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CANADIAN PACIFIC RAILWAY $74.14 (Toronto symbol CP; Shares outstanding: 170.0 million; Market cap: $12.6 billion; TSINetwork Rating: Average; Dividend yield: 1.6%; www.cpr.ca), transports freight between Montreal and Vancouver, and connects with hubs in the U.S. midwest and northeast.

In the three months ended December 31, 2011, CP’s revenue rose 8.8%, to $1.41 billion from $1.29 billion a year earlier. Earnings rose 18.8%, to $221 million, or $1.31 a share, from $186 million, or $1.10. CP’s $4.7 billion of debt is a manageable 37.3% of its market cap.

CP’s operating ratio worsened to 78.5% from 77.0%, mostly due to 29% higher fuel costs. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) But CP plans to lower that to between 70% and 72% in the next three years with a number of upgrades, like new snow-clearing equipment, new trains and software that optimizes train loads and speeds.

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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing, and not least on successful retirement planning. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “When you’re planning for retirement, make sure you make realistic calculations rather than indulging in wishful thinking.”...

Yesterday, we discussed U.S. drug store chain Walgreen, a name familiar to many Canadian investors. Today we examine a U.S. drug distributor that has a strong and growing Canadian presence, but is not as well known. We first included this stock in the Aggressive Growth portfolio of Wall Street Stock Forecaster in June, 2002. 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....

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of 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. This week, we heard from an Inner Circle member asking for investment advice on America’s largest drug store chain. Pat discussed the company’s prospects following a big acquisition last year, and this year’s decision to put an end to a key commercial relationship....

TORONTO-DOMINION BANK $80 (www.tdbank.com) is looking for new ways to cut its costs, as low interest rates have shrunk the revenue the bank earns from loans. However, its credit losses continue to fall as more borrowers repay their loans on time....

ROYAL BANK OF CANADA $56 (www.rbc.com) has completed the sale of its struggling U.S. retail-banking business, which consists of 424 branches in six southeastern states. That will free up cash that the bank can invest in its more profitable banking operations in Canada and the Caribbean....

LOBLAW COMPANIES LTD. $35 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 281.4 million; Market cap: $9.8 billion; Price-to-sales ratio: 0.3; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer. George Weston Ltd. (Toronto symbol WN) owns 64% of the company’s shares.

Loblaw continues to make progress with its multi-year plan to streamline its supply chain and avoid product shortages. These actions mainly included closing 11 distribution centres and opening eight new ones, and installing new computer systems. The company claims that about 99% of its products are now in stock at its 1,000 supermarkets across Canada.

Big restructuring starting to pay off

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MAPLE LEAF FOODS INC. $12 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 139.5 million; Market cap: $1.7 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.mapleleaf.ca) is starting to see the benefits of its a major restructuring plan, which mainly involves closing older meat-processing plants and bakeries and shifting their operations to modern facilities. Excluding all unusual items, earnings per share would have risen 38.4%, to $1.01 in 2011 from $0.73 in 2010.

Sales for the year fell 1.5%, to $4.9 billion from $5.0 billion. If you disregard operations that the company sold and unfavourable foreign currency rates, sales would have risen by 4.7%.

The company plans to raise its selling prices, which will help it offset rising ingredient costs. The savings from the restructuring plan, which Maple Leaf expects to complete in 2014, will also help it absorb these higher costs.

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TORSTAR CORP. $9.63 (Toronto symbol TS.B; Shares outstanding: 79.5 million; Market cap: $765.6 million; Price-to-sales ratio: 0.5; Dividend yield: 5.2%; TSINetwork Rating: Above Average; www.torstar.com) owns 90% of a company that publishes free commuter newspapers under the “Metro” banner in major Canadian cities; Sweden’s Metro International SA owns the remaining 10%.

The company now plans to expand Metro to Saskatoon and Regina. It will also launch Internet-only versions for four more cities: Hamilton, Kitchener and Windsor, in Ontario, and Victoria, B.C. These free publications should help the company attract more younger readers, who tend to avoid traditional newspapers.

Torstar is a buy.

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THE WESTAIM CORP. $0.60 (Toronto symbol WED, Aggressive Growth Portfolio, Finance sector; Shares outstanding: 586.8 million; Market cap: $352.1 million; Price-to-sales ratio: 1.0; No dividends paid; TSINetwork Rating: Speculative; www.westaim.com) owns Jevco Insurance Co., which sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles.

Westaim earned $32.9 million, or $0.05 a share, in 2011. That’s down 40.3% from $55.1 million, or $0.11 a share, in 2010. However, the 2010 earnings included a $25.1-million gain stemming from the company’s reorganization and purchase of Jevco in March 2010.

