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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 2.85 years. The bonds in the index are 66.5% government and 33.5% corporate. The fund’s MER is 0.28%.

iShares DEX Short-Term Bond Index Fund yields 2.8%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. As a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields.

The key figure when looking at the long-term return of this fund is yield to maturity. This yield takes into account the series of capital losses the fund will experience as its above-market-rate bonds mature. iShares DEX Short-Term Bond Index Fund’s yield to maturity is around 1.57%—less than the 2.8% yield but still higher than the 1.08% you’d earn by investing in, say, a one-year T-bill.

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NEWMONT MINING $47.31 (New York symbol NEM; Shares outstanding: 491.2 million; Market cap: $23.2 billion; TSINetwork Rating: Average; Dividend yield: 3.0%; www.newmont.com) operates gold mines in the U.S., Canada, Mexico, Australia, New Zealand, Peru, Indonesia and Ghana.

The company’s worldwide diversification, plus its strong cash flow and balance sheet, make it our favourite gold stock for safety-conscious investors.

In the three months ended September 30, 2012, Newmont’s cash flow fell 20.4%, to $849 million, or $1.72 a share, from $1.1 billion, or $2.12 a share, a year earlier. Lower gold prices and higher costs were the main reason for the decline. The company holds cash of $1.5 billion, or $3.07 a share.

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ISHARES MSCI EMERGING MARKETS EASTERN EUROPE INDEX FUND $24.70 (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, 72.2%; Poland, 18.6%; Czech Republic, 3.7%; and Hungary, 3.7%.

The fund’s top holdings are Gazprom (Russia: gas utility), 16.9%; Lukoil (Russia: oil), 11.0%; Sberbank (Russia: bank), 8.7%; Uralkali (Russia: potash), 3.5%; Rosneft Oil Company (Russia: oil and gas), 3.4%; Novatek (Russia: natural gas), 3.4%; Magnit OJSC (Russia: retailing), 3.3%; Tafneft (Russia: oil and gas), 3.2%; Mobile TeleSystems (Russia: wireless), 3.1%; and PKO Bank Polski SA (Poland: banking), 2.9%.

iShares MSCI Emerging Markets Eastern Europe Index Fund’s expense ratio is 0.68%.

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ISHARES S&P INDIA NIFTY 50 INDEX FUND $23.67 (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), 8.8%; Reliance Industries Ltd. (conglomerate), 7.2%; HDFC Bank, 6.9%; Housing Development Finance, 6.8%; ICICI Bank, 6.7%; Infosys Technologies (software), 6.4%; Larsen & Toubro Ltd. (conglomerate), 4.8%; Tata Consultancy Services (information technology), 3.7%; Hindustan Unilever (consumer goods), 3.1%; and State Bank of India, 3.1%.

The fund’s industry breakdown includes Banks, 20.7%; Computers, 12.2%; Cigarettes, 8.8%; Refineries, 7.6%; Housing, 6.8%; Pharmaceuticals, 5.1%; Engineering, 4.8%; Automobiles, 3.6%; and Oil Exploration/Production, 3.6%. The ETF has an expense ratio of 0.89%.

India’s economy likely slowed to a 5.5% growth rate in the third quarter of 2012 from 6.9% a year earlier. But that could rise to over 7.0% next year.

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RIOCAN REAL ESTATE INVESTMENT TRUST $26.69 (Toronto symbol REI.UN; Units outstanding: 296.3 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) recently formed a 50/50 joint venture with ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $30.71 (Toronto symbol AP.UN; Units outstanding: 60.0 million; Market cap: $1.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.alliedpropertiesreit.com).

RioCan, Allied and privately held Diamond Corp. have now agreed to buy the headquarters of The Globe and Mail newspaper in downtown Toronto. RioCan and Allied will each own 40%, while Diamond will hold 20%.

The three partners plan to redevelop the site into a complex with residential, retail and office units. RioCan will manage thestores, and Allied will operate the office portion.

