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ENBRIDGE INC. $46.66 (Toronto symbol ENB; Shares outstanding: 806.5 million; Market cap: $37.6 billion; TSINetwork Rating: Above Average; Dividend yield: 2.7%; www.enbridge.com) gets 90% of its revenue from pipelines that pump oil and gas from western Canada to eastern Canada and the U.S.

The remaining 10% mainly comes from distributing gas to 2 million consumers in Ontario, Quebec and parts of New York State.

Enbridge is spending $27 billion on expansion projects between 2012 and 2016. This excludes the controversial $5.5-billion Northern Gateway pipeline—but it includes a $6.2-billion plan to build pipelines and rail links to move oil from the Bakken region of North Dakota and Saskatchewan, as well as $5.8 billion of new lines to pump more oil from western Canada to the Gulf Coast.
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MCKESSON CORP. (New York symbol MCK; www.mckesson.com) is the largest wholesale drug distributor in the U.S. and Canada. It also owns 49% of Mexico’s largest drug distributor. McKesson’s clients include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. It also sells surgical tools and health and beauty products....

CANADIAN PACIFIC RAILWAY $122.51 (Toronto symbol CP; Shares outstanding: 174.2 million; Market cap: $21.3 billion; TSINetwork Rating: Above Average; Dividend yield: 1.1%; www.cpr.ca), transports freight between Montreal and Vancouver and connects with hubs in the U.S. midwest and northeast.

In the quarter ended December 31, 2012, CP’s revenue rose 6.7%, to $1.50 billion from $1.41 billion a year earlier. Earnings rose 17.9%, to $224 million, or $1.28 a share, from $190 million, or $1.11.

CP’s operating ratio improved to 74.3% in the latest quarter from 78.5% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) The company shipped more goods and made better use of its assets in the latest quarter. CEO Hunter Harrison feels he can cut CP’s operating ratio to as low as 65% by 2016.
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CENOVUS ENERGY $30.90 (Toronto symbol CVE; Shares outstanding: 755.0 million; Market cap: $23.3 billion; TSINetwork Rating: Average; Dividend yield: 3.1%; www.cenovus.com) has three heavy oil projects in Alberta and one in Saskatchewan. The oil sands supply about half of its output. The other half is conventional oil and gas.

U.S.-based ConocoPhillips (New York symbol COP) owns 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects. Cenovus ships the heavy bitumen from these assets to refineries in Illinois and Texas, which are also 50% owned by ConocoPhillips.

In the quarter ended December 31, 2012, cash flow per share fell 17.8%, to $0.92 from $1.12 a year earlier. Expansion pushed up oil output by 23.1%, to 177,646 barrels a day from 144,273, but that was offset by lower prices. Cenovus aims to boost its production to 500,000 barrels a day by 2021.
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ENCANA CORP. $18.66 (Toronto symbol ECA; Shares outstanding: 736.3 million; Market cap: $13.7 billion; TSINetwork Rating: Average; Dividend yield: 4.4%; www.encana.com) is one of North America’s largest natural gas producers. Its proven reserves should last over 11 years.

In the three months ended December 31, 2012, Encana’s cash flow per share fell 17.3%, to $1.10 from $1.33 a year earlier (all amounts except share price and market cap in U.S. dollars).

Natural gas accounts for 95% of Encana’s production. In response to lower gas prices, the company cut its output by 14.8% during the quarter, to 2.9 billion cubic feet per day from 3.5 billion; this was the main reason for the lower cash flow.
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RUSSEL METALS (Toronto symbol RUS; www.russelmetals.com) is one of North America’s largest metal distributors. It serves its 39,000 clients through 54 locations in Canada and 12 in the U.S. In the three months ended December 31, 2012, Russel’s revenue rose 7.6%, to $765.9 million from $711.6 million a year earlier....

