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CGI GROUP INC. $30 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 309.3 million; Market cap: $9.3 billion; Price-to-sales ratio: 1.5; No dividends paid; TSINetwork Rating: Extra Risk; www.cgi.com) has won contracts from the Kentucky and Louisiana health cooperatives. Created under the Affordable Care Act, also known as Obamacare, these are private, non-profit organizations that sell low-cost health insurance to individuals and small businesses.

For the next five years, CGI’s computer-outsourcing expertise will help them automate their billing and claims-processing functions.

CGI Group is a buy....

TORSTAR CORP. $6.17 (Toronto symbol TS.B; Shares outstanding: 79.8 million; Market cap: $492.4 million; TSINetwork Rating: Above Average; D i v i d e n d y i e l d : 7 . 7 % ; www.torstar.com) gets 70% of its revenue from its newspapers, including The Toronto Star, Canada’s largest daily newspaper by circulation. The remaining 30% comes from Harlequin, a leading romance novel publisher.

In the first quarter of 2013, Torstar’s earnings fell 76.2%, to $4.2 million, or $0.05 a share. A year earlier, it earned $17.5 million, or $0.22 a share. If you exclude unusual items, earnings per share would have declined 36.4%, to $0.14.

Revenue fell 4.8%, to $313.4 million from $329.3 million. Lower advertising revenue offset higher distribution revenue at Torstar’s weekly community papers as it expanded into new markets. Harlequin’s revenue fell 2.9%, excluding the negative impact of foreign exchange rates. That’s because rising e-book sales failed to offset slowing demand for printed books.
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TRANSCONTINENTAL INC. $12 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 77.9 million; Market cap: $934.8 million; Price-to-sales ratio: 0.4; Dividend yield: 4.8%; TSINetwork Rating: Average; www.tctranscontinental.com) gets 68% of its revenue from its commercial printing business, which is the largest in Canada. The remaining 32% comes from publishing newspapers and magazines.

In its 2013 second quarter, which ended April 30, 2013, Transcontinental’s revenue fell 0.2%, to $521.3 million from $522.4 million a year earlier. Revenue from six recently acquired printing plants in Canada helped offset the loss of a contract to print flyers for the now-closed Zellers retail chain.

So far, the company has realized annual savings of $30 million by combining the new plants with its current operations. Even so, earnings fell 2.0% in the latest quarter, to $34.8 million from $35.5 million. Earnings per share were unchanged at $0.44 on fewer shares outstanding.
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ANDREW PELLER LTD. $12 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.3 million; Market cap: $171.6 million; Price-to-sales ratio: 0.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.andrewpeller.com) reported that its sales rose 4.4% in the fiscal year ended March 31, 2013, to a record $289.1 million from $276.9 million in 2012. The winemaker continues to benefit from its November 2011 licensing deal with the Wayne Gretzky Estates winery. The 2011 acquisition of a home wine making kit company, plus the launch of several new products, also contributed to the higher sales.

Peller earned $1.12 a share for the year, up 20.4% from $0.93. The company also raised its dividend for the fifth time in eight years. The new annual rate of $0.40 a share, up 11.1% from $0.36, yields 3.3%.

Andrew Peller is a buy.

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NORDION INC. $7.73 (Toronto symbol NDN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 61.9 million; Market cap: $478.5 million; Price-to-sales ratio: 2.0; Dividend suspended in September 2012; TSINetwork Rating: Extra Risk; www.nordion.com) is selling its Targeted Therapies division to U.K.-based BTG plc. This business makes TheraSphere, a process that Nordion developed for treating liver cancer using millions of small glass beads that contain radioactive materials.

Nordion will receive $185 million for Targeted Therapies (all amounts except share price and market cap in U.S. dollars). In addition, the company will continue to make TheraSphere on BTG’s behalf for three years after the sale closes in June 2013. BTG has an option to extend this arrangement for two more years.

Without unusual items (but including the Targeted Therapies division), Nordion lost $1.8 million, or $0.03 a share, in the three months ended April 30, 2013. A year ago, it earned $4.8 million, or $0.08 a share. Revenue rose 12.1%, to $56.1 million from $50.0 million. That was mainly due to the favourable timing of sales of equipment for sterilizing food and surgical tools.

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DUNDEE CORP. $22 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 54.1 million; Market cap: $1.2 billion; Price-to-sales ratio: 1.9; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) is a holding company with investments in wealth management, real estate, resources and agriculture.

