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INTEL CORP. $23 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.0 billion; Market cap: $115.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.intel.com) is the world’s leading computer chip maker. Its products power 80% of the world’s personal computers.

In the three months ended June 29, 2013, Intel’s sales fell 5.1%, to $12.8 billion from $13.5 billion a year earlier. Sales of personal computer chips (which supply 63% of Intel’s total sales) fell 7.5%, while sales of chips for server computers were flat. Earnings declined 29.3%, to $2.0 billion from $2.8 billion. Due to fewer shares outstanding, earnings per share fell 27.8%, to $0.39 from $0.54.

Intel continues to invest heavily in new chips. It spent $2.52 billion (or 19.6% of its sales) on research in the latest quarter, up slightly from $2.51 billion (or 18.6% of sales) a year earlier.

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MICROSOFT CORP. $32 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.3 billion; Market cap: $265.6 billion; Priceto- sales ratio: 3.6; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.microsoft.com) continues to benefit from strong demand for its business software, particularly programs that run server computers and data centres.

However, falling demand for desktops and laptops is hurting sales of the company’s new Windows 8 operating system. Sales of mobile devices powered by Windows 8 have also suffered in the face of strong competition from other smartphones and tablets.

In its 2013 fiscal year, which ended June 30, 2013, Microsoft’s revenue rose 5.6%, to $77.8 billion from $73.7 billion in 2012. However, earnings fell 5.4%, to $27.0 billion, or $2.62 a share, from $28.5 billion, or $2.78 a share. These figures exclude several unusual items, such as a $900-million writedown of unsold Surface RT tablet computers. To spur sales, Microsoft has cut the price of these tablets by 30%.

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APPLE INC. $441 (Nasdaq symbol AAPL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 940.1 million; Market cap: $414.6 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.8%; TSINetwork Rating: Average; www.apple.com) gets 69% of its sales from its hugely popular mobile devices: the iPhone smartphone and the iPad tablet computer. The remaining 31% comes from its Mac computers and iPod music players.

In its 2013 third quarter, which ended June 29, 2013, Apple’s sales rose 0.9%, to $35.3 billion from $35.0 billion a year earlier. Thanks to strong demand for older, cheaper models, the company sold 31.2 million iPhones, up 20.0% from a year earlier. However, iPad sales fell 14.2%, to 14.6 million units. Apple also sold 6.6% fewer Mac computers, and 32.3% fewer iPods as many iPod users upgrade to iPhones.

Even with the higher sales, earnings in the quarter fell 21.8%, to $6.9 billion from $8.8 billion. Earnings per share fell 19.8%, to $7.47 from $9.32, on fewer shares outstanding.

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CISCO SYSTEMS INC. $26 (Nasdaq symbol CSCO; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.3 billion; Market cap: $137.8 billion; Priceto- sales ratio: 2.9; Dividend yield 2.6%; TSINetwork Rating: Average; www.cisco.com) is a leading maker of hardware and software that links and manages computer networks. The company’s hardware includes routers, local area network (LAN) and asynchronous transfer mode (ATM) switches, and dial-up access servers.

Like IBM and Texas Instruments (see box on page 73), Cisco is a good example of a tech company that has matured into a cyclical growth stalwart. Even though its sales growth has slowed in the past few years, Cisco still dominates its field. That’s partly because it has formed long-term relationships with government agencies and other large customers.

The company also continues to benefit from its 2011 restructuring plan, which included selling its money-losing consumer-products businesses and cutting jobs.

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PROCTER & GAMBLE CO. $80 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.7 billion; Market cap: $216.0 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.pg.com) began operating in 1837 and is now one of the world’s largest makers of household and personal-care products. It has 25 different brands that each generate over $1 billion in annual sales.

The company has five main divisions: Fabric Care and Home Care products, such as Tide laundry detergent and Duracell batteries (32% of 2012 sales, 26% of earnings); Beauty goods like Olay cosmetics (24%, 22%); Baby Care and Family Care products, including Pampers diapers (19%, 19%); Health Care items such as Crest toothpaste (15%, 17%); and Grooming products, including Gillette razors (10%, 16%). Wal-Mart accounts for 14% of the company’s sales.

The recession cut Procter’s sales by 5.5%, from $83.5 billion in 2008 to $78.9 billion in 2009 (fiscal years end June 30). Sales recovered to $82.6 billion in 2011, and rose to $83.7 billion in 2012.
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Emerging markets have been down lately but the long-term outlook remains sound. A good way to profit from that outlook with less risk is through low-fee exchange traded funds (ETFs). Here are two we follow regularly.

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Pat McKeough responds to many requests for specific advice on stocks to buy and other questions on investment strategy and the economy from the members of his Inner Circle. 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, we received a question from an Inner Circle member about one of the world’s leading makers of luxury accessories. In order to generate further growth Coach is relying on increasing overseas sales and on an expansion into more men’s products. Pat examines the company’s prospects in the face of stiffer competition and rising costs. ...

