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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 stock market advice, and shows you how you can put it into practice right away. Today’s tip: “Base your investment decisions of the value and quality of the stocks you’re considering, not stock price flip-flops.”...

LEON’S FURNITURE LTD. (Toronto symbol LNF; www.leons.ca) built its 75-store furniture chain on its four main strengths: a huge selection of furniture, appliances and electronics; a lowest-price guarantee; strong after-sales service; and aggressive TV, radio and print advertising. In the three months ended March 31, 2013, Leon’s sales rose 3.2%, to $162.5 million from $157.4 million a year earlier. However, earnings fell 36.9%, to $5.4 million, or $0.08 a share....

ROYAL BANK OF CANADA (Toronto symbol RY; www.rbc.com) is Canada’s largest bank, with $867.5 billion of assets. Royal recently paid $3.7 billion for Ally Financial’s Canadian operations. This business mainly provides car loans through over 1,600 dealerships across the country. It also offers no-fee savings accounts and consumer and business loans....

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 about a stock that made headlines in the past week. Popular athletic wear maker lululemon is dealing with the unexpected departure of CEO Christine Day in the wake of well publicized manufacturing problems. Pat examines the company’s financial outlook and its future prospects in a competitive activewear market. ...

GOOGLE INC. (Nasdaq symbol GOOG; www.google.com) is the world’s top Internet search engine, with about two-thirds of this market. The company makes money by selling advertising on its websites. Google gets 96% of its revenue from advertising. The company also offers a variety of free services such as Gmail (email), YouTube (videos) and Google+ (social networking). These services help draw more users to Google’s websites, which lets the company sell more ads and charge higher ad rates....

TIM HORTONS INC. (Toronto symbol THI; www.timhortons.com) is the largest fast-food company in Canada, with 3,453 outlets that mainly serve coffee and donuts. The company also has 808 U.S. stores. The stock has moved up lately in response to demands from Highfields Capital Management, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares. Highfields has proposed several ways to boost shareholder value, including slowing Tim Hortons’ expansion in the U.S., where it faces intense competition from larger chains like McDonald’s, Dunkin’ Donuts and Starbucks....

MANITOBA TELECOM SERVICES INC. (Toronto symbol MBT; www.mts.ca) gets around 55% of its revenue from its 1.3 million telephone and wireless customers in Manitoba. The remaining 45% has come from its Allstream division, which sells integrated telephone, Internet and other communication services to over 50,000 businesses across Canada. Following a strategic review, Manitoba Telecom has agreed to sell its Allstream subsidiary to Accelero Capital Holdings, a private firm controlled by Egyptian billionaire Naguib Sawiris....

VISA INC. $183 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 792.0 million; Market cap: $144.9 billion; Price-to-sales ratio: 10.9; Dividend yield: 0.7%; TSINetwork Rating: Above Average; 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.


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PFIZER INC. $28 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 7.1 billion; Market cap: $198.8 billion; Price-to-sales ratio: 3.6; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.pfizer.com) has completed its plan to hand out shares in its 80.2%-owned animalhealth subsidiary to its own shareholders. This business, ZOETIS INC. $31 (New York symbol ZTS, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 500.0 million; Market cap: $15.5 billion; Price-to-sales ratio: 3.6; Dividend yield: 0.8%; TSINetwork Rating: Average; www.zoetis.com) makes drugs and vaccines for livestock and pets.

Pfizer set the exchange ratio at 0.9898 of a Zoetis share for each Pfizer share tendered. Due to much stronger-than-expected demand for Zoetis stock, Pfizer will accept less than half of the shares tendered to the offer.

Zoetis has long-term appeal. The company spends around 8% of its sales on research, which should help it profit as developing countries like China raise more livestock for food. However, the stock trades at a high 22.0 times Zoetis’s forecast 2013 earnings of $1.41 a share. Zoetis pays a quarterly dividend of $0.065 a share, for a 0.8% annualized yield.
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3M COMPANY $110 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 690.2 million; Market cap: $75.9 billion; Priceto- sales ratio: 2.5; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.3m.com) makes over 55,000 consumer and industrial products.

