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GREAT-WEST LIFECO INC. $32 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $32.0 billion; Price-to-sales ratio: 1.3; Dividend Yield: 3.8%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is one of Canada’s largest insurance companies, with $705.1 billion of assets under administration. It also sells mutual funds and retirement planning and wealth management services. Power Financial (Toronto symbol PFC) owns 68.1% of Great-West.

In July 2013, the company completed its $1.75- billion purchase of Irish Life Group, Ireland’s largest pension manager and life insurance provider.

If you exclude costs to integrate Irish Life, Great-West would have earned $583 million in the three months ended September 30, 2013. That includes $41 million from Irish Life. This new business should contribute $215 million to Great- West’s annual earnings by the end of 2014.
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BOMBARDIER INC. (Toronto symbols BBD.A $4.62 and BBD.B $4.57; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $8.2 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www.bombardier.com) recently began test flights of its CSeries jet, which seats 100 to 150 passengers. The new CSeries is quieter and 20% more fuel efficient than comparable aircraft.

The company now expects the CSeries’ development costs to total $3.9 billion, up 14.7% from its original 2008 estimate of $3.4 billion (all amounts except share prices and market cap in U.S. dollars). That’s because new accounting rules, which took effect in 2011, have forced Bombardier to include interest costs in the overall estimate.

Bombardier now has firm orders for 177 CSeries jets, plus options for 226 more. If the buyers exercise all these options, the resulting 403 orders would be worth $29 billion. The company aims to begin delivering the planes by the end of 2014.
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SAPUTO INC. $49 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 194.2 million; Market cap: $9.5 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.9%; TSINetwork Rating: Average; www.saputo.com) has spent $2.4 billion on acquisitions in the past five years, mainly dairy producers in the U.S. It now wants to buy Warrnambool Cheese and Butter Factory Company, one of Australia’s largest producers of milk, cheese, butter and other dairy products.

Buying Warrnambool would add around $480 million to Saputo’s annual revenue of $7.3 billion. It would also give the company access to the fast-growing Asia-Pacific region. However, this firm continues to attract rival takeover offers, which is why Saputo recently raised its offer by 16.0% to $523 million. To put this figure in context, Saputo earned $133.3 million, or $0.67 a share, in the three months ended September 30, 2013.

Warrnambool’s shares are trading for more than Saputo’s new offer. This shows that investors expect an even higher bid.
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TECK RESOURCES LTD. $27 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.3 million; Market cap: $15.6 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.3%; TSINetwork Rating: Average; www.teck.com) will contribute $2.9 billion to the Fort Hills oil sands project (see Suncor at left).

Teck mainly produces coal, copper and zinc, so Fort Hills will help diversify its operations. Its mining expertise will also help keep Fort Hills’ operating costs down.

The company will probably sell some of its less important assets to free up cash for Fort Hills. For example, it has reportedly agreed to sell its 3% stake in Australian iron ore mining company Fortescue Metals Group for about $479 million.
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CENOVUS ENERGY INC. $30 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.7 million; Market cap: $22.7 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.2%; TSINetwork Rating: Average; www.cenovus.com) gets 60% of its production from its three heavy oil projects in Alberta and one in Saskatchewan. Conventional oil and natural gas wells supply the remaining 40%. In all, Cenovus’s proved reserves should last at least 23 years.

U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta. These operations produce heavy bitumen, which Cenovus ships to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these refineries.

In the three months ended September 30, 2013, Cenovus produced 264,100 barrels of oil equivalent a day (67% oil and 33% gas), down 1.3% from 267,500 barrels a year earlier.
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IMPERIAL OIL LTD. $45 (Toronto symbol IMO; Conservative Growth Portfolio; Resources sector; Shares outstanding: 847.6 million; Market cap: $38.1 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.2%; TSINetwork Rating: Average; www.imperialoil.ca) produces oil and natural gas, mainly from its oil sands projects in Alberta. It also owns three refineries and operates 1,800 Esso gas stations.

Imperial began operating its new Kearl oil sands project in April 2013. It owns 71% of Kearl. ExxonMobil (New York symbol XOM) holds the other 29%. Exxon also owns 69.9% of Imperial.

