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FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 186.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. In addition, wholly owned FortisBC Energy distributes natural gas in British Columbia.

Fortis recently agreed to buy CH Energy Group (New York symbol CHG), which supplies electricity to 300,000 customers in New York State. This company does not own power plants; instead, it buys electricity from other producers. It also distributes natural gas to 75,000 users.

Regulators must still approve the deal, but Fortis should close it in early 2013. It will pay $1.5 billion U.S., including $500 million U.S. of CH’s debt.

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p>ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $76 and ACO.Y [class II voting] $76; Income Portfolio, Utilities sector; Shares outstanding: 57.6 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.7%-owned Canadian Utilities (see page 103). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms; Canadian Utilities owns the remaining 24.5%. In the three months ended June 30, 2012, ATCO’s revenue rose 11.9% to $987 million from $882 million a year earlier. That’s because its structures division won a number of new contracts, and it recently purchased a gas-distribution business in Australia. Earnings rose 21.3%, to $74 million, or $1.28 a share, from $61 million, or $1.07.

Companies like ATCO sometimes trade for less than the value of their assets. Investors call this a “holding company discount.” That’s why you can buy a share of ATCO for $76 and get roughly $79 worth of Canadian Utilities. That means you get ATCO’s non-utility businesses, which provide a third of its earnings, for free.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $67 and CU.X [class B voting] $67; Income Portfolio, Utilities sector; Shares outstanding: 127.6 million; Market cap: $8.5 billion; Price-to-sales ratio: 2.8; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see page 104) owns 52.7% of the company.

Canadian Utilities continues to benefit from last year’s $1.1-billion purchase of a company that distributes natural gas in Perth, Australia. That helped offset lower revenues from its Alberta power plants due to planned maintenance shutdowns.

As a result, the company’s earnings rose 5.6% in the second quarter of 2012, to $95 million, or $0.74 a share. The new Australian business added $16 million to that total. A year earlier, Canadian Utilities earned $90 million, or $0.70 a share. Revenue rose 6.0%, to $706 million from $666 million.

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TRANSCANADA CORP. $44 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 704.0 million; Market cap: $31.0 billion; Price-to-sales ratio: 3.6; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.transcanada.com) is mainly known for its natural gas and oil pipelines. However, the company continues to expand its electrical-power business. TransCanada’s 19 power plants in Canada and the U.S. now supply 30% of its revenue.

The company has agreed to build a new gas-fired power plant near Napanee, Ontario, as part of a deal with the Ontario Power Authority (OPA), which regulates the province’s power producers. This new plant will replace a plant that TransCanada previously agreed to build in Oakville, Ontario.

The OPA will pay TransCanada $210 million for the turbines and other equipment originally earmarked for the Oakville plant. The company will also receive $40 million to cover the costs of equipment that it can’t move to the new site. However, the OPA will pay TransCanada lower rates for the new plant’s power when it starts up in 2017.

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AGRIUM INC. $102 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $16.1 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.0%; TSINetwork Rating: Average; www.agrium.com) has gained 30% since May 2012....

RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 291.3 million; Market cap: $7.9 billion; Price-to-sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) is Canada’s largest real estate investment trust (REIT).

RioCan specializes in big-box-style outdoor malls. It owns 278 shopping centres in Canada, 10 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. The trust often leaves room at its malls for expanding existing stores and building new ones. This makes itseasy to add more tenants.

In the past few years, RioCan has expanded in the U.S., where it now owns or invests in 48 malls, 22 of which the trust operates through a joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). RioCan owns 80% of this joint venture and 14.3% of Cedar.

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Pat McKeough responds to many personal questions about stock investing 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 the Inner Circle.

This week, we had a question from an Inner Circle on a U.S. company that operates a group of bakery-cafes. This stock has seen its share price rise substantially in the past year and Pat examines whether it can continue to maintain its strong niche in the face of intense competition among restaurant chains....

“Theme investing” can pay off from time to time. Recent investment themes have included renewable energy and emerging markets such as China and India. Today’s most popular investment themes include social media. However, theme investing can turn out badly for investors, especially those who get in late or forget about investment quality....

CALIAN TECHNOLOGIES (Toronto symbol CTY; www.calian.com) operates in two areas: the business and technology services division (which supplies 70% of Calian’s revenue) provides engineers, health care workers and other skilled professionals to clients on a contract basis. The systems engineering division (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communication systems. In the three months ended June 30, 2012, Calian’s revenue rose 1.4%, to $59.3 million from $58.5 million a year earlier. Earnings rose slightly, to $3.48 million, or $0.45 a share, from $3.45 million, or $0.45 a share....

This is the time of year when many Canadians prepare to spend part or all of the coming winter in warmer weather down south. For some, this could raise the question of time-shares as an option for cheaper vacations. If you visit a resort this winter, you may receive an invitation to a party or other event whose object is to try to sell you and other guests time-shares. It could be worthwhile to attend, depending on what else you have to do. But our view is that investing your money in a time-share rarely provides you with any real advantage....