The company plans to spend 6% of its revenue on research by 2017, up from 5.5% in 2012. That will slow 3M’s earnings growth, but it has a long history of developing successful new products. Right now, 34% of the company’s revenue comes from items it has launched in the past five years. The extra research spending should raise this figure to 40% by 2017.

3M is a buy.
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HONDA MOTOR CO. LTD. ADRs $36 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $64.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.honda.com) sold 255,540 cars in China in the first five months of 2013. That’s down 2.4% from the same period a year earlier. Chinese consumers continue to boycott Japanese products because of a dispute between the two countries over several small islands in the East China Sea.

The company hopes to spur sales by launching 12 new models in China by 2015. These cars will have a number of new features, including better pollution control and safety equipment. In addition, Honda will move some of its research activities to China and buy more parts from local suppliers.

Honda is a buy.
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ARCHER DANIELS MIDLAND CO. $34 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 658.8 million; Market cap: $22.4 billion; Priceto- sales ratio: 0.2; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.adm.com) is looking to sell its cocoa business, which sells cocoa powder, cocoa butter and related ingredients to chocolate and confectionery makers. This operation accounts for about 4% of the company’s sales.

The cocoa business’s profits have suffered lately, because high inventories have depressed prices. Selling it would give Archer around $2 billion that it can put toward its upcoming $3.4-billion purchase of the remaining 80.2% of GrainCorp, a leading Australian grain-storage and shipping company.

Archer Daniels Midland is a buy....

ALLIANT ENERGY CORP. $49 (New York symbol LNT; Income Portfolio, Utilities sector; Shares outstanding: 119.6 million; Market cap: $5.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.8%; TSINetwork Rating: Average; www.alliantenergy.com) sells electricity and natural gas to 1.4 million residential and business customers in Wisconsin, Iowa and Minnesota.

Like Ameren (see left), Alliant benefited from colder- than-normal winter weather. The company earned $79.3 million, or $0.72 a share, in the first quarter of 2013, up 45.5% from $54.5 million, or $0.50 a share, a year earlier. Revenue rose 12.3%, to $859.6 million from $765.7 million.

Recent rate hikes in Iowa will help offset lower rates in Wisconsin. That should push up Alliant’s earnings to $3.30 a share in 2013 from $3.05 in 2012. The stock trades at a reasonable 14.8 times that estimate. The $1.88 dividend yields 3.8%.
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AMEREN CORP. $34 (New York symbol AEE; Income Portfolio, Utilities sector; Shares outstanding: 242.6 million; Market cap: $8.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 4.7%; TSINetwork Rating: Average; www.ameren.com) sells power and natural gas to 3.3 million customers in Illinois and Missouri.

The company is selling its energy marketing business and five of its non-regulated coal-fired power plants in Illinois to Dynegy Inc. (New York symbol DYN). It aims to complete the sale in the fourth quarter of 2013.

Ameren’s unregulated power plants supply 20% of its revenue. However, power demand has fallen in Illinois, and Ameren is paying more to comply with stricter environmental regulations. That has cut these plants’profits.
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NCR CORP. $33 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 164.4 million; Market cap: $5.4 billion; Price-to-sales ratio: 0.9; No dividends paid; TSINetwork Rating: Average; www.ncr.com) is a leading maker of automated teller machines (ATMs), checkout scanners, cash registers and self-serve kiosks.

In February 2013, the company paid $791 million for Israel-based Retalix, whose software helps retailers manage their sales and track inventories. Retailers with a combined 70,000 locations in over 50 countries use Retalix’s products. NCR feels Retalix’s expertise will improve its point-of-sale terminals and self-serve kiosks.

In the three months ended March 31, 2013, Retalix contributed $50 million to NCR’s revenue. That helped push up the total by 13.3% in the latest quarter, to $1.4 billion from $1.2 billion a year earlier. The acquisition should add $255 million to the company’s full-year revenue.
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STANLEY BLACK & DECKER INC. $77 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 161.9 million; Market cap: $12.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.5%; TSINetwork Rating: Average; www.stanleyblackanddecker.com) earned $163.1 million in the first quarter of 2013, down 1.3% from $165.2 million a year earlier.

