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PRECISION DRILLING CORP. $8.42(Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding:276.3 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.1;Dividend yield: 2.4%; TSI Network Rating: Extra Risk;www.precisiondrilling.com) has agreed to build and operate two drilling rigs for Kuwait’s state-owned oil company. The company did not say how much this contract is worth, but the rigs will start up in2014 and run for a five-year term.

This is a small order for Precision, which operates over 325 rigs. Still, this deal will help expand its international operations, which supply just 5% of its total revenue. It should also help Precision win more contracts in the Persian Gulf region.

Precision Drilling is a buy.

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CANADIAN IMPERIAL BANK OF COMMERCE$82 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 403.7 million; Market cap: $33.1 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.6%;TSI Network Rating: Above Average; www.cibc.com)has agreed to settle a lawsuit related to the 2008collapse of U.S. investment bank Lehman Brothers.

Bankruptcy trustees sued CIBC and other banks for failing to honor certain financial commitments they made to Lehman. After Lehman failed, CIBC felt it did not have to provide further funds and recognized a gain of $841 million U.S.

CIBC will pay $149.5 million U.S. to settle this lawsuit. To put that in context, the bank earned $3.3billion (Canadian) in fiscal 2012. That’s up 8.5%from $3.0 billion 2011. Earnings per share rose6.6%, to $8.07 from $7.57, on more shares outstanding.

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BANK OF MONTREAL $62 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 650.8 million; Market cap: $40.3 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.6%; TSI Network Rating: Above Average;www.bmo.com) earned $4.1 billion in fiscal 2012.That’s up 24.9% from $3.3 billion in 2011.Earnings per share rose 17.6%, to $6.00 from $5.10,on more shares outstanding. These figures exclude integration costs related to U.S. bank Marshall & Ilsley, which Bank of Montreal bought for $4.1billion in stock in July 2011. Revenue rose 15.7%,to $16.1 billion from $13.9 billion.

Earnings at the Canadian banking business (46%of Bank of Montreal’s total earnings) increased0.7%. Low interest rates continue to attract borrowers, but they also hurt the income that the bank of earns on its loans. Marshall & Ilsley pushed up earnings at the bank’s U.S. operations (15% of the total) by 50.1%. Acquisitions also raised revenue at the wealth management division (14%) by 12.3%.

Fewer of the bank’s corporate clients are merging and issuing new stock. Even so, lower income taxes and loan losses pushed up earnings at the securities tradingdivision (25% of the total) by 5.1%.

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BANK OF NOVA SCOTIA $58 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $69.6billion; Price-to-sales ratio: 2.4; Dividend yield: 3.9%;TSI Network Rating: Above Average;www.scotiabank.com) recently bought ING Direct, which offers a wide variety of no-fee banking services, mainly over the Internet. ING Direct has1.8 million customers and $30 billion of deposits.

At $3.1 billion, this was the biggest purchase in the bank’s history. The price is also equal to 48% of the $6.5 billion that it earned in fiscal 2012. That’s up 21.3% from $5.3 billion in 2011. Earnings per share rose 15.2%, to $5.22 from $4.53, on more shares outstanding. Revenue rose 13.8%, to $19.7billion from $17.3 billion.

Earnings at the Canadian division (30% of the total) rose 16%, thanks to strong loan demand and lower loan-loss provisions. International earnings (28%) rose18%, partly due to its purchase of 51% of Colombia’s fifth largest bank.

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TORONTO-DOMINION BANK $82 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 916.1 million; Market cap: $75.1 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.8%; Stonework Rating: Above Average;www.td.com) recently agreed to buy the U.S. credit card portfolio of retailer Target Corp. (New York symbol TGT). TD will pay an amount equal to these loans’ $5.9-billion U.S. value. In addition, under a new seven-year deal, TD will become the exclusive issuer of Target-branded cards in the U.S.

Meanwhile, the bank earned $7.1 billion (Canadian)in its 2012 fiscal year. That’s up 10.0% from$6.4 billion in fiscal 2011. Because of more shares outstanding, earnings per share rose at a slower pace of 8.2%, to $7.42 from $6.86. Revenue increased6.7%, to $23.1 billion from $21.7 billion.

