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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on Canadian stocks and other investments 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....

GOOGLE INC. (Nasdaq symbol GOOG; www.google.com) is the world’s top Internet search engine, with about two-thirds of this market. It makes money by selling advertising on its websites. Google charges advertisers every time a user clicks on one of their ads. The company gets 93% of its revenue from advertising....

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 tips and stock market 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....

EMERA INC. (Toronto symbol EMA; www.emera.com) is Nova Scotia’s main power supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean. Other operations include the Brunswick pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in New Brunswick....

Every industry and group has its own special jargon. This specialized language always has the same purpose. It simplifies communications within the industry, and helps make insiders feel they are part of a tightly knit community. It also helps the group pursue its goals. It does that by shaping concepts so that they facilitate lines of thought and discussions that match the industry’s view of the world....

HECLA MINING COMPANY $3.61 (New York symbol HL; TSINetwork Rating: Extra Risk) (208-769- 4100; www.hecla-mining.com; Shares outstanding: 342.2 million; Market cap: $1.3 billion) explores for, mines and processes silver and gold in the U.S. and Mexico. Most of its silver output comes from its Greens Creek mine in Alaska and its Lucky Friday mine in Idaho.

In the three months ended June 30, 2013, Hecla’s revenue rose 27.3%, to $85.3 million from $67.0 million a year earlier. The company lost $0.03 a share, compared to a profit of $0.01. The loss mostly came from lower silver prices and costs related to its recent acquisition of Aurizon Mines.


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SHERRITT INTERNATIONAL $3.70 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.1 billion; Dividend yield: 4.7%) is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil and gas. It also manages 356 megawatts of power generation capacity in Cuba, with an additional 150 megawatts starting up this year.

The company is a major nickel producer, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and is Canada’s largest thermal coal producer.

In the three months ended June 30, 2013, Sherritt’s revenue fell 10.2%, to $338.5 million from $377.1 million a year earlier. Lower nickel, cobalt and coal prices were the main reasons for the drop. Cash flow per share declined 10.0%, to $0.18 from $0.20.
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AIMIA INC. $15.80 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 172.5 million; Market cap: $2.7 billion; Dividend yield: 4.3%) has finalized its deal for TD Bank to become the primary credit card issuer for Aeroplan, Aimia’s main loyalty program.

TD and Aimia are also negotiating a new agreement with Canadian Imperial Bank of Commerce, which has been Aimia’s banking partner in the Aeroplan program for the past 22 years.

This agreement would let CIBC sell around half of its existing Aeroplan accounts to TD. That would cut the risk of these clients switching to other loyalty plans or banks.
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NISSAN MOTOR CO. (ADR) $20.32 (Nasdaq symbol NSANY; TSINetwork Rating: Above Average) (310-771-3111; www.nissan-global.com; Shares outstanding: 2.3 billion; Market cap: $46.6 billion; No dividends paid) is reviving its dormant Datsun brand with the launch of an under-$6,700 hatchback in India. Other Datsun models will follow over the next three years.

The company will use the Datsun name to compete for sales of lower-cost cars in emerging markets, partly to avoid tarnishing its Nissan brand’s reputation for higher-quality vehicles.

The reintroduction also puts Nissan in a good position to profit from rising car demand in other emerging markets, such as Russia, Southeast Asia, Latin America, the Middle East and Africa.
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WYNDHAM WORLDWIDE $58.84 (New York symbol WYN; TSINetwork Rating: Extra Risk) (973- 753-6000; www.wyndhamworldwide.com; Shares outstanding: 133.0 million; Market cap: $8.0 billion; Dividend yield: 2.0%) reported higher revenue and earnings in the latest quarter.

In the three months ended June 30, 2013, the hotel and resort operator’s revenue rose 10.0%, to $1.25 billion from $1.14 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 average occupancy rate slightly, to 55.2%.

Before one-time items, earnings rose 12.6%, to $0.98 a share from $0.87. The company continues to buy back its stock. In the latest quarter, it repurchased 2.9 million shares for $175 million. In 2012, it bought back 12.9 million shares for $623 million.
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ALARMFORCE $10.01 (Toronto symbol AF; TSINetwork Rating: Speculative) (1-800-267-2001; www.alarmforce.com; Shares outstanding: 12.2 million; Market cap: $122.7 million; Div. yield: 1.0%) has fired Joel Matlin, its long-time and high-profile president and CEO.

AlarmForce recently completed the strategic review of business opportunities that it launched in August 2012. That review included a possible sale of the company. The process did not result in a takeover offer that AlarmForce was willing to accept.

The firing may be related to the company’s failure to find a buyer. Or it may reflect the fact that AlarmForce’s growth in Canada has slowed—it added just 700 new subscribers in the last six months.
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DELPHI ENERGY $1.39 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 153.1 million; Market cap: $211.3 million; No dividends paid) explores for oil and natural gas in Alberta and B.C. Gas makes up 72% of Delphi’s daily output; the remaining 28% is oil.