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 the Inner Circle. This week, an Inner Circle member asked about one of the world’s biggest toy companies. Hasbro’s revenue and earnings fell off in the most recent quarter and Pat analyzes the company’s different divisions to see where future growth may come from....

MONSANTO CO. $86 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 534.6 million; Market cap: $46.0 billion; Price-to-sales ratio: 3.4; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.monsanto.com) is a multinational firm that sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. Overseas markets account for about 45% of its revenue.

Monsanto has two business segments. Its Seeds and Genomics division, which supplies 73% of its total revenue, makes genetically modified seeds for corn, soybeans and other crops.

The company gets the remaining 27% of its sales from its Agricul- tural Productivity division, which makes herbicides for farmers under the Roundup brand. Roundup accounts for about 10% of Monsanto’s overall sales. The company also makes lawn and garden herbicides for consumers.

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MCGRAW-HILL COMPANIES INC. $55 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 280.2 million; Market cap: $15.4 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.9%; TSINetwork Rating: Average; www.mcgraw-hill.com) will soon split into two separate, publicly traded companies.

One of these new firms, McGraw-Hill Financial, will sell financial-information products. This business will include Standard & Poor’s, which provides credit ratings on bonds, and McGraw-Hill’s J.D. Power market- research firm. Right now, this division supplies 60% of McGraw-Hill’s total revenue.

The other company, McGraw-Hill Education Inc., will publish textbooks for schools and colleges. It sells its products in 28 countries and 65 languages.

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SNAP-ON INC. $76 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.2 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.8%; TSINetwork Rating: Average; www.snapon.com) makes tools for auto mechanics. The company sells its products through a fleet of franchised vans that visit garages. It also makes specialized tools for mining companies, electrical power generators and other industrial customers.

Snap-On’s earnings rose 8.6% in the three months ended September 30, 2012, to $1.26 from $1.16 a year earlier. That’s mainly due to improved results from its financing division, which provides loans to help mechanics buy Snap-On tools. Revenue rose 3.0%, to $752.1 million from $729.9 million.

Snap-On is a buy.

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DIAGEO PLC ADRs $113 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 627.1 million; Market cap: $70.9 billion; Price-to-sales ratio: 4.1; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.diageo.com) continues see strong demand for its top brands, such as Smirnoff vodka, Johnnie Walker scotch whisky and Captain Morgan rum, in fast-growing markets like Latin America and Africa. The company aims to get half of its sales from emerging markets by 2015, up from the current 40%.

In its fiscal 2013 first quarter, which ended September 30, 2012, Diageo’s sales rose 6% from a year earlier. If you exclude contributions from acquisitions, sales would have risen 5%.

Sales increased 6% in North America, 11% in Africa, 16% in Latin America and 2% in Asia. However, European sales fell 1%.

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FEDEX CORP. $91 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 314.1 million; Market cap: $28.6 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; TSI Network Rating: Average; www.fedex.com) is seeing lower demand for its overnight international air delivery services. That’s because the uncertain economy is prompting shippers to use lower but cheaper forms of transportation, such as trucks and ships. In response, FedEx plans to lower its costs by replacing older planes and trucks with more fuel-efficient models. It is also cutting jobs and consolidating facilities.

The company expects these moves to increase its earnings by $1.7 billion by May 31, 2015, which is the end of its 2015 fiscal year. In its latest fiscal year, FedEx earned $2.1 billion, or $6.59 a share.

FedEx is a buy.

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PHILIPS ELECTRONICS N.V. ADRs $25 (New York symbol PHG; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $25.0 billion; Priceto- sales ratio: 0.8; Dividend yield: 3.7%; TSINetwork Rating: Average; www.philips.com) continues to make progress with a major restructuring plan that includes cutting 4% of its workforce. This should save it 1.1 billion euros annually by 2015 (1 euro = $1.29 Canadian). It is also expanding its less-cyclical operations, such as medical equipment, and may sell its consumer electronics division.

Mainly due to savings from its restructuring, Philips’ earnings rose 30.8% in the three months ended September 30, 2012, to 170 million euros, or 0.18 euros per ADR (each American Depositary Receipt equals one Philips common share). A year earlier, it earned 130 million euros, or 0.14 euros per ADR. Sales rose 13.6%, to 6.1 billion euros from 5.4 billion euros.

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XEROX CORP. $6.48 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $8.4 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.6%; TSINetwork Rating: Average; www.xerox.com) now gets half of its sales from managing certain tasks, such as billing and accounting, for its clients. It sells these services under long-term ontracts. That gives it more predictable revenue streams than selling copiers and other hardware.

