Search

INTACT FINANCIAL CORP. $60.40 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 133.3 million; Market cap: $8.0 billion; Dividend yield: 2.9%) 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 March 31, 2013, Intact’s revenue rose 8.6%, to $1.52 billion from $1.40 billion a year earlier. Before one-time items, it earned $1.36 a share, down 12.2% from $1.55 a year earlier. The insurance business was hit by higher snow and windrelated claims compared to the year-earlier quarter.

Intact’s shares are down from over $65 in March 2013 because Ontario’s minority Liberal government looks like it will vote for an NDP motion calling for a 15% cut to auto insurance premiums. The vote would be in exchange for NDP support on the next provincial budget, which would avoid triggering an election.
...

BROADRIDGE FINANCIAL SOLUTIONS $26.81 (New York symbol BR; TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 121.9 million; Market cap: $3.3 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 third quarter, which ended March 31, 2013, Broadridge’s earnings per share, excluding one-time items, climbed 21.9%, to $0.39 from $0.32.

Revenue rose 5.4%, to $576.7 million from $547.0 million. Broadridge continues to do a good job of attracting new clients. It also held on to 99% of its existing customers.
...

SHERRITT INTERNATIONAL $4.74 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.9 million; Market cap: $1.4 billion; Dividend yield: 3.6%) reported cash flow of $0.20 a share in the three months ended March 31, 2013. That was down 35.4% from $0.31 a year earlier. A decline in coal sales and lower nickel, cobalt and oil prices were the main reasons for the drop.

Sherritt recently raised its quarterly dividend by 13.2%. The shares now yield 3.6%.

The company needs an improving global economy to fuel commodity demand. But its low production costs and ongoing geographic diversification enhance its prospects.
...

NEW GOLD $6.89 (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 four operating mines: the Mesquite mine in the U.S., the Cerro San Pedro mine in Mexico, the Peak mine in Australia and the just-completed New Afton mine in B.C. It also owns 30% of the El Morro copper/gold project in Chile and 100% of the Blackwater project in B.C.

In the quarter ended March 31, 2013, New Gold’s cash flow fell 5.6%, to $0.17 a share from $0.18 a year earlier. Lower gold prices offset new production from New Afton, which started up in late 2012.

New Gold’s $854.3 million of long-term debt is a moderate 26.7% of its market cap. It also holds cash of $672.4 million, or $1.41 a share.
...

IAMGOLD $5.23 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold- .com; Shares outstanding: 376.6 million; Market cap: $1.9 billion; Dividend yield: 4.7%) owns 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its new Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America.

IAMGold also has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. As well, it owns the Niobec niobium mine in Quebec. When used as an additive, niobium makes steel stronger, more heat resistant and easier to weld.

In the three months ended March 31, 2013, IAMGold’s revenue fell 13.8%, to $305.3 million from $354.l million a year earlier. Cash flow per share fell 35.4%, to $0.49 from $0.57. The declines mostly resulted from lower gold prices, partly offset by a decline in the company’s costs.
...

TIM HORTONS $57.34 (Toronto symbol THI; TSINetwork Rating: Average) (905-845-6511; www.timhortons.com; Shares outstanding: 153.4 million; Market cap: $8.9 billion; Dividend yield: 1.8%) has renovated and redesigned its stores over the last couple of years to make them more appealing to customers and boost traffic.

However, the company is now under pressure to do more from Highfields Capital, a U.S.-based activist investment firm that owns 1.5% of Tim Hortons’ shares.

Highfields has proposed several ways to unlock shareholder value, including slowing Tim Hortons’ expansion in the intensely competitive U.S. market; borrowing money to buy back roughly 40% of its stock; selling or spinning off its distribution operations; and transferring its real estate holdings to a new real estate investment trust.
...

FAIR ISAAC CORP. $49.29 (New York symbol FICO; TSINetwork Rating: Average) (415-472-2211; www.fairisaac.com; Shares outstanding: 35.9 million; Market cap: $1.8 billion; Dividend yield: 0.2%) makes FICO Scores, the computer program that dominates the market for software that businesses use to evaluate customer creditworthiness. The company is also profiting by selling software that helps credit card issuers control fraud and analyze their clients’ spending patterns.