In the three months ended September 30, 2013, Imperial produced an average of 288,000 barrels of oil equivalent a day (88% oil and 12% natural gas). That’s up 1.1% from 285,000 barrels a year earlier.
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SUNCOR ENERGY INC. $36 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $54.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www. suncor.com) gets 70% of its production from its Alberta oil sands projects. The rest comes from conventional oil and natural gas properties. Suncor also operates four refineries and 1,500 Petro- Canada gas stations.

The company recently sold most of its Western Canadian conventional natural gas properties for $1 billion.

The cash will help Suncor develop its Fort Hills oil sands project in Alberta. Suncor owns 40.8% of Fort Hills and will operate it. France’s Total S.A. owns 39.2%, and Teck (see box this page) holds the remaining 20.0%. Fort Hills’ reserves should last 50 years.
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ENCANA CORP. $18 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 740.1 million; Market cap: $13.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.encana.com) is cutting its reliance on natural gas, as rising shale gas production has cut prices from $11.50 U.S. per thousand cubic feet in 2008 to just $3.60 U.S. today.

Encana now plans to narrow its focus from around 30 properties to five: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico) and Tuscaloosa Marine Shale (Louisiana).

These five fields also produce significant amounts of oil and natural gas liquids (NGLs), such as butane and propane, and should last decades. Encana expects oil and NGLs to supply 75% of its cash flow by 2017, up from about 35% today.
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RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 303.2 million; Market cap: $7.6 billion; Price-to-sales ratio: 6.5; Dividend yield: 5.6%; TSINetwork Rating: Average; www.riocan.com) started up in 1993 and is now Canada’s largest REIT. It currently owns all or part of 295 retail properties, including 15 under development. These holdings account for 85% of its rental revenue. The remaining 15% comes from 51 malls in the U.S.

RioCan continues to expand beyond suburban big-box-style shopping centres. Mostly through joint ventures with other property developers, it has added mixed-use retail, office and residential buildings, mainly in densely populated urban areas.

RioCan’s revenue declined 0.8%, from $764 million in 2008 to $758 million in 2009. Some of the trust’s tenants went bankrupt during the recession, but it mostly offset that by adding new properties. RioCan’s revenue recovered to $882 million in 2010 and rose to $1.1 billion in 2012, as it took advantage of lower property values and interest rates to expand its portfolio.
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PENGROWTH ENERGY $6.57 (Toronto symbol PGF; Shares outstanding: 517.7 million; Market cap: $3.4 billion; TSINetwork Rating: Average; Dividend yield: 7.3%; www.pengrowth.com) has gained over 31% since early July 2013. That’s mainly because the company has successfully completed its plan to sell some of its less important oil and gas properties in Western Canada.

The cash from these sales will help Pengrowth speed up the development of its Lindbergh oil sands project in Alberta. As well, the company’s monthly dividend of $0.04 a share still seems safe and has a 7.3% annualized yield.

Pengrowth is a buy.
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ISHARES CDN REIT SECTOR INDEX FUND $15.46 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 15 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of each REIT is limited to 25% of the ETF’s value.

iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 5.0%.

The ETF’s largest holding is RioCan REIT at 19.5%, followed by H&R REIT (14.9%), Dundee REIT (8.0%), Canadian REIT (7.4%), Calloway REIT (6.7%), Allied Prop. REIT (5.9%), Boardwalk REIT (5.8%), Canadian Apt, REIT (5.7%), Cominar REIT (5.6%), Artis REIT (4.7%), Chartwell REIT (4.6%), Granite REIT (4.4%), Dundee Intl. REIT (2.3%), Northern Property REIT (2.3%) and Crombie REIT (1.8%).
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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on 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 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. This week an Inner Circle member asked us about a pharmaceutical firm whose shares recently had a strong run. Tekmira specializes in RNAi therapeutics which can “silence” disease-causing genes. The company is developing two drugs, one for Ebola and one for cancer. Pat looks at the progress of Tekmira’s drug trials and examines the company’s cash balance and its ability to continue developing its treatments in the years ahead. ...