Earnings at TD’s Canadian retail banking division(which supplies 49% of the bank’s total earnings) rose 11.7% thanks to strong loan demand and the bank’s purchase of MBNA’s Canadian credit card operations. High loan demand also pushed up earnings at the U.S. division (20% of the total) by 12.0%. The wealth management division’s earnings (19%) rose 4.0%. Earnings from securities trading (12%) increased 8.0% as low interest rates prompted businesses to issue more bonds.

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ROYAL BANK OF CANADA $61 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.5 billion; Market cap:$91.5 billion; Price-to-sales ratio: 2.4; Dividend yield:3.9%; TSI Network Rating: Above Average;www.rbc.com) is Canada’s largest bank by market cap. It earned a record $7.6 billion, or $4.96 a share, in its 2012 fiscal year, which ended October 31,2012. That’s up 8.9% from $7.0 billion, or $4.55 a share, in fiscal 2011. Revenue rose 7.7%, to $29.8billion from $27.6 billion.

The bank continues to report strong loan demand at its retail banking operations in Canada, the U.S. and the Caribbean. This division’s earnings, which accounted for 56% of Royal’s total, rose 9.3%.Earnings from securities trading (22% of overall earnings) rose 22.4% due to higher income from bond trading. The insurance division’s earnings (10%) climbed19.0% due to fewer claims.

These gains offset a 5.9%earnings decline at Royal’s wealth management business(11% of the total). Earnings at the investor and treasury services division (1%) fell 63.0%.That’s because of a loss related to the purchase of 50% of joint venture that the bank didn’t already own. Without this loss, this business’s earnings would have risen by 30%.

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CGI GROUP INC. $24 (Toronto symbol GIB.A) was our Stock of the Year for both 2010 and 2011. We first recommended it as our top choice at$15, which works out to a 60.0% rise.

The company should continue to benefit as more businesses and government agencies use its computer outsourcing expertise to cut their costs. For more on CGI, see page 18.

CGI Group is a buy.

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p>CANADIAN PACIFIC RAILWAY LTD.$108 (Toronto symbol CP) was our top pick for 2012 at $69. Since then, the stock has gained 56.5%. We’ve long admired CP, but bad weather and poor efficiency have held back its earnings and stock price in the past few years.

It seems activist investment firm Pershing Square shared our view, and in 2011 it became CP’s largest shareholder(it now holds 14.2%). We felt Pershing would push management to improve efficiency, and help unlock more of CP’s value. That’s partly why we made CP our #1 buy for 2012.

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TECK RESOURCES LTD. $37 (Toronto symbol TCK.B;Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $21.7 billion; Price-to sales ratio: 2.0; Dividend yield: 2.4%; TSI Network Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steel making. Its six coal mines (five inB.C. and one in Alberta) should last from six to 75 years.

Asian customers buy 60% of the company’s coal. In 2011,coal accounted for 49% of Teck’s revenue and 57% of its earnings.

Teck also produces copper (27%, 28%), which its clients in Asia and Europe use to make electrical wire, auto parts and components for electronic devices. As well, Teck is a major supplier of zinc (24%, 15%), which prevents rusting when added to steel.

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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, an Inner Circle member asked about the wisdom of taking profits on a high-yielding stock whose shares have had a big run-up in price. Pat assesses the prospects of this gas station operator which has done an astute job of franchising its stations but also pursues a growth-by-acquisition that adds risk in a competitive industry.

Q: Hello again Pat: I bought Parkland Fuel Corp. about 18 months ago and have enjoyed the wonderful yield and am up 60% on the stock value. I am tempted to realize my capital gain. What are your thoughts on this stock?

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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, including the best use of financial ratios in your stock market research. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “When you’re trying to assess whether a company can manage its debt, the most popular ratio may actually be misleading.”...

A month ago, we examined one of the energy stocks we cover in our newsletter for aggressive investing, Stock Pickers Digest. Zargon Oil and Gas (Toronto symbol ZAR) has trimmed its commitment to natural gas due to the slump in prices (view the article here). Today, in the wake of a recent rally in oil prices, we look at the prospects for a tech stock that serves the oil and gas drilling industry.
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Pat McKeough responds to many personal questions about buying 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, an Inner Circle member asked about Empire Company, a stock that makes money from a variety of sources, including movie theatres. But its chief source of revenue is grocery chain Sobeys. Pat considers the reliable income generated by Sobeys’ stores against the threat of increased competition as more big-box retailers crowd into the grocery business.