Still, demand for the company’s products and services is cyclical, and the stock will likely stay in a narrow range until global economic growth improves. Xerox’s $7.5-billion long-term debt is also a high 89% of its market cap. That means the company will likely put more of its future cash flow into debt repayments and less toward buying back shares or raising its dividend.

Xerox is a sell.

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WEYERHAEUSER CO. $28 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 537.8 million; Market cap: $15.1 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products, including paper and packaging.

The stock is up 48% since the start of 2012. That’s mainly because of signs that the U.S. housing market is starting to recover, which should spur lumber demand. However, paper prices remain depressed.

As well, Weyerhaeuser trades at a high 50.9 times its projected 2012 earnings of $0.55 a share. That makes it vulnerable to sudden drop if growth slows.

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STATE STREET CORP. $44 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 479.1 million; Market cap: $21.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.2%; TSINetwork Rating: Extra Risk; www.statestreet.com) has completed its $550-million purchase of the hedge fund management business of Goldman Sachs Group Inc. (New York symbol GS). These operations should immediately add to its earnings.

Meanwhile, the company earned $473 million in the three months ended September 30, 2012. That’s down 0.6% from $476 million a year earlier. Earnings per share rose 3.1%, to $0.99 from $0.96, on fewer shares outstanding. Revenue fell 2.7%, to $2.35 billion from $2.41 billion, as lower volumes hurt its trading division.

State Street is a buy.

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J.P. MORGAN CHASE & CO. $42 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.8 billion; Market cap: $159.6 billion; Priceto- sales ratio: 1.7; Dividend yield: 2.9%; TSINetwork Rating: Average; www.jpmorganchase .com) earned a record $5.7 billion in the three months ended September 30, 2012. That’s up 33.9% from $4.3 billion a year earlier. Earnings per share rose 38.2%, to $1.40 from $1.02, on fewer shares outstanding.

More borrowers are paying back their loans on time. As a result, Morgan set aside $1.8 billion to cover bad loans in the quarter, down 25.8% from $2.4 billion a year earlier.

Low interest rates are also spurring demand for mortgages and credit cards. At the same time, the bank is seeing higher underwriting revenue as businesses issue more stocks and bonds. As a result, its overall revenue rose 5.8% in the quarter, to $25.1 billion from $23.8 billion.

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WELLS FARGO & CO. $34 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.3 billion; Market cap: $180.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.6%; TSINetwork Rating: Average; www.wellsfargo.com) earned $4.9 billion, or $0.88 a share, in the three months ended September 30, 2012. That’s up 21.7% from $4.1 billion, or $0.72 a share, a year earlier.

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 the latest quarter, it set aside $1.6 billion to cover bad loans, down 12.1% from $1.8 billion a year ago.

Revenue rose 8.0%, to $21.2 billion from $19.6 billion. Low interest rates continue to encourage businesses and consumers to take out loans. The wealth management division is also attracting more clients.

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MCDONALD’S CORP. $87 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.0 billion; Market cap: $87.0 billion; Price-to-sales ratio: 3.2; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.mcdonalds.com) is seeing stronger competition from other fast-food chains. The higher U.S. dollar is also undermining the value of its overseas profits.

In the three months ended September 30, 2012, the company’s sales fell 0.2%, to $7.15 billion from $7.17 billion a year earlier. However, if you exclude the negative impact of foreign exchange rates, sales would have risen 4%. Overall same-store sales rose 1.9% in the quarter.

Earnings fell 3.5%, to $1.46 billion from $1.51 billion. Due to fewer shares outstanding, earnings per share fell 1.4%, to $1.43 from $1.45. On a constant-currency basis, earnings per share would have risen 4%. The company also raised its quarterly dividend by 10.0%, to $0.77 a share from $0.70. The new annual rate of $3.08 yields 3.5%.

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PFIZER INC. $25 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 7.5 billion; Market cap: $187.5 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.pfizer.com) has agreed to buy NextWave Pharmaceuticals Inc.

This private company has developed Quillivant XR, a liquid drug that treats attention deficit/hyperactivity disorder (ADHD). Pfizer’s extensive marketing and distribution operations should help expand sales of Quillivant XR.

Based on future sales of this drug, this purchase could cost Pfizer a total of $700 million. That’s equal to 15% of the $4.7billion, or $0.62 a share, that it earned in the second quarter of 2012. The deal should close by the end of 2012.

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ABB LTD. ADRs $19 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $43.7 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.abb.com) is a leading maker of power technologies for utilities, including transformers, transmission systems and circuit breakers. The Switzerland-based company also makes automation systems and robotics that industrial clients use to make their facilities more productive.

ABB has spent over $7.6 billion on acquisitions, including the cash these companies held, since the start of 2011. Expanding by acquisition adds risk, but these purchases have helped ABB expand into new regions. They also nicely complement its current products.

For example, in January 2011 ABB paid $4.2 billion for Arkansas-based Baldor Electric Co., which makes electric motors and related products, such as conveyor belts, fans and pumps.

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