ISHARES DEX UNIVERSE BOND INDEX FUND $30.34 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through brokers) mirrors the performance of the DEX Universe Bond Index. The 762 bonds in the portfolio have an average term to maturity of 9.53 years. The fund’s MER is 0.33%.

The bonds in the index are 68.0% government and 32.0% corporate.

The fund yields 3.2%, compared to the Short-Term Bond Fund’s 2.6%. Its yield to maturity is 2.79%, 0.95% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
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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 379 bonds with an average term to maturity of 2.87 years. The bonds in the index are 60.9% government and 30.1% 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.
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ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $27.58 (New York symbol ESR; buy or sell through brokers) has 73.6% of its assets invested in Russia, followed by Poland at 20.3%; Czech Republic, 3.0%; and Hungary, 2.4%.

The fund’s top holdings are Gazprom (Russia: gas utility), 17.3%; Sberbank (Russia: bank), 10.8%; Lukoil (Russia: oil), 10.2%; Magnit OJSC (Russia: retailing), 5.1%; and Novatek (Russia: natural gas), 3.9%. Its expense ratio is 0.67%.

The fund’s concentration in Russia, and in resources, adds risk. But the long-term outlook for commodities, including oil, is positive.
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MARKET VECTORS VIETNAM ETF $18.84 (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 Bank for Foreign Trade of Vietnam, 9.1%; Vincom Corp. (real estate), 7.7%; PetroVietnam Fertilizer & Chemical, 7.0%; Baoviet Holdings (finance and insurance), 6.5%; PetroVietnam Technical Services (oilfield services), 5.2%; Saigon Thuong Tin Commercial Bank, 5.1%; Minor International (a Thailand-based firm with hotels and fast-food restaurants in Vietnam), 5.1%; Charoen Pokphand Foods (a Thailand-based food conglomerate), 4.6%; PetroVietnam Drilling & Well Services (oilfield services), 4.6%; and Gamuda Bhd (a Malaysia-based construction group), 4.6%.

Market Vectors Vietnam ETF’s industry breakdown is as follows: Financials, 37.5%; Energy, 23.1%; Industrials, 11.7%; Materials, 9.7%; Consumer Discretionary, 9.1%; Consumer Staples, 4.4%; and Utilities, 2.9%. Its expense ratio is 0.76%.
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ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $37.54 (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 and 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 the New York exchange.

The fund’s top holdings are China Mobile, 9.6%; China Construction Bank, 9.0%; Industrial & Commercial Bank, 8.0%; Tencent Holdings, 7.1%, Bank of China, 6.1%; China Overseas Land & Investment, 4.1%; PetroChina, 4.1%, Agricultural Bank of China, 4.0%; and CNOOC, 3.9%.

The fund’s holdings give it the following industry breakdown: Financials, 56.0%; Telecommunications, 16.0%; Oil and Gas, 12.1%; Technology, 7.1%, Basic Materials, 3.7%; and Consumer Goods, 3.2%. Its expense ratio is 0.74%.
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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $28.64 (Toronto symbol BEP.UN; Units outstanding: 265.2 million; Market cap: $7.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.3%; www.brpfund.com) owns 196 hydroelectric generating stations, 11 wind farms and two natural-gas-fired plants. In all, it has 5,900 megawatts of generating capacity.

Roughly 35% of Brookfield Renewable’s generating capacity is in Canada, with another 50% in the U.S. and 15% in Brazil.

In the three months ended June 30, 2013, Brookfield’s revenue rose 43.6%, to $484 million from $337 million a year earlier. Cash flow jumped sharply, to $187 million, or $0.71 a share, from $87 million, or $0.33.
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BELL ALIANT INC. $26.76 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.1 billion; TSINetwork Rating: Average; Dividend yield: 7.1%; www.aliant.ca) sells phone and Internet services to 2.5 million customers in Atlantic Canada and rural Ontario and Quebec. It also provides wireless services through an alliance with BCE, which owns 45% of Bell Aliant. The company continues to replace copper wires with fibre optic cable. That’s attracting more highspeed Internet and digital TV customers. Strong demand for these services is also helping offset lower revenue from traditional phone services, which still supply 52% of the company’s revenue. Bell Aliant’s high-speed fibre optic systems now reach 725,000 homes, up from 650,000 at the start of this year. By the end of 2013, it plans to expand its network to 800,000 homes....