BLACKBERRY INC. $15 (www.blackberry.com) plans to shut down BBM Music, a music-streaming service for the company’s BlackBerry smartphones. The company’s new phones, which run on the BlackBerry 10 operating system, do not offer this service, so cancelling it will have little impact on future sales. Hold.

BOMBARDIER INC. $4.13 (www.bombardier.com) has won a $440-million U.S. contract to design high-speed railcar components for a German rail operator. The company will also help build these trains. It did not say when it would begin deliveries, but the deal is equal to 3% of its 2012 revenue of $16.8 billion U.S....

PENGROWTH ENERGY CORP. $5.16 (www.pengrowth.com) has completed the sale of its 10.02% stake in the Weyburn oil project in Saskatchewan. It received $316.0 million, which is equal to 59% of its 2012 cash flow of $538.8 million, or $1.20 a share. The company used the cash to pay down its long-term debt....

GREAT-WEST LIFECO INC. $27 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 950.6 million; Market cap: $25.7 billion; Price-to-sales ratio: 0.8; Dividend Yield: 4.6%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s secondlargest insurance company after Manulife, with $545.8 billion of assets under administration. It also sells mutual funds and retirement planning and wealth management services. Power Financial Corp. (Toronto symbol PFC) owns 68.2% of Great-West.

Revenue fell 11.9%, from $33.9 billion in 2008 to $29.9 billion in 2011. That’s partly because low interest rates have cut the interest income the company earns on its investment portfolio. However, revenue rose 0.5%, to $30.1 billion, in 2012.


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SHAWCOR LTD. $41 (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.8 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 1.0%; TSINetwork Rating: Average; www.shawcor.com) has completed its plan to convert its class A (one vote per share) and class B (10 votes per share) shares into a single class of common shares (one vote per share).

Under the plan, each class A share became one common share. Class B shareholders had the option of receiving 1.1 common shares or $43.43 in cash for each share they held (the company capped the cash portion at 90% of the total compensation). ShawCor will also pay a special dividend of $1.00 a share to all shareholders on April 19, 2013.

The total cost of buying back the class B shares and the special dividend is roughly $580 million. To help pay for this, ShawCor has borrowed $350 million U.S. That pushed up its total debt to $368 million (Canadian), which is still a low 15% of its market cap.
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RIOCAN REAL ESTATE INVESTMENT TRUST $28 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 300.8 million; Market cap: $8.4 billion; Price-to-sales ratio: 4.9; Dividend yield: 5.0%; TSINetwork Rating: Average; www.riocan.com) has teamed up with Allied Properties Real Estate Investment Trust (Toronto symbol AP.UN) and privately held Diamond Corp. to buy a second property in downtown Toronto. In December 2012, the partners acquired a larger, adjacent building. They plan to redevelop these two holdings into a single retail-office complex.

As before, RioCan and Allied will each own 40%, while Diamond will own 20%. RioCan’s share of this latest purchase is $14.9 million. To put that in context, its cash flow was $116 million, or $0.39 a unit, in the fourth quarter of 2012.

RioCan is a buy....

NORDION INC. $6.98 (Toronto symbol NDN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 61.9 million; Market cap: $432.1 million; Price-to-sales ratio: 1.8; No dividends paid since July 2012; TSINetwork Rating: Extra Risk; www.nordion.com) has agreed to settle a lawsuit related to problems at its Montreal drug-testing lab, which the company sold in 2010.

Nordion will pay $22.5 million U.S. That’s equal to 46% of the $48.7 million U.S., or $0.79 U.S. a share, that it earned in the year ended October 31, 2012.

Nordion is still a hold.
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TORSTAR CORP. $7.15 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.7 million; Market cap: $569.9 million; Price-to-sales ratio: 0.4; Dividend yield: 7.3%; TSINetwork Rating: Above Average; www.torstar.com) owns romance novel publisher Harlequin, which recently formed a joint venture with Cosmopolitan magazine that will publish two e-books a month, starting in August 2013.