In the three months ended June 30, 2013, Delphi’s average daily output fell 11.6%, to 7,635 barrels of oil equivalent (including gas) from 8,636 barrels a year earlier. Disruptions at third-party processing facilities, which cut the company’s output by 1,495 barrels a day, were the main reason for the decline. Those issues are now resolved.

Higher oil and prices offset the lower output, and that kept cash flow unchanged at $0.05 a share.
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strong>CALIAN TECHNOLOGIES $18.36 (Toronto symbol CTY; TSINetwork Rating: Speculative) (613-599-8600; www.calian.com; Shares outstanding: 7.5 million; Market cap: $138.4 million; Dividend yield: 6.1%) earned $0.43 a share in the three months ended June 30, 2013, down 4.4% from $0.45 a year ago. Revenue fell 2.1%, to $58.1 million from $59.3 million.

Fewer orders from Canadian federal government departments hurt results in the latest quarter. Still, Calian is well positioned to wait for a rebound in government orders, with cash of $31.3 million, or $4.17 a share, and no debt. Its dividend, which now yields a very high 6.1%, also looks safe.

Calian Technologies is still a buy....

BELLATRIX EXPLORATION $6.97 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266- 8670; www.bellatrixexploration.com; Shares outstanding: 107.9 million; Market cap: $756.5 million; No dividends paid) produces natural gas (70% of output) and oil (30%) in Alberta, B.C. and Saskatchewan.

Bellatrix continues to enter into joint ventures to speed up the development of its Cardium shale oil deposits in west-central Alberta.

It has agreed to sell a 50% interest in its producing wells in the Ferrier and Willesden Green area to Daewoo International Corp. and Devonian Natural Resources Private Equity Fund for $52.5 million.
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WESTJET AIRLINES $21.66 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1- 877-493-7853; www.westjet.com; Shares outstanding: 118.4 million; Market cap: $2.8 billion; Dividend yield: 1.9%) reports that its earnings rose 5.2% in the three months ended June 30, 2013, to a record $44.7 million from $42.5 million a year earlier.

Earnings per share rose 9.7%, to $0.34 from $0.31, on fewer shares outstanding. Revenue increased 4.3%, to $843.7 million from $809.3 million.

Demand for WestJet’s flights remains high, and it continues to enter into partnerships with other airlines. The launch of West- Jet Encore, its new regional airline, has also gone well. All of these strengths should keep WestJet’s revenue—and profits—growing.
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CHIPOTLE MEXICAN GRILL $403.00 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $12.6 billion; No dividends paid) is a Denver- based Mexican restaurant chain. It charges slightly higher prices than fast food companies, but it offers better quality food, including naturally raised meat, and superior decor and service.

In the three months ended June 30, 2013, Chipotle’s sales rose 18.2%, to $816.8 million from $690.9 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 5.5%. Moreover, Chipotle opened 44 new outlets and now has 1,502 locations. For all of 2013, it plans to open 165 to 180 restaurants. Earnings rose 7.6%, to $87.9 million, or $2.84 a share, from $81.7 million, or $2.68.

The company’s earnings would have been even higher, but it spent 33.1% of its sales on food and ingredients in the latest quarter, up from 32.1% a year ago. Prices rose particularly sharply for chicken, dairy products and salsa ingredients.
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DOMINO’S PIZZA $61.50 (New York symbol DPZ; TSINetwork Rating: Average) (734-930-3030; www.dominos.com; Shares outstanding: 55.7 million; Market cap: $3.5 billion; Dividend yield: 1.3%) is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,440 outlets in the U.S. and over 70 other countries. Franchisees run most of these stores.

The company’s earnings per share rose 21.3% in the quarter ended June 16, 2013, to $0.57 from $0.47 a year earlier. The latest figure beat the consensus estimate of $0.56. Sales gained 10.0%, to $414.0 million from $376.1 million. That also exceeded the consensus estimate of $405.1 million. Same-store sales rose 5.8% internationally and 6.7% in the U.S.

Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting by moving into ordering online and through software applications, or apps, on smartphones. In addition, it still has lots of growth potential overseas.
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CARFINCO FINANCIAL GROUP $9.45 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888-486-4356; www.carfinco.com; Shares outstanding: 26.4 million; Market cap: $250.2 million; Dividend yield: 5.1%) provides car loans to consumers who don’t meet the criteria of traditional lenders, like banks.

In the three months ended June 30, 2013, Carfinco’s revenue rose 10.6%, to $19.5 million from $17.7 million a year earlier. Earnings rose 7.0%, to $5.8 million from $5.4 million. Earnings per share were unchanged at $0.22 on more shares outstanding.