Q: Hi: I have recently taken a small position in Empire Company. What do you think of their shares? Thank you.

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Investors who are still years away from retirement are often plagued by a nagging fear. When they stop working, there won’t be enough income coming in.

This underlines the fact that successful retirement planning begins well before you approach retirement age. There is one plan that we have found is more effective than any other in preparing a secure retirement. It begins during your working years.

The best retirement plan you can have is to start saving as early in your working career as possible. You then invest a steady or rising amount of that money in the stock market every year. When you follow this plan, you automatically profit from dollar-cost averaging. You will automatically buy more shares when prices are low, and fewer shares when prices are high

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p>GOOGLE INC. $742 (Nasdaq symbol GOOG; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 328.6 million; Market cap: $243.8 billion; Price-to-sales ratio: 4.6; No dividends paid; TSINetwork Rating: Above Average; 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.
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JONES GROUP INC. $12(New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.0 million; Market cap: $960.0 million; Price-to-sales ratio: 0.3; Dividend yield: 1.7%; TSINetwork Rating: Average; www.jonesgroupinc.com) earned $42.9 million in the three months ended September 29, 2012. That’s up 10.0% from $39.0 million a year earlier. Earnings per share rose 18.8%, to $0.57 from $0.48, on fewer shares outstanding. That’s mainly because the company is doing a good job of cutting costs and controlling its inventories.

Sales fell 0.7%, to $1.03 billion from $1.04 billion. Jones gets half of its sales from department stores, which are seeing strong demand for the company’s shoes and jeans. However, sales at Jones’s own stores, which mainly focus on upscale brands, fell sharply as cost-conscious consumers shifted to discount retailers.

Jones Group is a hold.

NVIDIA CORP. $12 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 624.9 million; Market cap: $7.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.5%; TSINetwork Rating: Average; www.nvidia.com) has developed a new handheld video game system. Called the Shield, this device features a 5-inch, high-definition touch screen that plays games designed for Google’s Android mobile operating system. Users can also wirelessly stream games from their computers to the Shield.

Nvidia normally designs chips for other manufacturers, so making its own device adds risk. However, the Shield should help it profit from the growth of mobile gaming. As well, developers already make games for Android, so Nvidia can focus solely on hardware. That gives it an advantage over competitors like Sony and Nintendo, which must convince programmers to make games specifically for their systems.

Nvidia is a buy....

AGILENT TECHNOLOGIES INC. $44 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 347.9 million; Market cap: $15.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.1%; TSINetwork Rating: Average; www. agilent.com) makes testing systems that help electronics companies improve their products. It also manufactures testing equipment for medical research labs.

Agilent recently raised its quarterly dividend by 20.0%, to $0.12 a share from $0.10. The new annual rate of $0.48 yields 1.1%. As well, the company will buy back up to $500 million of its shares in the fiscal year ending October 31, 2013. That’s equal to 3% of its market cap. These repurchases will reduce the dilution caused by shares it will issue under its employee stock option plan.

Agilent is a buy.
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C.R. BARD INC. $102 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 82.3 million; Market cap: $8.4 billion; Price-to-sales ratio: 2.8; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www. crbard.com) sued W.L. Gore & Associates Inc., the maker of Gore-Tex fabrics, for violating its patents in 2007.

Bard and Gore both make medical stents using a Teflon-like material called ePTFE. Lower courts have previously ruled that Bard held the rights to ePTFE. However, Gore continued to make its products using this substance.

In 2009, an Arizona court ordered Gore to pay Bard $185 million. With interest, royalties and fees, that award is now worth over $900 million, or 11% of Bard’s market cap. The U.S. Supreme Court has refused to hear Gore’s appeal. That increases the likelihood that Bard will receive at least part of this award.
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MOODY’S CORP. $54 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.9 million; Market cap: $12.0 billion; Price-to-sales ratio: 4.7; Dividend yield: 1.5%; TSINetwork Rating: Average; www.moodys.com) has raised its quarterly dividend by 25.0%, to $0.20 a share from $0.16. The new annual rate of $0.80 yields 1.5%.