In its fiscal 2013 second quarter, which ended March 31, 2013, Fair Isaac’s earnings per share before one-time items rose 4.4% from a year ago, to $0.69 from $0.66. Revenue rose 12.4%, to $179.3 million from $159.5 million.

Fair Isaac continues to spend around 8% of its revenue on research. That lets it keep producing innovative new products that help it stay ahead of its competitors. It’s also building its expertise by purchasing other technology firms. That adds risk, but most of these are small purchases that it can easily integrate into its current businesses.
...

KRAFT FOODS GROUP INC. (Nasdaq symbol KRFT; www.kraftfoodsgroup.com) makes a variety of grocery products, including Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Jell-O desserts and Miracle Whip salad dressing. In October 2012 Kraft broke itself up into two companies, spinning off Mondelez (Nasdaq symbol MDLZ), which makes cookies, biscuits, gum and beverages and does over 80% of its business outside North America....

Pat McKeough responds to many requests for advice on stock market investments 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. This week, we heard from an Inner Circle member who was interested in one of the best known courier companies, UPS. Pat looks at the company’s strategy of growth by acquisition which suffered a recent setback. And while UPS still does the greater part of its business in the U.S., he also looks at the effect of a slowdown in international markets on the company’s results....

BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. It also sells satellite TV services across the country. The company continues to benefit from strong demand for wireless and high-speed Internet services. That’s a big reason why the stock is up 31% since 2008....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network....

ISHARES CDN REIT SECTOR INDEX FUND $17.10 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 15 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of each REIT is limited to 25% of the ETF’s value.

iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 4.4%.

The ETF’s largest holding is RioCan REIT at 19.5%, followed by H&R REIT (10.7%), Dundee REIT (8.4%), Canadian REIT (7.2%), Calloway REIT (7.0%), Primaris REIT (6.3%), Cominar REIT (6.2%), Canadian Apartment REIT (6.0%), Boardwalk REIT (5.7%), Allied Properties REIT (5.2%), Chartwell REIT (4.5%), Artis REIT (4.5%), Granite REIT (4.3%), Northern Property REIT (2.6%) and Crombie REIT (1.8%).
...

TELUS $69.31 (Toronto symbol T; Shares outstanding: 326.0 million; Market cap: $22.6 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.telus.com) will split its common shares on a 2-for-1 basis on April 16, 2013. Following the split, the company will have roughly 653.6 million common shares outstanding.

The split will make Telus’s shares more liquid. The lower trading price could also entice more investors to buy the stock.

Even without the positive impact that usually accompanies stock splits, Telus’s outlook remains bright. Demand for wireless services should continue to rise, particularly as more users upgrade from cellphones to smartphones. As well, Telus’s new Internet television service, Optik TV, is helping it compete with cable companies.
...

LOBLAW COMPANIES $42.01 (Toronto symbol L; Shares outstanding: 281.8 million; Market cap: $11.8 billion; TSINetwork Rating: Above Average; Dividend yield: 2.1%; www.loblaw.ca) started selling its popular Joe Fresh clothing and accessories in its supermarkets in 2006. It has also opened 20 stand-alone Joe Fresh stores in Canada and the U.S.

Sales of Joe Fresh products should rise sharply now that J.C. Penney (New York symbol JCP) has opened Joe Fresh boutiques inside nearly 700 of its 1,100 department stores in the U.S. (J.C. Penney is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks.) Penney will also sell Joe Fresh products through its website.

Loblaw is a buy.
...

IMPERIAL OIL $40.62 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $34.4 billion; TSINetwork Rating: Average; Dividend yield: 1.2%; www.imperialoil.ca) has completed its purchase of 50% of Celtic Exploration Ltd. from its parent company, ExxonMobil Corp. (New York symbol XOM).

