americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its charge cards (which have no pre-set spending limit and must be paid in full each month) and credit cards (which can carry a balance).

Unlike other credit card companies, such as Visa and MasterCard, Amex is also a lender. That lets it collect interest payments on its cardholders’outstanding balances.


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