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GUGGENHEIM CHINA SMALL CAP ETF $22.33 (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 $231.4-millon fund’s top holdings are Great Wall Motor Co., 2.4%, Shimao Property Holdings, 1.8%; Sino-Ocean Land Holdings, 1.8%; Longfor Properties, 1.7%; China Railway Group, 1.6%; Guangdong Investment Ltd., 1.4%; China Railway Construction Corp., 1.3%; Zoomlion Heavy Industry, 1.3%; China State Construction International Holdings, 1.3%; and Agile Property Holdings, 1.2%.

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.

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SPDR S&P CHINA ETF $68.92 (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 $919.1-million fund’s top holdings are China Mobile, 7.6%; China Construction Bank, 7.5%; Industrial & Commercial Bank, 6.1%; CNOOC Ltd., 4.4%; Tencent Holdings Limited, 4.4%; PetroChina Corp., 3.7%; Bank of China, 3.7%; Baidu, 3.3%; China Life, 2.8%; and China Petroleum & Chemical, 2.4%.

The fund’s breakdown by industry is as follows: Financials, 33.4%; Oil and Gas, 14.9%; Information Technology, 11.4%; Telecommunication Services, 9.7%; Industrials, 9.5%; Consumer Discretionary, 6.1%; Consumer Staples, 5.8%; Basic Materials, 4.9%; Utilities, 2.6%; and Health Care, 1.8%.

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ISHARES CDN REIT SECTOR INDEX FUND $16.40 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 13 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 4.5%.

The ETF’s largest holding is RioCan REIT at 20.8%, followed by H&R REIT (11.6%), Dundee REIT (9.1%),Canadian REIT (7.4%), Calloway REIT (7.3%), Cominar REIT (6.7%), Boardwalk REIT (6.6%), Canadian Apartment REIT (6.0%), Primaris Retail REIT (5.5%), Allied Properties REIT (4.9%), Chartwell Seniors REIT(4.6%), Artis REIT (4.6%), Northern Property REIT (2.6%) and Crombie REIT (2.0%).

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PENN WEST PETROLEUM $10.70 (Toronto symbol PWT; Shares outstanding: 476.8 million; Market cap: $5.1 billion; TSINetwork Rating: Average; Dividend yield: 10.1%) is one of North America’s largest oil and gas producers. Its production is 66% oil and 34% gas. In the quarter ended September 30, 2012, Penn West’s cash flow per share fell 2.7%, to $0.72 from $0.74 a year earlier. Lower oil and gas prices hurt cash flow, as did a fall in daily output, to 160,339 barrels of oil equivalent from 161,323 barrels.

Penn West has taken on debt, but the resulting investments have failed to increase its production. To improve its performance, it has fired four senior executives and will likely hire outside the company to bring in new expertise.

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CRESCENT POINT ENERGY CORP. $39.03 (Toronto symbol CPG; Shares outstanding: 350.1 million; Market cap: $13.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.1%; www.crescentpointenergy.com) produces oil and natural gas in western Canada. Its production is weighted 90% toward oil and 10% to natural gas.

The company continues to focus on its Bakken light-oil development in southeastern Saskatchewan.

In the three months ended September 30, 2012, Crescent Point’s cash flow per share rose 3.7%, to $1.13 from $1.09 a year earlier. The company’s shares yield a high 7.0%. Crescent Point paid out just 62% of its cash flow as dividends in the latest quarter, so its current payout rate looks sustainable.

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GREAT-WEST LIFECO $23.52 (Toronto symbol GWO; Shares outstanding: 949.9 million; Market cap: $22.3 billion; TSINetwork Rating: Above Average; Dividend yield: 5.2%) is Canada’s largest insurance company, with $532.0 billion in assets under administration. It also operates in the U.S. and Europe.

In the three months ended September 30, 2012, Great-West’s earnings rose 13.8%, to $520 million, or $0.55 a share. A year earlier, it earned $457 million, or $0.48. Revenue rose 1.5%, to $8.6 billion from $8.5 billion.

