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AMERICAN EXPRESS CO. $59 (New York symbol AXP, Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $64.9 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.4%; TSINetwork Rating: Average; www. americanexpress.com) gets most of its revenue from the fees it charges merchants who accept its American Express charge and credit cards. Unlike Visa (see page 13), Amex is also a lender. As a result, it earns interest on its cardholders’ outstanding balances, and writes off bad loans. In addition, the company operates a travel business.

On average, the company’s cardholders spent 5.6% more in 2012 than in 2011. However, demand for Amex’s travel services is falling because businesses are conducting more meetings online.

In response to the drop in corporate travel, the company is restructuring its travel division, including cutting the number of travel agents it employs and making it easier for clients to book trips and hotels online. These moves will cut its workforce by 9% and cost $287 million (after tax).
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VISA INC. $159 (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 810.6 million; Market cap: $128.9 billion; Price-to-sales ratio: 12.4; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.visa.com) operates the world’s largest electronic payments network. The company processes credit, debit, prepaid and commercial payments under the Visa, Visa Electron, Interlink and PLUS brands.

Visa gets its revenue from fees it charges card issuers and merchants for using its network. These charges are based on payment volume, transactions processed and other factors.

Moreover, Visa is a financial intermediary, so it doesn’t lose money if cardholders fail to pay their bills. Instead, banks that issue Visa cards assume liability, set repayment terms and evaluate customer creditworthiness. That cuts Visa’s risk.
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INTERNATIONAL BUSINESS MACHINES CORP. $205 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $225.5 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.ibm- .com) has gained 6.8% since we named it last year’s top pick at $192 in our February 2012 issue.

Demand for the company’s software is rising. However, the slow global economy is hurting demand for its mainframe computers and computer services. As a result, IBM’s overall revenue fell 2.3% in 2012, to $104.5 billion from $106.9 billion in 2011.

The company earns higher profits on software and services than from selling computer hardware. That’s the main reason why its earnings rose 8.0% in 2012, to $17.6 billion from $16.3 billion. IBM spent $12.0 billion on share buybacks during the year. Due to fewer shares outstanding, earnings per share rose 13.5%, to $15.25 from $13.44.
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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 advice and insights on good investments. 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 follow these 8 important steps, you are putting your financial security on a secure footing for the future.

Investors are continually deluged with promises of lifelong financial happiness, some legitimate if overly optimistic, others frankly deceptive or fraudulent. But there is no magic formula for financial security

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CGI GROUP INC. (Toronto symbol GIB.A; www.cgi.com) is Canada’s largest provider of computer outsourcing services. CGI helps its clients automate routine functions, like accounting and buying supplies. That makes them more efficient and lets them focus on their main businesses.

CGI was our #1 stock pick for 2010 and 2011. In the past few years, the company has used acquisitions to expand outside of Canada. For example, it recently paid $2.7 billion for Logica plc, a U.K.-based firm that provides computer outsourcing services in 36 countries.

Thanks to purchases like this, CGI is more geographically diversified: it now gets 47% of its revenue from the U.S., 36% from Canada and 17% from the rest of the world.

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As we have consistently pointed out to our subscribers and wealth management clients, investing can never be an exact science. Experience and judgment are just as essential as fundamental analysis in successful investing.

That’s also why a balanced temperament is so important. It can keep you on a steady course and help you avoid losses. It can also help you avoid investing strategies that narrow your chances of success.

One way to judge your own temperament for investing is to take a quick survey of investment approaches to see what works best for you.

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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, we had a question from an Inner Circle member on one of the prominent Canadian stocks in the agricultural industry. This firm specializes in grain handling and other equipment and does the greater part of its business overseas, in the U.S. and countries of the former Soviet Union. The company is buying up small firms and Pat examines whether these acquisitions and today’s sophisticated farming methods provide steady growth in an industry that is traditionally cyclical and fickle. ...

From time to time, investors ask us questions to which there is not a simple yes-or-no answer. One of these is whether buying stocks “on margin” is a good idea. That is, should investors borrow money from their brokers to buy securities?

This strategy is reasonable in some circumstances, but it carries more than the usual amount of risk.

The main cost involved with buying on margin is the interest on the money you borrow. Plus, when you sell a security that you’ve bought on margin, you must first pay back the loan from your broker.

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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 advice and insights, such as how we pick our top stocks. 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: “Here are 5 more ways in which our exclusive ratings system helps investors make stock selections with a much better chance of success.”...

Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new companies: the new Encana, which focuses on natural gas, and Cenovus Energy (Toronto symbol CVE), which specializes in oil sands.

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COMPUTER MODELLING GROUP $22.10 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgroup.com; Shares outstanding: 37.8 million; Market cap: $835.4 million; Dividend yield: 2.9%) sells consulting services and software that help oil and gas producers use advanced recovery techniques to get more out of their existing wells. The company has customers in over 50 countries and offices in Calgary, Houston, London, Caracas and Dubai.

In the three months ended September 30, 2012, Computer Modelling’s revenue rose 34.1%, to $16.1 million from $12.0 million a year earlier.