Due to fewer shares outstanding, earnings per share rose 5.1% to $1.03. These figures exclude costs to integrate its $826.4-million purchase of Infastech, a Hong Kong-based fastener maker that serves automotive, electronic, aerospace and construction clients. Infastech should add $0.20 a share to Stanley’s yearly earnings.

Sales rose 2.5%, to $2.5 billion from $2.4 billion. Infastech’s contribution offset weaker sales of tools and other products and the negative impact of exchange rates.
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TEXAS INSTRUMENTS INC. $35 (Nasdaq symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $38.5 billion; Price-to-sales ratio: 3.2; Dividend yield: 3.2%; TSINetwork Rating: Average; www.ti.com) continues to benefit from its focus on analog chips, which convert inputs like touch, sound and pressure into electronic signals. Carmakers and other industrial clients continue to buy more of these chips from the company. However, its sales to makers of computers and video game consoles remain weak.

The company recently said that it expects revenue of $2.99 billion to $3.11 billion in the second quarter of 2013. The midpoint of that range— $3.05 billion— missed the consensus estimate of $3.06 billion. The company also expects earnings of $0.39 to $0.43 a share. The midpoint of $0.41 matched the consensus forecast.

Texas Instruments is a hold....

ENCANA CORP. $17 (New York symbol ECA;Conservative Growth Portfolio, Resources sector;Shares outstanding: 735.5 million; Market cap: $12.5billion; Price-to-sales ratio: 2.9; Dividend yield: 4.7%;TSINetwork Rating: Average; www.encana.com) is amajor North American natural gas producer that isincreasing its oil output.

In the quarter ended March 31, 2013, Encana’s oilproduction rose 48.5%, to 43,500 barrels a day from29,300 a year earlier. Encana expects to increase its oilproduction to 70,000 to 75,000 barrels a day by theend of 2013. It sold some of its U.S. gas properties in2012, so gas production fell 12.1% in the quarter. Gasstill accounted for 92% of Encana’s output.

Due to lower oil and gas prices, Encana’s earningsfell 25.4%, to $179 million from $240 million a yearearlier. Earnings per share declined 27.3%, to $0.24from $0.33, on slightly fewer shares outstanding.These figures exclude several unusual items, particularlygains related to hedging. Cash flow per share fell43.2%, to $0.79 from $1.39. Revenue declined 41.1%,to $1.1 billion from $1.8 billion.
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CENOVUS ENERGY INC.$28 (New York symbol CVE;Conservative Growth Portfolio,Resources sector; Sharesoutstanding: 755.6 million;Market cap: $21.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.3%; TSINetworkRating: Average; www.cenovus.com) gets half itsoutput from the western Canadian oil sands.Conventional oil and gas wells supply the other half.

U.S.-based Phillips 66 (New York symbol PSX)owns 50% of Cenovus’s main Foster Creek and ChristinaLake oil sands projects in Alberta. These assetsproduce heavy bitumen, which Cenovus ships to its50%-owned refineries in Illinois and Texas. Phillips 66owns the other 50% of these operations.

In the first three months of 2013, Cenovus produced271,100 barrels of oil equivalent a day (66% oil and34% gas), up 3.1% from 262,900 barrels a year earlier.However, lower oil prices cut Cenovus’s revenueby 5.4%, to $4.3 billion from $4.6 billion a year earlier(all amounts except share price and market cap inCanadian dollars).
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APACHE CORP. $83 (New York symbol APA;Aggressive Growth Portfolio, Resources sector;Shares outstanding: 391.9 million; Market cap: $32.5billion; Price-to-sales ratio: 2.0; Dividend yield: 1.0%;TSINetwork Rating: Average; www.apachecorp.com)produces oil and gas in the U.S., Canada, the U.K.,Australia, Egypt and Argentina.