The company’s balance sheet is strong. As well, Great-West trades at just 11.5 times the $2.05 a share that it is likely to earn in 2012. The stock yields a high 5.2%.

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BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $29.47 (Toronto symbol BEP.UN; Units outstanding: 262.5 million; Market cap: $7.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.7%; www.brpfund.com) owns 172 hydroelectric generating stations, seven wind farms and two natural-gas-fired plants. In all, it has 4,909 megawatts of generating capacity.

Roughly 35% of Brookfield Renewable’s generating capacity is in Canada, with another 45% in the U.S. and 20% in Brazil. The company sells virtually all of its power under agreements that are an average of 24 years in length.

In the three months ended September 30, 2012, Brookfield’s revenue declined 26.4%, to $229 million from $311 million a year earlier. Cash flow per unit fell sharply, to $0.04 from $0.46.

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BELL ALIANT INC. $27 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $6.2 billion; TSINetwork Rating: Average; Dividend yield: 7.0%; www.aliant.ca) sells telephone and Internet services to 2.5 million customers in Atlantic Canada and rural parts of Ontario and Quebec. The company also sells wireless services through an alliance with BCE, which owns 45% of Bell Aliant.

The company faces strong competition from cable providers. In addition, many of its phone customers are switching to wireless devices. However, Bell Aliant’s wireless agreement with BCE, plus upgrades to its high-speed Internet network, are helping it hold on to its current clients and attract new ones.

Bell Aliant’s high-speed fibre optic systems now reach 621,000 homes. The company plans to increase that to 650,000 by the end of 2012.

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TORSTAR CORP. $6.85 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $547.3 million; TSINetwork Rating: Above Average; Dividend yield: 7.7%; www.torstar.com) publishes The Toronto Star, Canada’s largest daily newspaper by circulation. It also publishes three other daily papers and over 110 weeklies.

As well, the company owns Harlequin Enterprises, the world’s leading romance novel publisher.

In the three months ended September 30, 2012, Torstar earned $14.1 million, or $0.18 a share. That was down 44.0% from $25.2 million,or $0.32 a share, a year earlier. Revenue fell 6.2%, to $355.3 million from $378.7 million.

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TRANSCANADA CORP. $45.12 (Toronto symbol TRP; Shares outstanding: 705.0 million; Market cap: $31.8 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.transcanada.com) operates 68,500 kilometres of natural gas pipelines in Canada and the U.S. It also has interests in over 10,800 megawatts of power generation, including the Bruce Power nuclear plant.

In the three months ended September 30, 2012, TransCanada’s evenue rose 4.1%, to $2.1 billion from $2.0 billion a year earlier. Earnings per share fell 15.3%, to $0.50 from $0.59. The decline was mostly due to the shutdown of two reactors, Bruce Power Units 1 and 2, for maintenance. Both have now resumed normal operations.

The company has completed $13 billion of projects since 2010. It now aims to finish a further $10 billion worth by 2015, including not just Keystone XL but also the $2.3-billion Gulf Coast pipeline, which will pump oil from Cushing, Oklahoma, to Houston, Texas, starting next year. TransCanada has another $9 billion of projects planned for after 2015.

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Pat McKeough responds to many personal questions about specific stocks and other investment topics 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, one Inner Circle member asked about one of the Canadian copper stocks operating in South America. This firm is developing a large copper, gold and silver project. But it’s in Peru, so Pat takes a close look at the additional political risk that faces mining stocks in that country....

A good way to diversify your Finance holdings is to look beyond the banks to firms that are leaders in their niche markets. Stocks with well-established brands should be able to keep fuelling their growth, which in turn will give them more cash for dividends. One well-known brand is a stock we cover in our advisory on U.S. investments, Wall Street Stock Forecaster. T. ROWE PRICE GROUP INC. (Nasdaq symbol TROW; www.troweprice.com) sells mutual funds and wealth management services....

