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Pat McKeough responds to many personal questions on 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 every Friday, we offer you one of the highlights from these Q&A sessions. An interesting question came up this week about Ocean Power Technologies, a company that is generating electricity from ocean waves. This raised the issue of the risks and rewards associated with a renewable energy stock. In particular, Pat drew the comparison between the long-term prospects of wave power and wind power....

Our TSI Network rating system is a key guide we use to find the best stocks to recommend in our newsletters and investment services, including Wall Street Stock Forecaster, our newsletter that focuses on top-quality U. S. stocks. ...

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 how you can make the best investments for your portfolio. Each Investor Toolkit update gives you a fundamental piece of investment strategy, and shows you how you can put it into practice right away. Tip of the week: “Insider trading is just one indicator when you’re looking for the best investments”...

Technological advances can spur on some powerful growth stocks. However, when a company bases its future growth on the widespread adoption of a single technological breakthrough, it can also add risk. Intuitive Surgical (Nasdaq symbol ISRG; www.intuitivesurgical.com) makes the da Vinci, a computerized surgical system....

Here are 4 keys we consistently rely on when picking the stocks we recommend in our newsletters and investment services. We believe they can help you succeed in stock market investing in all kinds of markets, including today’s volatile conditions.

1. Always ask yourself, “What can go wrong with this investment?” What upcoming event/technology/political trend could derail its profitability? In other words, don’t fall in love with a stock just because it has a great track record.
   When a company’s profits have been rising for years, its stock price will always be expensive in relation to its per-share profit. If something goes wrong and profit starts to erode or, worse, turns into a loss, the stock can go through a devastating drop. In stock market investing, too much enthusiasm for a favourite can lead investors to ignore its risks and price it as if those risks don’t exist.
2. Remember that high profits attract competition. This is related to rule #1. When a company is making a lot of money, you can be sure that other companies are making plans to enter its market with a competitive product that is slightly cheaper, or better, or more effectively marketed or whatever. Unless demand is exploding, this is bound to limit sales growth and depress profit margins....

CAE INC. $9.67 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 257.2 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.7%; TSINetwork Rating: Average; www.cae.com) makes military and airline flight simulators. It also runs pilot-training schools. CAE continues to apply its simulator expertise to new fields, such as medical training. It recently bought Florida-based Medical Education Technologies, Inc. (METI), which makes medical simulators and other products, including life-like mannequins, for training paramedics and medical students. Since 1996, METI has sold about 6,000 simulators to medical schools in 40 countries. This purchase will add $60 million U.S. to CAE’s annual revenue of $1.6 billion (Canadian)....

Pat McKeough responds to many personal questions on 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 every Friday, we offer you one of the highlights from these Q&A sessions. This week, an investor asked about one of the telecommunications giants of the world stock market, Telefonica. That prompted Pat to examine the balancing act a company like Telefonica undergoes when it experiences weakness in some markets and strength in others....

BOMBARDIER INC. (Toronto symbols BBD.A $4.10 and BBD.B $4.01; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $6.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.bombardier.com) is the world’s third-largest commercial-aircraft maker, behind Boeing and Airbus. It is also the world’s largest passenger railcar manufacturer. In the three months ended July 31, 2011, Bombardier’s earnings rose 56.7%, to $210 million, or $0.12 a share (all amounts except share prices and market cap in U.S. dollars). A year earlier, it earned $134 million, or $0.07 a share. Sales rose 17.4% to $4.7 billion from $4.0 billion. Sales at the railcar division (which supplies 56% of Bombardier’s total sales) rose 26.0%, mainly due to strong demand from European public-transit systems. In the latest quarter, this business received $3.9 billion of new orders, down from $4.3 billion a year earlier. Its order backlog is $33.9 billion, up from $33.5 billion on January 31, 2011....

Sweeping up after the 1929 Crash


Today, many investors might not immediately recognize the name of master investor John Templeton. In the final quarter of the last century, however, Templeton was as famous and highly regarded as Warren Buffett is today. ...

