Search

TUPPERWARE BRANDS CORP. $62 (New York symbol TUP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 57.4 million; Market cap: $3.6 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.tupperwarebrands.com) was our Stock of the Year for 2011.

Like IBM, Tupperware continues to see strong demand for its products, particularly in fast-growing countries like Brazil, Indonesia and Turkey. These markets now supply 63% of the company’s sales.

Also like IBM, Tupperware continues to aggressively repurchase its shares. Buybacks raise earnings per share and other per-share calculations, and give the remaining shareholders a larger stake in the company.

...

EBAY INC. $30 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $39.0 billion; Price-to-sales ratio: 3.6; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) operates the world’s largest online auction website, with over 99 million users in 39 countries. The company charges users fees to list and sell their goods through its websites.

The company also operates several other websites, including StubHub (live event ticket sales), Shopping.com (comparison shopping) and Rent.com (apartment and house rentals).

In all, these websites account for 55% of eBay’s overall revenue. The company gets a further 35% of its revenue by processing online financial transactions, mostly through its PayPal subsidiary.

...

YUM! BRANDS INC. $58 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 460.5 million; Market cap: $26.7 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.yum.com) continues to expand in China, which now accounts for half of the company’s sales and earnings.

Yum now plans to double its fast-food outlets in China to 9,000 by 2020. The company will focus its expansion on smaller cities, which usually have lower labour and rental costs than larger centres. That should make these new outlets more profitable.

Yum Brands is a buy.

...

PROCTER & GAMBLE CO. $65 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.8 billion; Market cap: $182.0 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pg.com) plans to appeal a $305-million fine by French anti-trust regulators, which accused the company of collaborating with rival firms to set the price of laundry detergent between 1997 and 2004.

The company is appealing because it has already agreed to pay $275 million to settle a similar case with the European Commission. To put these figures in context, Procter earned $3.0 billion, or $1.03 a share, in the three months ended September 30, 2011.

Procter & Gamble is still a buy.

...

SHERWIN-WILLIAMS CO. $84 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 103.8 million; Market cap: $8.7 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.sherwinwilliams.com) recently raised its prices to offset the rising cost of oil (Sherwin needs oil to make its paints). That’s partly why its sales rose 14.4% in the quarter ended September 30, 2011, to $2.5 billion from $2.2 billion a year earlier. Recent acquisitions have also fuelled its growth.

However, it will take several months for Sherwin to realize the full benefits of its higher selling prices. Meanwhile, it continues to integrate its recent purchases. As a result, earnings rose a slower pace of 2.6%, to $179.9 million, or $1.71 a share. A year earlier, it earned $175.3 million, or $1.60 a share.

Sherwin recently settled a tax dispute with the IRS. As a result, it will incur a one-time charge of $75.0 million, or $0.72 a share, in the fourth quarter of 2011.

...

WINDSTREAM CORP. $12 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 515.8 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 8.3%; TSINetwork Rating: Average; www.windstream.com) has completed its purchase of PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. Windstream paid $891 million in stock and assumed $1.4 billion of PAETEC’s debt. That gives the deal a total value of $2.3 billion.

This is the latest in a series of acquisitions for Windstream. Its recent purchases pushed up its revenue by 6.0% in the third quarter of 2011, to $1.0 billion from $965.8 million a year earlier. However, the costs of integrating these new operations cut its earnings by 16.1%, to $71.5 million, or $0.14 a share, from $85.2 million, or $0.18 a share.

As a result of the PAETEC purchase, Windstream will now get 70% of its revenue from selling highspeed Internet and business services. That cuts its reliance on its slow-growing home phone business. As well, the company can use PAETEC’s losses to lower its tax bill over the next five years. That should let its keep paying quarterly dividends of $0.25 a share, for an 8.3% annualized yield.

...

CHEVRON CORP. $100 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $200.0 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.chevron.com) plans to spend $32.7 billion on capital upgrades in 2012. That’s up 25.8% from the $26.0 billion it will probably spend in 2011.

About 87% of the 2012 spending will go toward oil and gas exploration and upgrades of existing projects and new developments. For example, Chevron’s new liquefied natural gas plants in Australia will increase its daily production by 13% by 2016.

Chevron is a buy.

...

MOLSON COORS BREWING CO. $42 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 181.1 million; Market cap: $7.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.0%; TSINetwork Rating: Average; www.molsoncoors.com) is the world’s fifth-largest brewer by volume.

The company continues to realize savings from the June 2008 merger of its operations in the U.S. with those of rival brewer SABMiller to form MillerCoors.

Including its share of the savings from MillerCoors, Molson Coors cut its overall costs by $29 million in the quarter ended September 24, 2011. However, those savings were offset by rising ingredient costs, which pushed down earnings by 11.2%, to $212.4 million, or $1.14 a share. A year earlier, Molson Coors earned $239.1 million, or $1.28 a share.