SUNCOR ENERGY INC. $33 (www.suncor.com) produced an average of 330,000 barrels of oil per day at its oil sands projects in October 2012. That’s up 10.0% from 300,000 barrels in September. The increase is mainly because Suncor shut down one of its upgrading facilities for maintenance
in September. Buy.

LOBLAW COMPANIES LTD. $34 (www.loblaw.ca) started selling its popular Joe Fresh brand clothing and accessories in its supermarkets in 2006. Thanks to the label’s success, the company plans to open stand-alone Joe Fresh stores in Ottawa and Victoria, B.C., in early 2013....

MOLSON COORS CANADA INC. $42 (www.molsoncoors.com) earned $248.9 million in the three months ended September 30, 2012, up 17.2% from $212.4 million a year earlier (all amounts except share price in U.S. dollars). Earnings per share rose 20.2%, to $1.37 from $1.14, on fewer shares outstanding....

FINNING INTERNATIONAL INC. $23 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.9 million; Market cap: $4.0 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.finning.com) is the world’s largest seller of heavy equipment, such as tractors, bulldozers and trucks, made byCaterpillar Inc. (New York symbol CAT). It sells these products to customers in the mining, forest products and construction industries in western Canada (53% of total revenue), South America (33%) and the U.K. (14%).

Finning also rents and fixes equipment. These services—which are more profitable than selling this gear—now supply half of the company’s sales.

Rising resource prices boosted results

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TECK RESOURCES LTD. $34 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $19.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.6%; TSINetwork Rating: Average; www.teck.com) produced 6.3 million tonnes of metallurgical coal in the third quarter of 2012, up 6.2% from 6.0 million tonnes a year earlier. Copper production jumped 28.6%, to 99,000 tonnes from 77,000, thanks to Teck’s recent expansion projects.

However, slowing growth in China and India cut coal prices by 32.5% from a year earlier. Copper prices fell 14.0%. That’s why Teck’s earnings declined 53.0% in the quarter, to $349 million or $0.60 a share. A year earlier, it earned $742 million, or $1.26. Cash flow per share fell 42.7%, to $1.26 from $2.20. Revenue declined 25.9%, to $2.5 billion from $3.4 billion.

The company will probably lower its production in response to the weaker demand. It also aims to cut $200 million from its annual costs, mainly by making its rail shipments more efficient.

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CENOVUS ENERGY INC. $33 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.8 million; Market cap: $24.9 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.7%; TSINetwork Rating: Extra Risk; www.cenovus.com) planned to drill up to 1,275 new natural gas wells on land belonging to Canadian Forces Base Suffield in southern Alberta. However, regulators have blocked this plan, as the area is now a national wildlife reserve.

This is a minor setback for Cenovus. The company still has 1,145 gas wells on this property, which it drilled before the area became a reserve.

Cenovus is a buy.

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SAPUTO INC. $49 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 197.0 million; Market cap: $9.7 billion; Priceto- 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. The company operates in the U.S., Argentina and Europe.

Saputo will repurchase up to 1.2 million of its shares from a private seller at a discount to the market price. It aims to complete this purchase in December 2012.

This move is part of Saputo’s plan to buy back up to 9.85 million of its common shares, or roughly 5% of the total outstanding, by November 14, 2013. Buybacks raise earnings per share and other per-share calculations, and give the remaining shareholders a larger stake in the company.

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CANADA BREAD CO. LTD. $50 (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: 4.0%; TSINetwork Rating: Above Average; www.canadabread.ca) reported that its sales fell 3.8% in the three months ended September 30, 2012, to $401.5 million from $417.2 million a year earlier. That’s partly because the company recently closed an unprofitable U.K. plant that made frozen products. Sales of fresh baked goods also declined during the quarter.

If you exclude an unusual tax gain and costs related to the plant closure, earnings per share would have risen 11.6% to $0.96 from $0.86. Higher profits on frozen foods and gains from hedging contracts on raw materials offset lower earnings from pasta products.

Canada Bread is still a hold.

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