The new series, called Cosmo Red Hot Reads, will help Harlequin profit from fast-growing demand for erotica, such as the best-selling Fifty Shades of Grey trilogy. Harlequin has also hired best-selling author Sylvia Day to launch this new series, which should help attract new readers.

Torstar is a buy....

ENBRIDGE INC. $46 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 806.5 million; Market cap: $37.1 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.enbridge.com) has agreed to build a 50-kilometre pipeline that will connect the Hangingstone oil sands project in Alberta to its existing pipeline system. This will be the ninth oil sands project to use this network.

The company will spend $200 million to build this pipeline. That’s equal to 16% of the $1.25 billion, or $1.62 a share, that Enbridge earned in 2012. The new line should begin operating in late 2015. Enbridge also has a 25-year shipping contract with Hangingstone’s developer, which cuts the risk of this investment.

Enbridge is a buy....

Pat McKeough responds to many requests for stock market advice 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, an Inner Circle member asked us a question about a stock whose prospects depend on the continued growth of 3D printing. Pat looks at the company’s attempts to spur further growth by aggressively promoting the sale of 3D home printers and by convincing industrial clients to adopt 3D printing. ...

FINNING INTERNATIONAL INC. $24 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.9 million; Market cap: $4.1 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.finning.com) sells and services heavy equipment made by Caterpillar Inc. (New York symbol CAT). Its main customers are in the oil, mining, forest products and construction industries.

In May 2012, Finning paid Caterpillar $305.8 million U.S. for Bucyrus’s distribution and support businesses in South America and the U.K.; Bucyrus makes equipment for clients in the mining and oil sands industries. In October 2012, Finning paid $159.2 million for Bucyrus’s Canadian operations.

Thanks to these new operations, Finning’s revenue rose 12.3% in 2012, to a record $6.6 billion from $5.9 billion in 2011. Earnings jumped 30.1%, to $337.6 million, or $1.96 a share, from $259.4 million, or $1.51 a share. Bucyrus contributed $0.09 a share to the latest earnings.
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ENCANA CORP. $20 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $14.7 billion; Price-to-sales ratio: 2.7; Dividend yield: 4.1%; TSINetwork Rating: Average; www.encana.com) earned $997 million, or $1.35 a share (all amounts except share price and market cap in U.S. dollars) in 2012.

That’s down 16.3% from $1.2 billion, or $1.62 a share, in 2011. Cash flow per share fell 16.1%, to $4.80 from $5.72. Revenue declined 39.1%, to $5.2 billion from $8.5 billion. That’s partly because it sold $4.0 billion of assets in 2012, including stakes in its shale gas properties in B.C. and Alberta.

Encana benefits from its hedging program, which has shielded it from falling gas prices. In 2012, it sold its gas at an average of $4.82 per thousand cubic feet, compared to today’s price of $3.16. For 2013, Encana has hedged 52% of its forecast production at $4.39 per thousand cubic feet.
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SNC-LAVALIN GROUP INC. $45 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.1 million; Market cap: $6.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.0%; TSINetwork Rating: Average; www.snclavalin.com) has held up well in the face of negative press coverage, beginning with $56 million U.S. in unusual payments it made in 2011 to help win Libyan construction contracts. Lately, the company has come under scrutiny over allegations of widespread corruption in the Quebec construction industry.

SNC’s quick response to these situations, including replacing its chief executive officer and other executives, helped prevent permanent damage to its 102-year-old reputation. It has also brought in stronger oversight and compliance procedures.

Due to higher than-expected costs on a powerplant project, SNC’s 2012 earnings fell 18.4%, to $309.1 million, or $2.04 a share. In 2011, the company earned $378.8 million, or $2.49 a share.
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CANADIAN PACIFIC RAILWAY LTD. $124 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 174.6 million; Market cap: $21.7 billion; Price-to-sales ratio: 3.8; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www.cpr.ca) suffered two derailments in the past month that resulted in oil spills. One of these incidents was in Minnesota, and the other was in northern Ontario. However, the spills were minor, and the cleanup costs should not have a large impact on CP’s earnings.