New regulations could force Moody’s to change the way it rates bonds and other securities. That could increase the company’s costs. However, the new rules would also apply to its competitors.

Moody’s should earn $3.25 a share in 2013, up from its likely 2012 earnings of $2.99. The stock trades at 16.6 times this year’s estimate.
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FRONTIER COMMUNICATIONS CORP. $4.55 (Nasdaq symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 998.4 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.9; Dividend yield: 8.8%; TSINetwork Rating: Average; www.frontier.com) sells phone, Internet and video services to 4.9 million customers in 27 states.

In July 2010, the company purchased Verizon’s telephone businesses in 14 states. In return, Verizon shareholders received 0.24 shares of Frontier for each Verizon share they held.

In the quarter ended September 30, 2012, Frontier’s earnings jumped 228.5% to $67.0 million, or $0.07 a share. A year earlier, it earned $20.4 million, or $0.02 a share. Even if you disregard unusual items, earnings per share would have risen 40.0%. That’s partly because Frontier is selling more Internet and video services. However, it continues to lose traditional phone customers to wireless providers. That’s why its revenue fell 3.0%, to $1.25 billion from $1.3 billion.
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WINDSTREAM CORP. $9.69 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 588.1 million; Market cap: $5.7 billion; Price-to-sales ratio: 1.0; Dividend yield: 10.3%; TSINetwork Rating: Average; www.windstream.com) provides telephone and other communication services to 4.2 million clients, mainly in rural areas.

In 2006, Alltel merged its telephone business with Valor Communications, which then changed its name to Windstream. Alltel investors received 1.0339267 Windstream shares for each share they held.

In November 2011, Windstream acquired PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. Windstream issued $842 million in stock to PAETEC shareholders. It also assumed $1.6 billion of PAETEC’s debt.
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ARCHER DANIELS MIDLAND CO. $29 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 658.6 million; Market cap: $19.1 billion; Price-to-sales ratio: 0.2; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, canola, flax seed, peanuts, cocoa and other crops into a variety of food ingredients, such as flour, oils and sweeteners. It is also the largest maker of ethanol from corn in the U.S.

In its fiscal 2013 first quarter, which ended September 30, 2012, the company earned $182 million, or $0.28 a share. That’s down 60.4% from $460 million, or $0.68 a share, a year earlier. Lower profits from its ethanol business offset higher earnings from its oilseeds operations. Revenue fell 0.4%, to $21.8 billion from $21.9 billion.

The latest earnings included a $146-million writedown of its investment in a Mexican maker of corn flour and tortillas. Without this charge and other unusual items, the company would have earned $0.50 a share in the latest quarter, down 13.8% from $0.58 a year earlier.
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WELLS FARGO & CO. $35 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.3 billion; Market cap: $185.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.5%; TSINetwork Rating: Average; www.wellsfargo.com) earned a record $18.9 billion, or $3.36 a share, in 2012. That’s up 19.1% from $15.9 billion, or $2.82 a share, in 2011.

The bank continues to do a good job of adjusting the terms of troubled loans it acquired when it bought rival banking firm Wachovia in 2008. In 2012, it set aside $7.2 billion to cover bad loans, down 8.6% from $7.9 billion in 2011.

Revenue rose 6.4%, to $86.1 billion from $80.9 billion. Low interest rates continue to encourage businesses and consumers to take out loans. The wealth management division is also attracting more clients. However, the bank is paying out higher interest rates to attract more depositors. That’s hurting its profitability.
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EBAY INC. $53 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $68.9 billion; Priceto- sales ratio: 4.9; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) gets 53% of its revenue by charging users fees to sell goods on its shopping websites, including its main auction site, which it launched in September 1995. This site now has 112.3 million users.

eBay gets a further 40% of its revenue from processing online transactions, mostly through its wholly owned PayPal subsidiary. This business now has 122.7 million users and connects to over 15,000 financial institutions.

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