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ENERFLEX LTD., $13.66 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 77.9 million; Market cap: $1.1 billion; Dividend yield: 2.1%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.

The company has a strong position in three expanding markets: U.S. and Canadian shale gas production; Australian natural gas from coal beds; and conventional Middle Eastern natural gas, most of which gets converted to liquefied natural gas (LNG) for shipping worldwide.

In the quarter ended March 31, 2013, Enerflex’s revenue fell slightly, to $353.3 million from $355.7 million a year ago. Lower revenue in Canada and the northern U.S. offset increases from producers in the southern U.S., Latin America and overseas. Earnings per share rose 5.3%, to $0.20 from $0.19, due to improved profit margins.
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TOROMONT INDUSTRIES LTD. $22.58 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 76.6 million; Market cap: $1.7 billion; Dividend yield: 2.3%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division.

The company completed the spinoff of Enerflex Ltd. (see below) in July 2011. Shareholders received shares of the new Toromont and shares of Enerflex.

In the three months ended March 31, 2013, higher equipment sales and rentals, particularly to mining customers, pushed up Toromont’s revenue by 11.3%, to $313.1 million from $281.5 million a year earlier.
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COMPUTER MODELLING GROUP $23.05 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 38.2 million; Market cap: $887.4 million; Dividend yield: 3.1%) reported revenue of $19.3 million in the three months ended March 31, 2013. That’s up 12.0% from $17.2 million a year earlier.

Earnings rose 9.6%, to $7.3 million from $6.6 million. Per-share earnings rose 5.6%, to $0.19 from $0.18, on more shares outstanding.

Computer Modelling holds cash of $59.4 million, or $1.56 a share, and has no debt. It spent $3.5 million, or a high 18.0% of its revenue, on research and development in the latest quarter.
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CIMAREX ENERGY $71.16 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.5 million; Market cap: $6.3 billion; Dividend yield: 0.8%) produces and explores for natural gas and oil. Gas makes up 49% of its output.

Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (55% of production); the Permian Basin of western Texas and southeastern New Mexico (42%); and the Texas Gulf Coast (3%).

In the three months ended March 31, 2013, Cimarex’s production averaged 661.1 million cubic feet of natural gas equivalent per day (including oil). That’s up 9.5% from 603.5 million cubic feet a year earlier. Thanks to the higher production, Cimarex’s cash flow per share fell just 4.2%, to $3.38 from $3.53, despite lower oil prices.
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DEVON ENERGY CORP. $54.13 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 406.0 million; Market cap: $22.5 billion; Dividend yield: 1.6%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 59% gas and 41% oil.

In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.

Devon has formed joint ventures to cut the risk of its big development projects. Last year, it sold a onethird stake in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec for $2.2 billion. As well, Japan’s Sumitomo Corp. bought 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.
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ADOBE SYSTEMS $45.78 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536 -6000; www.adobe.com; Shares outstanding: 501.9 million; Market cap: $21.8 billion; No dividends paid) has paid an undisclosed sum for Ideacodes. This privately held firm helps businesses make their mobile software, or apps, and other online content look and perform better.

Ideacodes’ technology will enhance Adobe’s new Creative Cloud suite of publishing and photo-editing programs. Adobe has switched from selling packaged software on CDs to offering ongoing subscriptions online.

Ideacodes’ founders, Emily Chang and Max Kiesler, will join Adobe as Creative Cloud’s new creative directors.
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ACI WORLDWIDE $44.92 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.8 million; Market cap: $1.8 billion; No dividends paid) 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.

In the three months ended March 31, 2013, ACI’s revenue rose 17.7%, to $162.0 million from $137.6 million a year earlier. The rise was partly because S1 contributed for the full quarter, compared to half of the 2012 first quarter.
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SYMANTEC CORP. $22.70 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (1-408-517-8000; www.symantec.com; Shares outstanding: 696.6 million; Market cap: $15.8 billion; Dividend yield: 2.6%) sells computer security technology, including anti-virus and emailfiltering software, to businesses and consumers. It also offers data-archiving software.

In its fiscal 2013 third quarter, which ended March 29, 2013, Symantec’s earnings per share rose 15.8%, to $0.44 from $0.38 a year earlier. Revenue gained 4.4%, to $1.75 billion from $1.68 billion.