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PASON SYSTEMS $17.26 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 82.0 million; Market cap: $1.4 billion; Dividend yield: 2.8%) rents equipment for monitoring and managing oil and gas rigs. It also sells communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas producers and drilling contractors throughout Canada, the U.S., Mexico, Argentina and Australia.

In the three months ended September 30, 2012, Pason’s revenue rose 4.9%, to $93.1 million from $88.7 million a year earlier. Cash flow per share was unchanged at $0.50.

Higher international sales and steady drilling activity in the U.S. offset lower revenue in Canada. Pason’s U.S. sales rose 13.8%, to $54.6 million, and international sales jumped 34.0% to $9.4 million. Canadian revenue declined 13.8%, to $29.0 million.
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RUBY TUESDAY, INC. $7.99 (New York symbol RT; TSINetwork Rating: Speculative) (865-379-5700; www.rubytuesday.com; Shares outstanding: 63.7 million; Market cap: $509.0 million; No dividends paid) has just announced a new plan to refocus its operations.

Under this initiative, the company will discontinue three of the new restaurant concepts it was developing: it’s closing its 13 Marlin & Ray’s restaurants and its single Wok Hay location. It’s also selling its two Truffles Grill restaurants. The company will keep 15 of its 17 newly launched Lime Fresh locations; it will close the remaining two.

The plan is being carried out by J.J. Buettgen, whom Ruby Tuesday appointed as its new president and CEO in November 2012. Buettgen was formerly the chief marketing officer at Darden Restaurants (symbol DRI on New York). Darden is the world’s largest casual dining operator. Ruby Tuesday hired him for his expertise in promoting multiple brands. As well, he has worked on turning around Darden’s well-established but underperforming Olive Garden and Red Lobster chains.
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IMPERIAL METALS $13.70 (Toronto symbol III; TSINetwork Rating: Speculative) (604-669-8959; www.imperialmetals.com; Shares outstanding: 74.3 million; Market cap: $1.0 billion) has seen its share price over 11% since January 1, 2013, after it reported the latest results from the exploration program at its 100%-owned Mount Polley open-pit copper/gold mine in central B.C.

The latest results confirm that copper/gold mineralization extends beyond the Zuke zone and into the Boundary zone. The drilling results included 12.8 metres of a high 4.73% copper, 2.61 grams per tonne of gold and 30.05 grams per tonne of silver, as well as a very high 9.66% copper, 6.42 grams per tonne of gold and 52.81 grams per tonne of silver over 2.8 metres.

Imperial Metals is still a hold....

CARFINCO FINANCIAL GROUP $10.95 (Toronto symbol CFN; TSINetwork Rating: Speculative) (1-888- 486-4356; www.carfinco.com; Shares outstanding: 24.6 million; Market cap: $269.4 million; Dividend yield: 4.4%) raised its monthly dividend by 14.3%, to $0.04 from $0.035, starting with the October 2012 payment. This was the fourth dividend increase since the start of 2011. The higher payout gives the stock a 4.4% yield.

The company also added a $0.05-a-share special cash dividend to the regular dividend of $0.04 a share it paid in December 2012.

Carfinco is still a buy for aggressive investors.
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AMAZON.COM $268.93 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 453.0 million; Market cap: $121.8 billion; No dividends paid) and ADOBE SYSTEMS $37.88 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 495.1 million; Market cap: $18.8 billion; No dividends paid) are part of a 12-company consortium that is buying bankrupt Eastman Kodak’s 1,100 digital-imaging patents for $525 million U.S.

Other members of the consortium include Apple, Google, Samsung, Research in Motion, Microsoft, China’s Huawei, Facebook and Fujifilm.

Under the deal, each of the 12 companies in the consortium will pay a portion of the total cost and then have access to all the patents.
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YAMANA GOLD $17.14 (Toronto symbol YRI; TSINetwork Rating: Speculative) (416- 815-0220; www.yamana.com; Shares outstanding: 752.0 million; Market cap: $12.9 billion; Dividend yield: 1.5%) saw its production rise 9% in 2012, to a record 1.2 million gold-equivalent ounces (including silver and copper) from 2011.

The company now forecasts production of 1.44 million to 1.6 million ounces in 2013, up 20% from 2012. Most of the increase will come from the expansion of its Minera Florida mine and production from three new Brazilian projects: Ernesto/Pau-a-Pique, C1 Santa Luz and Pilar.

As the company starts up more mines, its output will keep increasing: in 2014, its production should rise about 33% from 2012, to between 1.6 million and 1.77 million ounces.
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GABRIEL RESOURCES $2.82 (Toronto symbol GBU; TSINetwork Rating: Speculative) (416-955-9200; www.gabrielresources.com; Shares outstanding: 380.1 million; Market cap: $91.1 billion; No dividends paid) aims to develop its 80.46%-owned Rosia Montana gold project in Romania. With an estimated 10 million ounces of gold reserves and 500,000 ounces of projected annual output, Rosia Montana could become Europe’s largest producing gold mine.

However, the proposed mine is near the site of ancient Roman mining tunnels. That has triggered protests from environmentalists, historians and other civic groups.