VISA INC. (New York symbol V; www.visa.com) operates the world’s largest electronic payments network. The company processes credit, debit, prepaid and commercial payments under the Visa, Visa Electron, Interlink and PLUS brands. Visa gets most of its revenue from fees it charges card issuers and merchants for using its network. These fees are based on payment volume, transactions processed and other factors. The responsibility for evaluating customer creditworthiness and collecting payments lies with the banks that issue the cards, not with Visa....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of investment advice, and shows you how you can put it into practice right away. Today’s tip: “The best way to outperform the market is to invest consistently—and to avoid going in and out of the market erratically trying to buy low and sell high.”...

TELUS (Toronto symbol T; www.telus.com) has 7.7 million wireless subscribers across Canada. It gets much more of its revenue from wireless than major competitor BCE—54% compared to BCE’s 32%. Telus gets the remaining 46% of its revenue from its traditional phone business, which has 3.4 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.3 million Internet subscribers and 712,000 Telus TV subscribers....

ACI WORLDWIDE (Nasdaq symbol ACIW; www.tsainc.com) makes software for processing transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. Its products also help cut fraud. In mid-February 2012, ACI completed its $540 million purchase of S1 Corp. This acquisition has been a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide....

Pat McKeough responds to many requests for specific advice on investing in stocks and other questions on investment strategy and the economy from the members of his Inner Circle. 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 stock that is a leader in developing drugs for viral diseases. Gilead is particularly strong in the treatment of hepatitis, a lucrative market. Pat examines the progress of Gilead’s attempt to win approval for a new hepatitis drug against stiff competition from other major pharmaceutical firms. ...

RUSSEL METALS $26.27 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.9 million; Market cap: $1.6 billion; Dividend yield: 5.3%) is one of North America’s largest metal distributors. It serves 39,000 clients at 54 locations in Canada and 12 in the U.S.

In the quarter ended March 31, 2013, revenue rose 2.4%, to $821.8 million from $802.9 million a year earlier. The steel-distribution division’s revenue fell 26%, and the metal-services business saw a 10% decline. The slower economy cut steel demand.

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CHEMTRADE LOGISTICS INCOME FUND $17.30 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics- .com; Units outstanding: 41.7 million; Market cap: $716.7 million; Dividend yield: 7.0%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other by-products as part of their activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid.

Chemtrade’s Marsulex subsidiary provides a range of environmental services, including improving air quality and treating and handling industrial waste.

In the three months ended March 31, 2013, Chemtrade’s revenue fell 7.8%, to $210.0 million from $227.9 million a year earlier. The decline mostly reflects lower prices for sulphuric acid on international markets. However, cash flow per unit rose 7.6%, to $0.71 from $0.66.

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ALIMENTATION COUCHE-TARD $63.38 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couche-tard.com; Shares outstanding: 179.4 million; Market cap: $11.6 billion; Dividend yield: 0.5%) reports 44.9% higher sales in the three months ended April 28, 2013, up to $8.8 billion from $6.1 billion a year earlier. The gain mostly came from Norway’s Statoil Fuel & Retail ASA, which it bought for $2.7 billion in June 2012 (all figures except share price in U.S. dollars).

Excluding one-time items, earnings per share rose 7.0%, to $0.61 from $0.57. The latest earnings missed the consensus estimate of $0.77 a share, but that was because the latest quarter included upfront costs related to Statoil’s new computer systems and reporting software.

The company’s outlook is positive. But while high gasoline prices are pushing up the company’s sales, they’re also causing motorists to cut back on driving. That’s hurting its fuel sales volumes, which is cutting its profit margins on the fuel it does sell. As well, fewer customers at the pumps means less traffic through the company’s stores.

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TIM HORTONS $58.90 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 153.1 million; Market cap: $9.0 billion; Dividend yield: 1.8%) has a long track record of successfully launching new products to take advantage of consumer trends.

The latest is its first gluten-free snack, the Gluten- Free Coconut Macaroon. Gluten-free baked goods are for people who can’t digest wheat or are concerned about the possible unhealthy effects of eating gluten, first popularized in the 2011 book Wheat Belly.

Tim Hortons is a buy....

PASON SYSTEMS $18.98 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.1 million; Market cap: $1.6 billion; Dividend yield: 2.7%) has lost a patent dispute with its main competitor involving its AutoDriller product, which runs drilling operations more accurately and efficiently. The judgment awards the competitor $52.9 million of damages.

Pason rents equipment for monitoring and managing land-based oil rigs. It also provides communication systems that companies use to remotely collect data from their drilling operations. Pason serves oil and gas firms and drilling contractors in Canada, the U.S., Mexico and Argentina.

In the quarter ended March 31, 2013, revenue fell 5.1%, to $109.3 million from $115.1 million a year earlier. Strong international sales were offset by slower activity in the U.S. and Canada. Cash flow per share fell 7.9%, to $0.58 from $0.63. Pason holds cash of $168.9 million, or $2.06 a share, and has no debt.
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strong>AEROPOSTALE $14.15 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 78.5 million; Market cap: $1.1 billion; No dividends paid) now plans to launch the Aeropo
This summer, Aeropostale plans to open small outlets inside Liverpool’s department stores across the country. It will also roll out standalone stores, with the first one scheduled to open in Mexico City’s Sante Fe Mall.