LOBLAW COS. $48.12 (Toronto symbol L; Shares outstanding: 282.1 million; Market cap: $13.4 billion; TSINetwork Rating: Above Average; Dividend yield: 2.0%; www.loblaw.ca) is cutting 275 jobs, mostly managerial and administrative positions at its head office. That’s about 1% of its total workforce.

The company did not say how much it expects to pay in severance and other costs. However, lower operating expenses will help Loblaw compete with other supermarket operators and big U.S.-based retailers like Wal-Mart and Target, which are selling more groceries in their Canadian stores.

In addition, the cuts will help eliminate duplication ahead of its $12.4-billion takeover of Shoppers Drug Mart.
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INNERGEX RENEWABLE ENERGY $9.15 (Toronto symbol INE; Shares outstanding: 95.0 million; Market cap: $869.4 million; TSINetwork Rating: Extra Risk; Dividend yield 6.3%; www.innergex.com) operates 23 hydroelectric facilities, five wind farms and one solar-power plant in Quebec, Ontario, B.C. and Idaho. Innergex gets 59% of its power from hydroelectric facilities. Wind farms supply 36% and solar generates 5%.

In contrast to Algonquin, Innergex is growing slowly, mostly by building its own hydroelectric and wind plants, rather than through acquisitions. Right now, it is developing or building eight projects.

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ALGONQUIN POWER & UTILITIES CORP. $6.79 (Toronto symbol AQN; Shares outstanding: 205.6 million; Market cap: $1.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.0%) has nearly tripled in size over the last year through a series of acquisitions.

Algonquin made four acquisitions in 2012, and it has completed another four so far in 2013. Most recently, it paid $140.7 million U.S. for a natural gas distributor in Georgia that serves 64,000 clients.

The company’s regulated utility businesses now provide water, electricity and natural gas to over 470,000 customers, up from 120,000 a year ago. In addition, Algonquin’s hydroelectric, thermal energy and wind facilities generate 1,100 megawatts of power, up from 460.
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TRANSCANADA CORP. $47.15 (Toronto symbol TRP; Shares outstanding: 707.0 million; Market cap: $33.0 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.transcanada.com) has completed the purchase of two more Ontario solar power facilities from Canadian Solar (Nasdaq symbol CSIQ) for $470 million.

TransCanada now owns three of the nine solar farms it agreed to buy from Canadian Solar in December 2011. It expects to take possession of the remaining six by the end of 2014.

The company has 20-year deals to sell the power from these nine solar farms, which cuts the risk of this investment.
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SUN LIFE FINANCIAL $35.32 (Toronto symbol SLF; Shares outstanding: 606.0 million; Market cap: $21.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.1%; www.sunlife.ca) sells savings, retirement, pension and life insurance products to individuals and corporations.

The company mainly operates in Canada, the U.S. and the U.K., but it has expanded into Asia, China and India. Sun Life has $590 billion of assets under management.

In the three months ended June 30, 2013, Sun Life’s earnings per share jumped 69.0%, to $0.71 from $0.42. Revenue rose 18.5%, to $3.7 billion from $3.1 billion.
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MANITOBA TELECOM SERVICES INC. $29.44 (Toronto symbol MBT; Shares outstanding: 67.8 million; Market cap: $2.0 billion; TSINetwork Rating: Average; Dividend yield: 5.8%; www.mts.ca) is down over 9% since the federal government’s October 8, 2013, decision to block the company’s recent deal to sell its Allstream subsidiary to an Egyptian billionaire.

Allstream provides integrated telephone, Internet and other communication services to over 50,000 businesses across Canada, as well as government agencies. Ottawa felt that selling Allstream to a foreign investor could risk national security.

Manitoba Tel’s main telecom business continues to perform well, thanks to strong demand for wireless and high-speed Internet services. However, Allstream is still incurring big losses.
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