Gabriel recently won a vote related to its bid to build the mine. A regional referendum on the issue was held on December 9, 2012. Of the voters who participated, 62.45% supported the resolution to permit mining. In the community of Rosia Montana itself, support was even higher, at over 78% in favour.
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ENDEAVOUR SILVER $7.86 (Toronto symbol EDR: TSINetwork Rating: Speculative) (1-877-685-9775; www.edrsilver.com; Shares outstanding: 99.5 million; Market cap: $782.1 million; No dividends paid) operates the Guanacevi and Bolanitos silver/gold mines in Mexico, as well as the recently acquired El Cubo project.

In the three months ended December 31, 2012, Endeavour’s revenue jumped 281% from a year earlier, to $66.7 million (all amounts except share prices in U.S. dollars). The company hasn’t yet released its earnings or cash flow for the latest quarter.

The revenue gain was partly due to higher production and an increase in silver and gold prices. The company also held back on selling silver and gold a year ago in response to lower prices at that time.
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THE CHURCHILL CORP. $8.95 (Toronto symbol CUQ; TSINetwork Rating: Speculative) (780-454-3667; www.churchillcorporation.com; Shares outstanding: 24.5 million; Market cap: $219.3 million; Dividend yield: 5.4%) reported earnings of $1.8 million, or $0.07 a share, in the three months ended September 30, 2012. That was down sharply from $6.1 million, or $0.24 a share, a year earlier. Revenue fell 20.0%, to $303.2 million from $379.3 million.

Project delays were part of the reason for the declines. Churchill’s earnings also fell because of less-profitable contracts that should be completed by the end of this year.

Even with these setbacks, the company’s long-term prospects are sound. The stock trades at 17.2 times Churchill’s forecast 2013 earnings of $0.52 a share. Its dividend, which yields a high 5.4%, appears safe.
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GOODYEAR TIRE & RUBBER CO. $13.85 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 245.0 million; Market cap: $3.4 billion; No dividends paid) is the world’s largest tire maker, with 53 plants in 22 countries.

In the three months ended September 30, 2012, the weak global economy pushed down the company’s sales by 13.2%, to $5.26 billion from $6.06 billion a year earlier.

North American sales fell 6.0%, to $2.40 billion from $2.56 billion. Sales also declined by 20.1% in Latin America; 21.5% in Europe, the Middle East and Africa; and 5.7% in Asia. Unfavourable foreign currency moves also lowered Goodyear’s revenue.
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RUSSEL METALS $29.20 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 60.2 million; Market cap: $1.8 billion; Dividend yield: 4.8%) is one of North America’s largest metal distributors. The company serves its roughly 33,000 customers through 51 locations in Canada and 12 in the U.S.

In the three months ended September 30, 2012, Russel’s revenue rose 1.0%, to $712.6 million from $705.4 million a year earlier. Revenue at its steel distribution division fell 12%, and sales at the metal services business declined 2%. That’s because the slower economy pushed down steel demand. However, the energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 12% on higher drilling activity.

Earnings fell 12.5%, to $22.5 million, or $0.37 a share. A year earlier, Russel earned $25.7 million, or $0.43 a share. The company’s earnings fell even with the higher revenue because steel prices declined in the latest quarter. That cuts Russel’s profit margins and causes it to suffer losses on its current inventory.
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ADOBE SYSTEMS $37.88 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536- 6000; www.adobe.com; Shares outstanding: 495.1 million; Market cap: $18.8 billion; No dividends paid) reports that in the fourth quarter of its 2012 fiscal year, which ended November 30, 2012, its earnings fell 7.4%, to $307.9 million from $332.6 million a year earlier.

Before one-time items, earnings per share declined 9.0%, to $0.61 from $0.67, on more shares outstanding. Revenue was flat at $1.15 billion.

Adobe is doing a good job of selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription service instead of a one-time purchase.

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INTACT FINANCIAL CORP. $65.21 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 133.3 million; Market cap: $8.7 billion; Dividend yield: 2.5%) 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 September 30, 2012, Intact’s revenue rose 43.4%, to $1.66 billion from $1.16 billion a year earlier. That was mainly due to the contribution from AXA Canada, which Intact bought from Paris-based ASX Group for $2.6 billion in late 2011.

AXA Canada is the country’s sixth-largest home, auto and commercial insurer. It also gives Intact a presence in Quebec, B.C. and Atlantic Canada.

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BROADRIDGE FINANCIAL SOLUTIONS $22.97 (New York symbol BR: TSINetwork Rating: Extra Risk) (201-714-3000; www.broadridge.com; Shares outstanding: 122.2 million; Market cap: $2.8 billion; Dividend yield: 3.1%) 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.

Before one-time items, Broadridge’s earnings fell 2.2% in its fiscal first quarter ended September 30, 2012, to $22.3 million from $22.8 million a year earlier. Earnings per share were unchanged at $0.18 on fewer shares outstanding.

Sales rose 4.1%, to $495.8 million from $476.4 million. Broadridge continues to do a good job of attracting new clients and holding on to existing ones.

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