Aeropostale is still a hold.
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INTUITIVE SURGICAL $415.54 (Nasdaq symbol ISRG; TSINetwork Rating: Average) (515-507-5000; www.intuitivesurgical.com; Shares outstanding: 40.2 million; Market cap: $17.0 billion; No dividends paid) is down over 16% since it released a preliminary revenue forecast for the latest quarter that was below the consensus estimate.

In the second quarter of 2013, the company expects to report revenue of about $575 million, up 7% from $537 million a year earlier. However, that’s well below the consensus estimate of $629.8 million.

Intuitive expects revenue from sales of replacement parts, training and other services to rise 18%, but it predicts a 6% decline in da Vinci system sales. That’s mainly due to tightening hospital budgets in the U.S.

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WYNDHAM WORLDWIDE $59.05 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 140.3 million; Market cap: $8.3 billion; Dividend yield: 1.6%) is one of the world’s largest hospitality companies, with 7,380 franchised hotels worldwide.

In addition to hotels, Wyndham manages vacation resorts, rental properties, luxury clubs and time-shares. The company now has over 106,000 vacation rental properties worldwide.

In the three months ended March 31, 2013, the hotel and resort operator’s revenue rose 9.4%, to $1.13 billion from $1.04 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 push up Wyndham’s occupancy rate by 2.4%.
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ATLANTIC TELE-NETWORK $54 (Nasdaq symbol ATNI; TSINetwork Rating: Speculative) (340- 777-8000; www.atni.com; Shares outstanding: 15.7 million; Market cap: $855.6 million; Yield: 1.9%) expects to soon complete the sale of its Alltel wireless business to AT&T (symbol T on New York) for cash of $780 million. In April 2010, Atlantic bought Alltel from Verizon Wireless for just $223 million.

In the three months ended March 31, 2013, Atlantic’s revenue fell 5.6%, to $172.9 million from $183.1 million a year earlier. Alltel accounted for $108.0 million of revenue in the latest quarter, and slowed in the latest quarter. Earnings fell 5.8%, to $8.8 million, or $0.56 a share, from $9.3 million, or $0.60 a share.

After the sale, Atlantic Tele-Network will still have telecom operations in the U.S. southwest, New England, New York State, Guyana, Bermuda and portions of the Caribbean islands.
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BELLATRIX EXPLORATION $6.74 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 107.9 million; Market cap: $715.5 million; No dividends paid) has entered into a joint venture agreement with Grafton Energy that should speed up the development of its Cardium shale oil deposits in Alberta.

Under the agreement, Grafton will pay Bellatrix $100 million. In return, it will get 54% of the production from a 29-well, $122- million drilling program. Grafton will receive this share of the wells’ output until it earns back its $100 million, plus an 8% return on its original investment. It will then hold a 33% interest in each well.

On top of that, Bellatrix plans to spend a total of $210 million to $220 million on exploration and development this year.
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TRILOGY ENERGY CORP. $29.90 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290- 2900; www.trilogy.com; Shares outstanding: 91.7 million; Market cap: $3.5 billion; Dividend yield: 1.4%) owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 54% of Trilogy’s production is natural gas. The remaining 46% is oil.

In the three months ended March 31, 2013, Trilogy produced 36,119 barrels of oil equivalent per day (including gas), up 3.2% from 35,014 barrels a year earlier. Cash flow per share was unchanged at $0.67.

Trilogy pays out just 15% of its cash flow as dividends. That gives it a low 1.4% yield, but it’s also letting the company maintain an active drilling program. In the first quarter of 2013, Trilogy spent $169 million on exploration and development, down 6.3% from $180.4 million a year earlier. The company drilled 35 wells, up from 31.
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ZARGON OIL & GAS $6.39 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 30.0 million; Market cap: $189.3 million; Dividend yield: 11.3%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota. The company’s production is 67% oil and 33% gas.

In the three months ended March 31, 2013, Zargon produced 7,648 barrels of oil equivalent per day, down 13.4% from 8,834 barrels a year earlier. Cash flow per share was unchanged at $0.46.

Zargon expects cash flow of $2.03 a share in 2013. It trades at 3.1 times that estimate. But cash flow could fall to $1.60 a share in 2014. The shares yield a high 11.3%.
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ALARMFORCE $9.86(Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267- 2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $122.3 million; Dividend yield: 1.0%) has completed the strategic review of business opportunities that it launched in August 2012. This process included a possible sale of the company.

The review did not result in a takeover offer that the company felt reflected its value. As a result, it will now focus on growth.

AlarmForce’s outlook is bright, and it has potential to grow by offering new services to its subscribers. That includes its VideoRelay system, which lets users watch their homes through computers and smartphones.
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