The company’s combined ratio, or claims paid out divided by premiums taken in (the lower, the better), improved to 95.5% from 97.6%. Westaim is a hold for aggressive investors only.

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TRANSCANADA CORP. $44 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 703.0 million; Market cap: $30.9 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.transcanada.com) is expanding its Tamazunchale pipeline, which pumps natural gas from Mexico’s state-owned oil company to gas-fired power plants.

This extension will cost $500 million U.S., which is roughly equal to 30% of the $1.6 billion (Canadian), or $2.23 a share, that TransCanada earned in 2011. The company expects to complete the project in 2014.

The company has a 25-year supply deal with the state-owned power company, which cuts the risk of this project. Mexico continues to convert oil-fired power plants to gas, and TransCanada’s expertise should help it win more pipeline contracts.

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SUNCOR ENERGY INC. $34 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $54.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.suncor.com) produced an average of 361,000 barrels of oil per day at its oil-sands projects in February 2012. That’s up 1.7% from 355,000 barrels in January 2012.

Suncor aims to expand its oil-sands production by 10% a year. That will help it reach its goal of producing over 1 million barrels (including conventional oil and natural gas) per day by 2020.

Suncor is a buy.

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AGRIUM INC. $81 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $12.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 0.6%; TSINetwork Rating: Average; www.agrium.com) owns stores that sell fertilizer, seeds and other agricultural products to farmers. These retail stores account for two-thirds of its revenue, and half of its earnings.

The company also makes fertilizers from natural gas at 14 plants in North America and Argentina, as well as other fertilizers such as potash and phosphate.

Good weather and high grain prices continue to spur demand for fertilizers. Moreover, low gas prices continue to cut Agrium’s operating costs.

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POTASH CORP. OF SASKATCHEWAN $43 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 858.7 million; Market cap: $36.9 billion; Price-to-sales ratio: 4.0; Dividend yield: 1.3%; TSINetwork Rating: Average; www.potashcorp.com) is the world’s largest fertilizer producer. It has six potash mines in Saskatchewan and one in New Brunswick.

Thanks to a 30.4% rise in potash prices, the company’s earnings rose 73.6% in 2011 to $3.1 billion from $1.8 billion in 2010 (all amounts except share price and market cap in U.S. dollars). Earnings per share rose 80.0%, to $3.51 from $1.95, on fewer shares outstanding. Revenue gained 33.3%, to $8.7 billion from $6.5 billion.

The company sold 9.05 million tonnes of potash in 2011, up 4.7% from 8.6 million tonnes in 2010. However, sales fell 33.5% in the fourth quarter of 2011 due to lower demand from North American farmers. As a result, Potash Corp. has temporarily shut down three of its mines. That should help stabilize prices ahead of the spring planting season.

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TIM HORTONS INC. $53 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 157.4 million; Market cap: $8.3 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.6%; TSINetwork Rating: Average; www.timhortons.com) operates 3,295 coffee-and-donut stores in Canada and 714 in the U.S. It also has five recently-opened outlets in the Persian Gulf.

The company’s new menu items, such as espresso-based coffee drinks, continue to be extremely popular. Warmer-than-usual winter weather has also spurred customer traffic.

These two factors pushed up Tim Hortons’ sales by 12.5% in 2011, to $2.9 billion from $2.5 billion in 2010. If you exclude the positive impact of foreign currency rates, sales rose 7.4% in 2011. Same-store sales rose 6.3% at its U.S. outlets, and 4.0% in Canada.

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ENBRIDGE INC. $38 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 782.3 million; Market cap: $29.7 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.enbridge.com) plans to build a new pipeline that would pump shale oil from the Bakken region of North Dakota to refineries in the U.S. and Canada. If it can sign up enough oil shippers, this new line would increase Enbridge’s capacity in the region by 67,000 barrels a day by the end of 2013. Right now, the company’s North Dakota pipelines can pump 210,000 barrels a day.

The new line would cost $650 million, which is equal to 59% of the $1.1 billion, or $1.48 a share, that Enbridge earned in 2011. However, investments like this will help it take advantage of rising oil production in North Dakota, which has quadrupled since 2005.

Enbridge is a buy.

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BOMBARDIER INC. (Toronto symbols BBD.A $4.13 and BBD.B $4.08; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $7.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 2.4%; TSINetwork Rating: Average; www.bombardier.com) earned $837 million, or $0.47 a share, in the year ended December 31, 2011 (all amounts except share price and market cap in U.S. dollars). It earned $762 million, or $0.42 a share, in the 12 months ended January 31, 2011 (the company has changed its fiscal year end to December 31). Revenue was $18.3 billion compared with $17.9 billion.