The stock is up 19% since we first recommended it in our July 2012 issue at $7.93. The company’s outlook remains positive, and the shares trade at just 11.1 times Carfinco’s latest 12 months of earnings.
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INTACT FINANCIAL CORP. $61.99 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 132.0 million; Market cap: $8.2 billion; Dividend yield: 2.8%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.

In the three months ended June 30, 2013, Intact’s revenue rose 10.4%, to $2.18 billion from $1.98 billion a year earlier. The company earned $0.89 a share, down sharply from $1.35. However, the latest results include a one-time loss of $0.79 a share related to storms and flooding in Alberta.

Earlier this year, Ontario’s minority Liberal government agreed to meet an NDP demand for a 15% cut to auto insurance premiums. This was in exchange for NDP support on the June 2013 provincial budget, which avoided triggering an election.
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BROADRIDGE FINANCIAL SOLUTIONS $30.69 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 121.2 million; Market cap: $3.7 billion; Dividend yield: 2.7%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 85% of all proxy votes in the U.S.

In its fiscal 2013 fourth quarter, which ended June 30, 2013, Broadridge’s earnings jumped 61.4%, to $134.6 million from $83.4 million a year earlier. Pershare earnings rose 67.2%, to $1.12 from $0.67, on fewer shares outstanding.

If you disregard unusual items, such as writedowns and costs to integrate recent acquisitions, Broadridge’s per-share earnings would have risen 12.7%, to $1.15 from $1.02. On that basis, the company’s latest earnings beat the consensus estimate of $1.09 a share.
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THE CHURCHILL CORP. $9.11 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.6 million; Market cap: $224.1 million; Dividend yield: 5.3%) has reported earnings of just $485,000, or $0.02 a share, in the three months ended June 30, 2013. However, that’s a big improvement from a loss of $4.3 million, or $0.18 a share, a year earlier.

Churchill’s long-term prospects are sound, and the stock has rebounded from its low of $7 earlier this year. The company’s order backlog stood at $1.81 billion at the end of June 2013, up 15.2% from $1.57 billion a year previous. Meanwhile, its dividend, which yields a high 5.3%, appears safe.

However, the stock trades at a high 31.4 times the company’s forecast 2013 earnings of $0.29 a share, and its long-term debt of $150.2 million, which is a high 67% of its market cap, adds risk.
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WAJAX CORP. $36.32 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.7 million; Market cap: $601.0 million; Dividend yield: 6.6%) sells and services cranes, forklifts and other heavy equipment. It also sells related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions).

In the three months ended June 30, 2013, Wajax’s revenue declined 6.4%, to $362.1 million from $386.6 million a year earlier. Earnings fell 26.8%, to $13.5 million, or $0.81 a share, from $18.5 million, or $1.11.

The declines mostly came from reduced activity in the Western Canadian oil and gas industry, which hurt results at Wajax’s power systems business. Lower mining equipment and construction sales more than offset strength in the materials-handling market.
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MCCOY CORP. $6.25 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780-453-8451; www.mccoyglobal.com; Shares outstanding: 26.8 million; Market cap: $167.6 million; Dividend yield: 3.2%) operates through two divisions: Mobile Solutions and Energy Products and Services.

Energy Products and Services sells hydraulic equipment, including power tongs, for drilling rigs. Power tongs are large wrench-like tools that tighten and loosen the pipe in the drill hole.

Mobile Solutions builds heavy-duty trailers for U.S. and Canadian clients in the oil and gas, wind energy, infrastructure and construction industries.
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LEON’S FURNITURE LTD. $13.30 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243- 7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $930.0 million; Dividend yield: 3.0%) reports that its sales jumped to $480.6 million in the three months ended June 30, 2013, from $162.1 million a year earlier. Earnings rose 60.4%, to $14.4 million, or $0.20 a share, from $9.0 million, or $0.13.

The latest three months was the first full quarter in which the furniture chain owned former rival The Brick. Its $700-million purchase of The Brick closed on March 28, 2013.

The Brick operates 234 stores across Canada, while Leon’s has 76 outlets in every province except B.C. Leon’s and The Brick will continue to operate as separate chains.
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TIM HORTONS $58.56 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 153.1 million; Market cap: $8.8 billion; Dividend yield: 1.8%) operates 3,468 coffee-anddonut shops in Canada, 807 in the U.S. and 29 in the Persian Gulf.

In the three months ended June 30, 2013, Tim Hortons’ sales rose 1.9%, to $800.1 million from $785.6 million a year earlier. Same-store sales increased 1.5% at its Canadian outlets and 1.4% in the U.S. Earnings per share rose 17.4%, to $0.81 from $0.69.

The company continues to benefit from new menu items it has recently introduced, such as panini sandwiches. It also raised its prices to cover higher ingredient costs.
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