...

PEPSICO INC. $64 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $102.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats.

PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22.

PepsiCo continues to expand internationally. In November 2011, it paid an undisclosed sum for privately held Grupo Mabel, Brazil’s second-largest maker of cookies, crackers and snack foods. This business complements the foods that PepsiCo already sells in Brazil, including Frito-Lay chips (sold under the Elma Chips brand) and Quaker Oats snacks.

...

TEXAS INSTRUMENTS INC. $28 (New York symbol TXN [Switches to Nasdaq on January 1, 2012, symbol TXN]; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $30.8 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.ti.com) is seeing weaker demand for its analog chips, which convert sound and images into digital signals that computers can understand.

As a result, earnings per share will probably fall to $1.85 in 2011 from $2.62 in 2010. The stock trades at 15.1 times the new estimate. That’s still a reasonable p/e, particularly as chip sales should rebound in 2012 as manufacturers use up their inventories.

Texas Instruments is a buy.

...

DUN & BRADSTREET CORP. $70 (New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 48.6 million; Market cap: $3.4 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.1%; TSINetwork Rating: Average; www.dnb.com) is the world’s largest provider of credit reports on individual companies.

Dun & Bradstreet continues to launch new online services. Demand for these products is strong, because they give investors better access to the most current data. In addition, the company’s expanding online business cuts its printing and postage costs.

These new products helped push up earnings by 15.2% in the quarter ended September 30, 2011, to $69.9 million from $60.7 million a year earlier. Earnings per share rose 17.4%, to $1.42 from $1.21, on fewer shares outstanding. Revenue rose 11.0%, to $439.4 million from $396.0 million.

...

MOODY’S CORP. $32 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.0 million; Market cap: $7.1 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.0%; TSINetwork Rating: Average; www.moodys.com) provides credit ratings and other information on bonds and other securities. The company gets two-thirds of its revenue from credit ratings. The remaining third comes from its analytics businesses, which mainly sell credit-assessment software.

There have been fewer issues of speculative-grade bonds and bonds backed by mortgages due to concerns over high European debt levels. That has hurt demand for the company’s credit ratings.

That’s why Moody’s is continuing to expand beyond credit ratings. To that end, it recently bought a majority stake in Copal Partners, a private firm that sells research and other services to institutional investors. Moody’s did not say how much it paid, but Copal has about $50 million of annual revenue.

...

BAXTER INTERNATIONAL INC. $48 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 563.9 million; Market cap: $27.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.8%; TSINetwork Rating: Average; www.baxter.com) has purchased Baxa Corp., which makes products that improve the safety and effectiveness of oral and intravenous drugs. This company’s expertise will Baxter’s drug-delivery devices work better.

Baxter paid $380 million for Baxa. That’s equal to 61% of the $624 million that Baxter earned before unusual items in the third quarter of 2011. The latest earnings are up 4.9% from $595 million a year earlier. Earnings per share rose 7.9%, to $1.09 from $1.01, on fewer shares outstanding.

In addition, the company raised its quarterly dividend by 8.1%, to $0.335 from $0.31 a share. The new annual rate of $1.34 yields 2.8%.

...

FORD MOTOR CO. $10 (New York symbol F; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 3.8 billion; Market cap: $38.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 2.0%; TSINetwork Rating: Extra Risk; www.ford.com) stopped paying dividends in June 2006 to conserve cash for a major restructuring plan.

This plan helped turn the company around, and it is now seeing stronger vehicle sales. As a result, it will resume quarterly dividend payments of $0.05 a share. The $0.20 annual rate yields 2.0%.

In light of the new dividend, we’ve upgraded Ford’s TSINetwork Rating from Speculative to Extra Risk.

...

SARA LEE CORP. $18 (New York symbol SLE;
Conservative Growth Portfolio, Consumer sector; Shares outstanding: 590.7 million; Market cap: $10.6 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.saralee.com) announced in January 2011 that it would break itself into two separate, publicly traded companies.

One firm will consist of Sara Lee’s international coffee and tea businesses. The other will focus on its North American packaged meat operations. The company aims to complete the breakup by the end of fiscal 2012 (fiscal years end June 30). It will also pay a special dividend of $3.00 a share before the split.

...

MCGRAW-HILL COMPANIES INC. $42 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 293.4 million; Market cap: $12.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.4%; TSINetwork Rating: Average; www.mcgraw-hill.com) announced in September 2011 that it will split into two separate, publicly traded companies.

One of these new firms, McGraw-Hill Markets, will sell a variety of 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. McGraw-Hill Markets will have annual revenue of $4 billion. International sales will account for 40% of that total.