The company is poised to keep reporting higher earnings as its new restructuring plan takes effect.
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AEROPOSTALE INC.$13.75 (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) saw its sales fall 9.0% in the three months ended May 4, 2013, to $452.3 million from $497.2 million a year earlier. Samestore sales declined 14%.

The teen-clothing retailer lost $0.16 a share, compared to a year-ago profit of $0.13 a share. Aeropostale had to spend heavily on promotions and marketing to clear out inventory from the preceding quarter.

The company will likely be able to repeat its past success at attracting customers, but its sales may remain weak in the near term.
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LEON’S FURNITURE LTD. $12.97 (Toronto symbol LNF; TSINetwork Rating: Average) (416-243-7880; www.leons.ca; Shares outstanding: 70.6 million; Market cap: $897.5 million; Dividend yield: 3.1%) 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. A year earlier, it earned $8.6 million, or $0.12 a share. The decline mostly resulted from costs related to its $700-million purchase of The Brick, which closed on March 28, 2013.

The Brick operates 234 stores across Canada, while Leon’s has 75 outlets in every province except British Columbia. Leon’s and The Brick will continue to operate as separate chains.
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REITMANS (CANADA) LTD. $8.45 (Toronto symbol RET.A; TSINetwork Rating: Extra Risk) (514-384- 1140; www.reitmans.com; Shares outstanding: 64.6 million; Market cap: $544.7 million; Dividend yield: 9.5%) owns 909 women’s clothing stores across Canada.

The chain consists of 359 Reitmans, 145 Smart Set, 157 Penningtons, 103 Addition Elle, 72 Thyme Maternity and 73 RW & Co. stores. In addition, it has 20 Thyme Maternity boutiques in some Canadian Babies “R” Us locations, as well as 154 in U.S. Babies “R” Us stores.

In the three months ended May 4, 2013, Reitmans’ sales fell slightly, to $216.9 million from $217.1 million a year earlier. However, same-store sales declined 3.5%.
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NEW GOLD $6.63 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 476.9 million; Market cap: $3.2 billion; No dividends paid) has just agreed to buy Rainy River Resources (Toronto symbol RR) in a friendly takeover for $381.9 million.

Rainy River’s project in northwestern Ontario could hold as much as 4.0 million ounces of gold. The company has already completed a feasibility study that projects a mine producing 225,000 ounces annually for 16 years. Production could start as early as 2016.

New Gold produced 411,892 ounces of gold in 2012. That could top 1 million ounces within six years, even without Rainy River.

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DUNDEE REIT $33.17 (Toronto symbol D.UN; TSINetwork Rating: Extra Risk) (416-365-3535; www.dundeereit.com; Units outstanding: 104.4 million; Market cap: $3.7 billion; Dividend yield: 6.8%) owns and manages 24.1 million square feet of office and retail space across Canada.

As the Canadian economy improves, the trend in interest rates is likely to be upward. That rise—or the anticipation of an increase—can push down prices of REITs and high-yielding stocks, such as utilities. That’s largely why a number of REITs, including Dundee, have moved down lately.

When interest rates rise, REITs may suffer because they have a lot of mortgage debt, and it’s more expensive to raise money and refinance existing loans. As well, their units, which typically offer high yields, compete with fixed-income instruments for investor interest.

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The new U.S. health care law (“Obamacare”) will force Baxter International to pay a 2.3% tax on certain medical devices it sells in the country. However, the law will also expand health insurance to more Americans, which should spur demand for the company’s products. It is also increasing its overseas sales. The U.S. accounts for just 40% of Baxter’s sales....

Most gold stocks have moved down lately, along with gold prices. (Gold is down from almost $1,800 U.S. an ounce in September 2012 to $1,384 today.)...

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....

IBM (New York symbol IBM; www.ibm.com) started up in 1911, which makes it the world’s oldest computer company. Today, it operates in over 170 countries....

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 stock investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away....

BONAVISTA ENERGY $15.94 (Toronto symbol BNP; Shares outstanding: 179.1 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.3%; www.bonavistaenergy.com) explores for oil and gas in Alberta, Saskatchewan and B.C. Its production is 62% gas and 38% oil.