The company plans to sell some of its less importantproperties this year, including its offshore oil and gasholdings in the Gulf of Mexico. Offshore drilling ismuch riskier than Apache’s onshore operations. In addition,the 2010 sinking of the Deepwater Horizon rigand the resulting oil spill led to new safety rules thathave raised Apache’s costs.

As well, political uncertainty in Egypt will likelyprompt Apache to try to sell its gas operations there.Egypt supplies 20% of Apache’s gas output.
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CHEVRON CORP. $118 (New York symbol CVX;Conservative Growth Portfolio, Resources sector;Shares outstanding: 1.9 billion; Market cap: $224.2billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%;TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oilcompany in the U.S. after ExxonMobil.

Chevron continues to make progress on two bigAustralian projects. The first is its 47.3%-owned Gorgonnatural gas development off the country’s westcoast. Gorgon, which includes afacility to liquefy gas for shipping,is now 60% complete and shouldstart producing in 2015. Chevron’sshare of Gorgon’s $52-billioncost is $24.6 billion. Its reserveswill last 40 years.

Another big Australian projectis Chevron’s 64.14%-ownedWheatstone LNG facility on thecountry’s west coast. An offshoreoil field will supply 80% of thegas for this plant; Chevron owns80.17% of the joint venture thatwill build and operate the platformsand supply lines. Thisproject is 10% complete andshould start up in 2016. Wheatstone’sreserves should last 30years. Chevron’s share of the $29-billion cost is $18.6billion.
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MONSANTO CO. $101 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 533.8 million; Market cap: $53.9 billion; Price-to-sales ratio: 3.7; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.monsanto.com) reported that its sales in the three months ended May 31, 2013 rose 0.7%, to $4.25 billion from $4.22 billion a year earlier.

Sales of genetically modified seeds (72% of total sales) fell 2.4% on weaker demand for its soybean and cotton seeds. However, sales at the Agricultural Productivity division (28%) rose 9.4% due to higher selling prices for its Roundup weed killer.

Due to higher costs to make its seeds, earnings in the quarter fell 3.4%, to $1.68 a share from $1.74 a year earlier. If you exclude a one-time tax charge, earnings per share rose 1.8%, to $1.66 from $1.63.
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WAL-MART STORES INC. $75 (New York symbol WMT; Conservative Growth Portfolio: Consumer sector; Shares outstanding: 3.3 billion; Market cap: $247.5 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.walmart.com) is the world’s largest retailer. It has 10,800 stores in the U.S. and 26 other countries, including over 3,150 supercentres, which sell groceries as well as general merchandise. Groceries now account for 55% of Wal-Mart’s U.S. sales. Offering groceries helps encourage repeat visits.

Wal-Mart uses its large size to negotiate better prices with its suppliers. That gives it a big advantage over its competitors. The company has also invested heavily in computer systems that track its customers’ buying patterns. This information helps Wal-Mart quickly adjust its inventories to respond to changing trends.

The company’s sales rose 15.7%, from $405.6 billion in 2009 to $469.2 billion in 2013 (Wal-Mart’s fiscal year ends January 31). Earnings rose 25.8%, from $13.5 billion in 2008 to $17.0 billion in 2013. Earnings per share jumped 46.8%, from $3.42 to $5.02, on fewer shares outstanding.
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Pat McKeough responds to many requests for advice on specific stocks and other questions on investment 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. Our Inner Circle members ask Pat many questions about familiar stocks that are well known to investors, but he also gets a lot of requests to give his opinion on specific penny stocks in the resource sector. This week, in reply to a question on DNI Metals, Pat looks at the numerous risks this stock faces as it pioneers a technology that has had only limited success so far....

DOMINO’S PIZZA (New York symbol DPZ; www.dominos.com) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,040 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores. Excluding one-time items, the company’s earnings per share rose 25.5% in the quarter ended March 24, 2013, to $0.59 from $0.47 a year earlier. Sales rose 8.6%, to $417.6 million from $384.6 million. Same-store sales rose 6.5% internationally and 6.2% in the U.S....