Celtic owns large undeveloped shale gas deposits along the B.C.-Alberta border. These fields hold a total of 128 million barrels of oil equivalent. At the end of 2012, Imperial’s proved reserves totalled 3.6 billion barrels of oil equivalent.

The company paid $1.55 billion for its half of Celtic. That’s equal to 42% of the $3.7 billion, or $4.42 a share, that it earned in 2012.
...

BCE INC. $46.60 (Toronto symbol BCE; Shares outstanding: 775.4 million; Market cap: $36.1 billion; TSINetwork Rating: Above Average; Dividend yield: 5.0%; www.bce.ca) has restructured its $3.4-billion deal to buy Astral Media (Toronto symbols ACM.A and ACM.B).

Montreal-based Astral owns 22 TV stations, 84 radio stations and several pay TV and specialty channels. It also owns billboards and sells other outdoor advertising.

In November 2012, the Canadian Radiotelevision and Telecommunications Commission (CRTC) rejected the takeover, as the purchase would have given BCE an overwhelming share of Canada’s English-language TV market.

...

ISHARES DEX UNIVERSE BOND INDEX FUND $31.42 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through brokers) mirrors the performance of the DEX Universe Bond Index. The 732 bonds in the portfolio have an average term to maturity of 9.78 years. The fund’s MER is 0.33%.

The bonds in the index are 68.2% government and 31.8% corporate.

The fund yields 3.2%, compared to the Short-Term Bond Fund’s 2.8%. Its yield to maturity is 2.24%, 0.78% above the Short-Term Fund. That reflects the added risk of holding long-term bonds.
...

ISHARES DEX SHORT-TERM BOND INDEX FUND $28.91 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through brokers) mirrors the performance of the DEX Short-Term Bond Index.

This index consists of a wide range of investmentgrade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 347 bonds with an average term to maturity of 2.87 years. The bonds in the index are 63.4% government and 36.6% corporate. The fund’s MER is 0.28%.

...

BANK OF NOVA SCOTIA $58.08 (Toronto symbol BNS: Shares outstanding: 1.2 billion; Market cap: $69.7 billion; TSINetwork Rating: Above Average; Dividend yield: 4.1%, www.scotiabank.com) has received approval from the Chinese government to buy 33% of a joint venture that will offer wealth management services in that country.

This business’s long-term outlook is bright, because rising prosperity in China is giving its citizens more money to invest. Bank of Nova Scotia’s experience selling wealth management services in other parts of Asia should also make this venture more profitable.

The bank is still waiting for approval for its September 2011 deal to buy 19.99% of the Bank of Guangzhou; the Chinese government owns the remaining 80.01%. Bank of Nova Scotia will pay $719 million for this stake.
...

GUGGENHEIM CHINA SMALL CAP ETF $22.80 (New York Exchange symbol HAO; buy or sell through brokers; www.guggenheimfunds.com) aims to track the AlphaShares China Small Cap Index, which is made up of all Chinese stocks that are legal for foreign investors and have market caps between $200 million and $1.5 billion.

The $266.7-millon fund’s top holdings are Youku Tudou, 1.3%; Sino Biopharmaceutical, 1.2%; China Resources Gas Group, 1.2%, Air China, 1.1%; Tsingtao Brewery Co., 1.1%; Guangzhou R&F Properties, 1.0%; BYD Co., 1.0%; Nine Dragons Paper Holdings, 1.0%; China Everbright International, 1.0%; and China Communications Services Corp., 1.0%.

As China’s economy matures and wages rise, domestic spending should continue to increase. As well, China’s leaders will likely need to spend more on programs to ease the growing gap between the rich and poor. Guggenheim China Small Cap ETF is well positioned to benefit from both of these trends.
...

SPDR S&P CHINA ETF $68.23 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com) is an ETF that aims to track the S&P China BMI Index, which is made up of all publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 184 stocks.