In the three months ended December 31, 2012, cash flow per share fell 37.4%, to $0.57 from $0.91 a year earlier. Gas prices declined by 12.7%, to $3.22 per thousand cubic feet from $3.69. Production dropped 2.1%, to 71,842 barrels of oil equivalent a day (including gas) from 73,373.

Bonavista recently cut its monthly dividend by 41.7%, to $0.07 from $0.12. That’s helping it save cash for exploration and development. The new annual rate of $0.84 a share still yields a high 5.3%. As well, Bonavista now pays out just 36% of its cash flow as dividends, so more cuts are unlikely.
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PEYTO EXPLORATION & DEVELOPMENT CORP. $28.80 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $4.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.5%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 49,754 barrels of oil equivalent is 89% gas and 11% oil.

In the three months ended December 31, 2012, the company’s cash flow was $0.62 a share, up 3.3% from $0.60 a year earlier. A 26.3% rise in production offset lower gas prices.

The shares trade at 9.8 times Peyto’s forecast 2013 cash flow of $2.95 a share. The company’s long-term debt of $580 million is a low 13.5% of its $3.4-billion market cap.
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CANADIAN PACIFIC RAILWAY $123.16 (Toronto symbol CP; Shares outstanding: 174.6 million; Market cap: $21.9 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.cpr.ca) continues to benefit from a major restructuring plan, which includes new locomotives, better tracks and software that optimizes train loads and speeds.

In the first three months of 2013, CP’s earnings jumped 52.8%, to $217 million, or $1.24 a share. That beat the consensus estimate of $1.21. A year earlier, the company earned $142 million, or $0.82 a share.

Revenue rose 8.6%, to $1.5 billion from $1.4 billion. The company saw revenue gains from shipping consumer and industrial products (up 24.8%), fertilizers (up 20.6%), grain (up 9.0%), coal (up 8.8%) and forest products (up 6.0%). That offset declines in automotive products (down 7.6%) and intermodal (down 4.2%).
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RIOCAN REAL ESTATE INVESTMENT TRUST $28.93 (Toronto symbol REI.UN) has teamed up with ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $30.71 (Toronto symbol AP.UN) and privately held Diamond Corp. to buy the Globe & Mail lands in downtown Toronto. Currently the home of The Globe & Mail newspaper, the 252,617-square-foot property is on 6.47 acres of land forming part of the large city block bounded by Spadina Avenue and Front, Draper and Wellington Streets.

The partners plan to redevelop the property into a retail-office complex. RioCan and Allied will each own 40%, while Diamond will hold 20%. RioCan and Allied will each pay $14.9 million for their stakes.

RioCan is a buy....

POWERSHARES QQQ ETF $70.39 (Nasdaq symbol QQQQ; buy or sell through brokers; www.invescopowershares- .com), formerly called Nasdaq 100 Trust Shares, holds stocks that represent the Nasdaq 100 Index. That index consists of the 100 largest shares on the Nasdaq exchange, based on market cap.

The Nasdaq 100 Index contains shares of companies in a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The fund’s expenses are about 0.20% of its assets.

The index’s highest-weighted stocks are Apple, Microsoft, Qualcomm, Google, Cisco Systems, Intel, Amazon.com, Oracle Corp., Comcast Corp. and Amgen.
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SPDR DOW JONES INDUSTRIAL AVERAGE ETF $146.74 (New York symbol DIA; buy or sell through brokers; www.spdrs.com) holds the 30 stocks that make up the Dow Jones Industrial Average.

The fund’s top holdings are IBM, ExxonMobil, Chevron, 3M, Travelers Companies, McDonald’s, Johnson & Johnson, Caterpillar, United Technologies and Boeing. The fund’s expenses are about 0.17% of its assets.

SPDR Dow Jones ETF is a buy.
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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $22.02 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. It yields 4.3%.

The fund’s top holdings are CIBC, 6.5%; Bonterra Energy, 6.4%; National Bank, 5.8%; TD Bank, 5.5%; Bank of Montreal, 5.3%; Telus Corp., 4.9%; BCE Inc., 4.4%; Royal Bank, 4.4%; Bank of Nova Scotia, 4.1%; and IGM Financial, 4.1%.

The fund holds 51.4% of its assets in financial stocks. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.
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