The company recently completed its plan to set up 70%-owned DREAM UNLIMITED CORP. $12 (Toronto symbol DRM) as a separate, publicly traded firm. DREAM, which was formerly the company’s Dundee Realty Corp. subsidiary, develops and manages commercial and residential real estate in North America and Europe. Insiders still hold 30% of DREAM.

Dundee shareholders received one share of DREAM for each Dundee share they held. Investors are only liable for capital gains taxes when they sell their new shares.

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CANADIAN IMPERIAL BANK OF COMMERCE $77 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 399.8 million; Market cap: $30.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.0%; TSINetwork Rating: Above Average; www.cibc.com) is the fifth-largest Canadian bank, with $397.7 billion of assets.

CIBC has the highest exposure to Canada of all the big five banks: its domestic operations now supply 85% of its revenue. Its international businesses mainly consist of wealth management services in the U.S. and retail banking in the Caribbean.

In the three months ended April 30, 2013, CIBC earned $876 million, up 4.3% from $840 million a year earlier. Earnings per share rose 6.0%, to $2.12 from $2.00, on fewer shares outstanding. These figures exclude several unusual items, mainly losses on securities the bank holds.

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BANK OF MONTREAL $60 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 648.1 million; Market cap: $38.9 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.9%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with $555.3 billion of assets.

In the three months ended April 30, 2013, the bank’s revenue fell 0.4%, to $3.94 billion from $3.96 billion a year earlier.

Revenue was flat at the Canadian retail banking operations, which account for 39% of Bank of Montreal’s overall revenue. The value of this division’s business loans rose 12%, and personal loans increased 10%. However, lower interest rates on new loans offset these gains.

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TORONTO-DOMINION BANK $81 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 922.1 million; Market cap: $74.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with $826.4 billion of assets.

In the three months ended April 30, 2013, TD’s earnings rose 5.8%, to $1.8 billion from $1.7 billion a year earlier. Because of more shares outstanding, earnings per share rose 4.4%, to $1.90 from $1.82.

Revenue increased 4.3%, to $6.0 billion from $5.75 billion. Revenue at TD’s Canadian retail banking division (which supplies 44% of the bank’s overall revenue) rose 1.5%, as its credit card holders spent more and demand rises for home mortgages and car loans.

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ROYAL BANK OF CANADA $59 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $82.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.3%; TSINetwork Rating: Above Average; 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.

If you exclude unusual items, such as the cost of integrating this business, Royal earned $2.0 billion in the quarter ended April 30, 2013. That’s up 13.4% from $1.7 billion a year earlier. Earnings per share rose 14.2%, to $1.29 from $1.13, on fewer shares outstanding. The Ally business contributed $12 million to Royal’s latest earnings. As well, more of Royal’s borrowers are repaying their loans on time. The bank set aside $288 million for potential bad loans, down 17.2% from $348 million a year earlier.

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TECK RESOURCES LTD. $24 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 580.1 million; Market cap: $13.9 billion; Price-tosales ratio: 1.3; Dividend yield: 3.8%; TSINetwork Rating: Average; www. teck.com) is down 35% since we made it our Stock of the Year for 2013.

The drop is mainly because slowing industrial activity in China and elsewhere has hurt prices for its metallurgical coal, which is a key ingredient in steelmaking. In 2012, coal accounted for 45% of Teck’s revenue, and 51% of its earnings.

In response to the weaker demand, Teck and other coal producers are cutting production. That should support prices as steelmakers use up their inventories. Moreover, Teck has built strong relationships with its major customers, so they are unlikely to switch to other coal suppliers. Teck’s high-quality coal also helps steelmakers improve their efficiency.

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BANK OF NOVA SCOTIA $56 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $67.2 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.scotiabank.com) is Canada’s third-largest bank, with assets of $754.2 billion.

The bank has recovered strongly from the 2008 financial crisis. Revenue rose 65.9%, from $11.9 billion in 2008 to $19.7 billion in 2012 (fiscal years end October 31). Earnings gained 98.6%, from $3.0 billion in 2008 to $6.0 billion in 2012. Due to more shares outstanding, earnings per share rose at a slower pace of 71.1%, from $3.05 to $5.22. Without a one-time gain on the sale of real estate, it would have earned $4.61 a share in 2012.

Much of this growth is due to acquisitions. In the past six years, Bank of Nova Scotia has spent over $14 billion buying smaller financial services firms. It purchased most of these assets from banks that wanted to exit certain markets, so it probably got many of them at bargain prices.

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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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