The $1.1-billion fund’s top holdings are China Construction Bank, 7.9%; China Mobile, 6.7%; Industrial & Commercial Bank, 6.2%; Tencent Holdings, 4.1%; Bank of China, 4.0%; CNOOC Ltd., 3.9%; PetroChina, 3.5%; Baidu, 2.9%; China Petroleum & Chemical, 2.5%; and China Life, 2.5%;

The fund’s breakdown by industry is as follows: Financials, 34.9%; Oil and Gas, 14.0%; Information Technology, 11.4%; Industrials, 9.2%; Telecommunication Services, 8.6%; Consumer Discretionary, 6.2%; Consumer Staples, 5.6%; Basic Materials, 4.8%; Utilities, 3.2%; and Health Care, 2.1%.
...

TORSTAR $7.26 (Toronto symbol TS.B; Shares outstanding: 79.7 million; Market cap: $578.6 million; TSINetwork Rating: Above Average; Dividend yield: 7.2%; www.torstar.com) reports that its revenue fell 4.1% in 2012, to $1.49 billion from $1.55 billion in 2011. Before onetime items, earnings per share fell 25.0%, to $1.35 from $1.80.

Torstar continues to struggle with falling newspaper ad sales. Strong competition and unfavourable foreign exchange rates are also hurting profits at Harlequin Enterprises, the world’s leading romance novel publisher.

To improve its profitability, Torstar continues to cut jobs and sell surplus real estate. The company also plans to start charging users to access its websites.
...

ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $24.07 (New York symbol ESR; buy or sell through brokers), is an ETF that aims to track the MSCI Emerging Markets Eastern Europe Index. The fund’s geographic breakdown is as follows: Russia, 75.4%; Poland, 18.4%; Czech Republic, 3.2%; and Hungary, 2.6%.

The fund’s top holdings are Gazprom (Russia: gas utility), 15.4%; Sberbank (Russia: bank), 11.5%; Lukoil (Russia: oil), 11.1%; Magnit OJSC (Russia: retailing), 4.0%; Mobile TeleSystems (Russia: wireless), 3.6%; Novatek (Russia: natural gas), 3.3%; Uralkali (Russia: potash), 3.3%; Rosneft Oil Company (Russia: oil and gas), 3.3%; Tafneft (Russia: oil and gas), 3.2%; and PKO Bank Polski SA (Poland: banking), 3.1%.

iShares MSCI Emerging Markets Eastern Europe Index Fund’s expense ratio is 0.69%.
...

ISHARES S&P INDIA NIFTY 50 INDEX FUND $23.61 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities.

The fund’s top holdings are ITC Ltd. (conglomerate), 9.3%; Infosys Technologies (software), 7.6%; Housing Development Finance, 7.1%; Reliance Industries Ltd. (conglomerate), 7.0%; ICICI Bank, 6.7%; HDFC Bank, 6.4%; Tata Consultancy Services (information technology), 4.4%; Larsen & Toubro Ltd. (conglomerate), 4.1%; Oil & Natural Gas Corp., 3.0%; and State Bank of India, 3.0%.

The fund’s industry breakdown includes Banks, 20.4%; Computers, 14.5%; Cigarettes, 9.3%; Refineries, 7.5%; Housing, 7.1%; Pharmaceuticals, 5.3%; Engineering, 4.1%; Oil Exploration and Production, 3.9%; Automobiles, 3.1%; and Utilities, 2.8%; The ETF has a 0.92% expense ratio.
...

PENGROWTH ENERGY $4.98 (Toronto symbol PGF; Shares outstanding: 512.6 million; Market cap: $2.6 billion; TSINetwork Rating: Average; Dividend yield: 9.6%; www.pengrowth.com) produced 85,748 barrels of oil equivalent a day (60% natural gas and 40% oil) in 2012. That’s up 15.9% from 73,973 barrels in 2011.

The stock is down 47% in the past year. That’s because investors are concerned that low gas prices and Pengrowth’s high debt ($1.8 billion, or 69% of its market cap) will force it to cut its $0.04-a-share monthly dividend, for a 9.6% annualized yield.

However, Pengrowth’s rising oil production will cut its risk. This includes its Lindbergh oil sands project, which is now under construction. Moreover, the company has $4.5 billion of tax pools that it can use to cut its tax bill until 2017.
...