The other company, McGraw-Hill Education, will publish textbooks for schools and colleges. This business will have $2.4 billion of annual revenue.

...

KRAFT FOODS INC. $36 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.8 billion; Market cap: $64.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.kraft.com) plans to break itself into two separate, publicly traded companies by the end of 2012.

One company will sell snack foods, such as Oreo cookies, Cadbury chocolates, Trident gum and Tang powdered beverages. This business will have annual sales of $32 billion, with 42% of that coming from developing markets, such as China, Brazil and India.

The other company will consist of Kraft’s slower-growing grocery-products business, which mainly sells its foods in North American supermarkets. These products include Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Jell-O desserts and Miracle Whip salad dressing. This company will have $16 billion of annual sales.

...

INTEL CORP. $23 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $117.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.intel.com) warned that its revenue in the fourth quarter of 2011 will fall to $13.7 billion, down from its earlier forecast of $14.7 billion.

Factories in Thailand produce half of the world’s computer hard drives, and flooding in that country has led to shortages. As a result, computer makers have cut production and are ordering fewer chips from Intel.

Chip sales should rise over the next few months as hard-drive production returns to normal. As well, the shortage will not affect demand for Intel’s more-profitable server chips. Moreover, Intel gets 57% of its revenue from fast-growing markets in Asia, and just 13% from Europe.

...

NEWMONT MINING CORP. $61 (New York symbol NEM; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 494.8 million; Market cap: $30.2 billion; Price-to-sales ratio: 3.3; Dividend yield: 2.3%; TSINetwork Rating: Average; www.newmont.com) is one of the world’s largest gold-mining companies. It has major mines in the U.S., Australia and Peru.

Newmont gets about 90% of its revenue from gold. It gets the remaining 10% from copper, zinc and other metals. Most of Newmont’s copper comes from its 27.56% stake in the large Batu Hijau mining complex in Indonesia. Combined with financing arrangements the company has with other Batu Hijau shareholders, Newmont’s economic interest in this mine is effectively 44.56%.

The company prefers to sell its gold at the market price instead of through long-term hedging contracts that lock in prices. This policy has helped it take full advantage of rising gold prices: Newmont’s average realized gold price jumped 105.7%, from $594 an ounce in 2006 to $1,222 in 2010.

...

Carnival Corp. operate as a single business but have separate exchange listings. Stock market investments: Carnival increases earnings despite jump in fuel costs.

Investors often ask how we have managed to recommend so many stocks over the years that get taken over. One key is that we aim to recommend stocks with hidden assets — assets that attract less investor attention than they deserve. That gives buyers a bargain. It also attracts takeover bids....

Stock investing tips: How one investment “rule” could kill your profits. The value of investor rules or sayings may be psychological rather than financial.

CANADIAN NATIONAL RAILWAY CO. (Toronto symbol CNR; www.cn.ca) operates the largest freight rail network in Canada. It also serves 16 U.S. states. Ottawa nationalized CNR in 1918 because of the vital role the company played in Canada’s early growth. CNR became a publicly traded company in 1995. The company is upgrading its Alberta rail networks to take advantage of expanding oil sands development. These investments are helping drillers in remote areas without pipelines ship their heavy oil to refineries and other destinations....

RUSSEL METALS $22.09 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 67.0 million; Market cap: $1.5 billion; Dividend yield: 5.4%) is one of North America’s largest metal distributors. The company serves its roughly 30,000 customers through a network of 50 locations in Canada and 12 in the U.S.

In the three months ended June 30, 2011, Russel’s earnings per share rose sharply, to $0.43 from $0.14 a year earlier. Revenue rose 21.1%, to $705.4 million from $582.5 million.

Revenue rose at all three of Russel’s divisions: The steel distribution division’s revenue rose 19% due to higher sales volumes and steel prices. Metal services revenue rose 24%, also on higher sales volumes and prices. The energy tubular products division, which supplies pipes for oil and gas companies, saw its revenue rise 19% on higher drilling activity.

...

TOROMONT INDUSTRIES LTD. $20.01 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667-5511; www.toromont.com; Shares outstanding: 77.2 million; Market cap: $1.5 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. Toromont also makes refrigeration systems through its CIMCO division.

In July 2011, Toromont completed the spinoff of Enerflex Ltd.. Shareholders received shares of the new Toromont and shares of Enerflex. That company leases and sells equipment and services for natural gas production, including field production plants and compression and processing plants.

In the three months ended September 30, 2011, higher equipment sales and rentals pushed up Toromont’s revenue by 9.3%, to $367.3 million from $336.0 million a year earlier. Without one-time items, earnings per share rose 33.3% to $0.40 from $0.30, on the higher revenue and improved profit margins.

...