The company should keep benefiting from rising demand for trains to ship oil. That’s because a lack of new pipelines has forced more producers to ship their crude by train. CP will probably ship 70,000 carloads of oil this year, up 438.5% from 13,000 in 2011.

CP Rail is a buy....

SUNCOR ENERGY INC. $30 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $45.0 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.suncor.com) has cancelled its $11-billion Voyageur oil sands upgrader project, which would have converted the tar-like bitumen into a lighter form of oil that is easier to pump through pipelines to refineries. The company cancelled Voyageur because a lack of new pipeline capacity is hurting oil prices and the project’s economic viability.

As part of this decision, Suncor paid $515 million to Total SA for its 49% stake in Voyageur. The price is equal to 11% of the $4.9 billion, or $3.16 a share, that Suncor earned in 2012. Buying back this stake will make it easier for Suncor to use some of Voyageur’s equipment at its other oil sands projects.

Suncor is still a buy....

CANADA BREAD CO. LTD. $51 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.canadabread.ca) is Canada’s second-largest producer of fresh and frozen baked goods, after Weston Bakery. It also makes pastas and sauces. The company’s main brands include Dempster, Tenderflake and Olivieri.

Canada Bread supplies around a third of Maple Leaf’s sales (see page 44). As a result, it has a big role in Maple Leaf’s restructuring.

For example, in 2011, Canada Bread opened a new $100-million bakery in Hamilton, Ontario. That let it close two outdated facilities in Toronto and shift their production to the new plant; it plans to close a third Toronto bakery in 2013.
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MAPLE LEAF FOODS INC. $14 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 140.0 million; Market cap: $2.0 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.1%; TSINetwork Rating: Average; www.mapleleaf.ca) is Canada’s largest foodprocessing company. It mainly sells its products, which include fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. Though 90.0%-owned Canada Bread (see right), the company also makes fresh and frozen bread, pastries and pasta.

Maple Leaf is starting to see the benefits of a major restructuring plan, which includes building new plants and eliminating unprofitable products. It’s also installing a new computer system that will give its managers more timely information.

In 2012, Maple Leaf’s earnings rose 40.5%, to $122.7 million, or $0.81 a share. In 2011, it earned $87.3 million, or $0.58 a share. If you disregard restructuring costs, earnings per share rose at a more modest rate of 5.0%, to $1.06 from $1.01.
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SAPUTO INC. $50 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 197.2 million; Market cap: $9.9 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.7%; TSINetwork Rating: Average; www.saputo.com) is Canada’s largest producer of dairy products, including milk, butter and cheese. It also makes snack cakes and tarts. Saputo operates in the U.S., Argentina and Europe.

In its fiscal 2013 third quarter, which ended December 31, 2012, Saputo earned $130.0 million, or $0.65 a share. That’s up 0.2% from $129.8 million, or $0.64 a share, a year earlier. Revenue was unchanged at $1.8 billion. Unfavourable currency exchange rates offset the positive impact of higher cheese prices in the U.S. The company’s Argentinian division also sold fewer products at lower prices, which weighed on Saputo’s overall earnings.

These results do not include privately held Morningstar Foods, which Saputo bought for $1.4 billion in January 2013. Morningstar makes milk products, including cream, ice cream and cottage cheese, at 10 plants in the U.S.
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BCE INC. $47 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 775.9 million; Market cap: $36.5 billion; Price-to-sales ratio: 1.7; Dividend yield: 5.0%; TSINetwork Rating: Above Average; www.bce.ca), like Telus (see left), 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.

Unlike Telus, however, BCE has invested heavily in expanding its media operations, which include the 28-station CTV Television Network, 30 specialty channels and 33 radio stations.

BCE now hopes to complete its $3.0-billion purchase of Astral Media in June 2013. Montreal-based Astral owns 22 TV stations, 84 radio stations and popular specialty channels like The Movie Network and Teletoon.
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