Sales of passenger railcars supplies 53% of Bombardier’s total revenue. This business has a backlog of $31.9 billion. The company gets the remaining 47% of its revenue from its aerospace division. This division has an order backlog of $22.0 billion.

Bombardier is a buy. The subordinate-voting class B shares are the better choice, due to their greater liquidity and slightly higher dividend yield.

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MANITOBA TELECOM SERVICES INC. $33 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 66.2 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 5.2%; TSINetwork Rating: Average; www.mtsallstream.com) has 1.3 million telephone and wireless customers in Manitoba. This business now accounts for 55% of the company’s revenue. The remaining 45% comes from its Allstream division, which provides integrated telephone, Internet and other communication services to businesses across Canada.

Like BCE and Telus, Manitoba Telecom continues to profit from fast-growing demand for smartphones and wireless service. It ended 2011 with 496,432 wireless subscribers, up 2.6% from a year earlier. About 41% of users under long-term contracts had data plans, up from 27% in 2010.

The company is also seeing strong demand for its fibre-optic Internet and TV services. It now has 188,946 high-speed Internet customers (up 2.9% from 2010) and 95,456 TV subscribers (up 6.1%).

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BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 227.8 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells telephone and Internet services to 2.6 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. It also sells wireless services through an alliance with BCE; BCE owns 45% of the company.

The company continues to replace its copper-wire cables with fibre-optic lines. This lets its sell more high-speed Internet and digital TV services, and offset declining demand for its regular phone services, which still account for 60% of its revenue.

Bell Aliant’s fibre-optic systems now reach 458,000 homes. The company plans to expand this to 650,000 homes by the end of 2012.

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TELUS CORP. (Toronto symbols T $57 and T.A $57; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 325.0 million; Market cap: $18.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings.

The remaining 48% of Telus’s earnings comes from its wireline division, which mainly consists of 3.6 million traditional phone customers in B.C., Alberta and eastern Quebec. This division also includes 1.3 million Internet users and 509,000 TV customers.

Telus added 369,000 wireless subscribers (net of deactivations) in 2011. That’s down 17.4% from a net gain of 447,000 users in 2010, mainly due to the loss of a contract with the federal government.

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SNC-LAVALIN GROUP INC. $39 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.9 million; Market cap: $5.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.2%; TSINetwork Rating: Average; www.snclavalin.com) fell over 20% on February 28, 2012 after it announced that its 2011 earnings will be $80 million, or 18% below its earlier forecast. In 2010, SNC earned $437.0 million, or $2.87 a share.

The earnings drop is partly due to $35 million in unusual payments related to certain construction contracts. Because of the recent civil war, SNC will also write down the value of its Libyan operations, including a prison, an airport and a water treatment system, by $23 million. The company did not say if the unusual payments are connected to its Libyan projects.

SNC is working with its external auditors and lawyers to examine these payments and certain other contracts.

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BCE INC. $41 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 774.0 million; Market cap: $31.7 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.3%; TSINetwork Rating: Above Average; www.bce.ca) is
Canada’s largest provider of telephone services.

BCE’s main subsidiary, Bell Canada, has 6.1 million telephone customers in Ontario and Quebec, as well as 2.1 million high-speed Internet customers and 2.1 million TV subscribers. Bell Canada supplied 53% of BCE’s 2011 revenue.

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This is another in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. In this post he has stock market investment advice on stocks that are taken over. It’s not a guessing game, he tells viewers—there are specific qualities to look for that can point to potential takeover candidates. And Pat has recommended more than his fair share in his newsletters. Below is the transcription of Pat’s comments. ...

Not everybody is happy with the agreement on Greece’s national debt that was reached after much hard bargaining. But it didn’t exactly bring world stock markets crashing into the abyss, either—although many predicted just such a disaster. That gives it a resemblance to the Y2K crisis of a dozen years ago. Y2K, in case you missed it, was media shorthand for the crisis that was supposed to hit at midnight on December 31, 1999. That’s when the world’s computers were supposed to freeze up; they were programmed to designate years by their last two digits, and they wouldn’t know how to handle the year “00”. Many investors thought this would usher in an immediate stock market plunge. Nothing of the kind happened. Before 1999 ended, owners of all of the world’s most important computers had found ways around the problem in time to avoid it....

Companies take different paths to growth. Over the years, this Canadian company has steadily acquired a series of small firms with specialized expertise and integrated them into a large organization that can undertake a wide range of projects. And this year, it has joined the ranks of Canadian dividend stocks. STANTEC INC. (Toronto symbol STN; www.stantec.com) sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a wide variety of markets, including industry, environment, transportation and construction. Stantec has over 11,000 employees at 170 locations throughout North America. It also has four international offices....