TORSTAR CORP. $8.97 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.5 million; Market cap: $713.1 million; Price-to-sales ratio: 0.5; Dividend yield: 5.6%; TSINetwork Rating: Above Average; www.torstar.com) publishes The Toronto Star, which is Canada’s largest daily newspaper by circulation. The company also publishes three other daily newspapers and over 100 weeklies, mainly in southern Ontario. Torstar’s newspaper business accounts for about 70% of its revenue and 60% of its earnings. The company’s other main business is wholly owned Harlequin Enterprises Ltd., the world’s leading publisher of romance novels. Torstar recently received $291.6 million from the sale of its 20% stake in CTVglobemedia to BCE Inc. (Toronto symbol BCE). CTVglobemedia owns CTV Television and other broadcasting businesses....

Our advice on 2 ways of investing money in the stock market. Most investors place two types of orders when buying stocks: market orders or limit orders

TRANSCONTINENTAL INC. $12 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 81.0 million; Market cap: $972.0 million; Price-to-sales ratio: 0.5; Dividend yield: 4.5%; TSINetwork Rating: Average; www.transcontinental.com) is the largest commercial printer in Canada, and the fourth-largest in North America. Its printing operations provide two-thirds of its revenue. The remaining third comes from publishing over 170 newspapers and magazines. The publishing division also has over 1,000 web sites, which will become more important to Transcontinental’s growth in the next few years as advertisers spend more on the Internet than print products. In the quarter ended July 31, 2011, the company’s revenue rose 2.3%, to $492.6 million from $481.3 million a year earlier. It has won a number of new printing contracts, including an expanded deal to print The Globe and Mail....

THOMSON REUTERS CORP. $29 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 836.8 million; Market cap: $24.3 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.thomsonreuters.com) has two main divisions: Markets (which supplied 57% of Thomson Reuters’ 2010 revenue and 48% of its earnings), sells news and information products to banks and other financial institutions. Professional (43%, 52%) sells information to professionals in the legal, taxation, accounting and scientific research fields. Thomson Reuters recently said it plans to sell its healthcare business, which sells data and software that helps hospitals, clinics and health-care professionals cut costs and reduce fraud. In 2010, this division accounted for $450 million, or 3%, of the company’s revenue of $13.1 billion (all amounts except share price and market cap in U.S. dollars). Thomson Reuters may use proceeds from the sale to make more acquisitions, particularly in developing markets, where demand for reliable information is growing quickly....

One of the trends in Canadian investing in recent years has been for companies to expand internationally. This strategy can diversify a company’s customer base and add revenue. But it can also add risk. Linamar Corp. (Toronto symbol LNR; www.linamar.com) makes engines, transmissions and other precision-machined parts for the North American, European and Asian car and truck markets. The company has 39 plants in Canada, the U.S., Mexico, Germany, France, Hungary, South Korea and China....

CANADA BREAD CO. LTD. $43 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.1 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.canadabread.ca) is Canada’s second-largest producer of baked goods, after Weston Bakery. It also makes pastas and sauces. Its main brands include Dempster, Tenderflake and Olivieri. Canada Bread’s sales rose from $1.3 billion in 2006 to $1.7 billion in 2008. The gain largely came from bakeries the company bought in the U.K. and U.S. However, sales fell to $1.6 billion in 2010, mainly due to unfavourable exchange rates. Before unusual items, the company’s earnings per share rose from $3.09 in 2006 to $3.31 in 2007. Its 2008 earnings fell to $2.87 a share, but rebounded to $3.20 in 2009. The lower 2010 sales pushed down its 2010 earnings to $2.85 a share....

MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 144.4 million; Market cap: $1.6 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.mapleleaf.ca) is Canada’s largest food-processing company. It mainly makes its products, which include fresh and prepared meats and poultry, under the Maple Leaf and Schneider brands. This business accounts for roughly 65% of its revenue. The company also makes fresh and frozen bread, pastries and pasta through its 90.0% stake in Canada Bread Co. Ltd., which supplies 30% of Maple Leaf’s revenue. The remaining 5% comes from its agribusiness division, which raises hogs for the company’s processed-meat operations. This division also recycles animal by-products into other materials, such as soaps and biodiesel fuel. In 2006, Maple Leaf began to shift its focus to more-profitable processed foods, and cut back its fresh pork production. It also sold its animal-feed business and most of its fresh-meat operations....

POWERSHARES QQQ ETF $53.53 (Nasdaq symbol QQQQ; buy or sell through brokers; www.invescopowershares.com), formerly called Nasdaq 100 Trust Shares, holds the stocks that represent the Nasdaq 100 Index. That index is made up of the 100 largest shares on the Nasdaq exchange, based on market cap. The Nasdaq 100 Index contains shares of companies in a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The fund’s expenses are about 0.20% of its assets. The index’s highest-weighted stocks are Apple, Microsoft, Qualcomm, Google, Cisco Systems, Intel, Amazon.com, Oracle Corp., Comcast Corp. and Amgen Inc....

SPDR DOW JONES INDUSTRIAL AVERAGE ETF $109.28 (New York symbol DIA; buy or sell through brokers; www.spdrs.com) holds the 30 stocks that make up the Dow Jones Industrial Average. The fund’s top holdings are IBM, ExxonMobil, Chevron Corp., 3M, Johnson & Johnson, McDonald’s Corp., Coca-Cola Co., Caterpillar Inc., United Technologies and Procter & Gamble. The fund’s expenses are about 0.18% of its assets. SPDR Dow Jones ETF is a buy....

SPDR S&P 500 ETF $114.42 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group. The index’s highest-weighted stocks are Exxon-Mobil, Microsoft, Procter & Gamble, Apple, Wells Fargo & Co., Johnson & Johnson, IBM, Chevron, General Electric, Pfizer Inc., Coca-Cola Co. and AT&T. The fund’s expenses are just 0.10% of its assets....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $19.60 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. Its yield is 2.7%. The fund’s top holdings are CIBC, 6.6%; Bank of Montreal, 5.3%; Bonterra Energy, 5.2%; National Bank, 4.9%; TD Bank, 4.9%; Telus, 4.8%; IGM Financial, 4.3%; Enbridge, 4.2%; BCE, 4.2%; Canadian Utilities, 3.7%; and Manitoba Telecom, 3.7%. The fund holds 50.2% of its assets in financial stocks. Utilities are next, at 26.4%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....

Pat McKeough responds to many personal questions on 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 every Friday, we offer you one of the highlights from these Q&A sessions. This week, a particularly interesting request concerned a U.S. retailer with a reputation for quality. Deckers Outdoors has many popular brands, but it is contending with a highly competitive market. ...

ISHARES S&P/TSX 60 INDEX FUND $16.56 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include. The index’s top holdings are Royal Bank, 6.7%; TD Bank, 6.4%; Bank of Nova Scotia, 5.5%; Barrick Gold, 4.8%; Suncor Energy, 4.1%; Potash Corp., 3.9%; Goldcorp, 3.8%; Bank of Montreal, 3.7%; Canadian Natural Resources, 3.2%; CN Railway, 3.2%; BCE Inc., 3.0%, TransCanada Corp., 2.9%, CIBC, 2.9%; Enbridge, 2.6%; Cenovus Energy, 2.3% and Manulife Financial, 2.1%....

In international stock markets ABB has taken advantage of the strong Swiss currency to make an acquisition to strengthen its holdings in the U.S. ABB LTD. American Depository Receipt “ADR” (New York symbol ABB; www.abb.com)is a leading maker of power technologies for utilities. The Switzerland-based company’s products include transformers, transmission systems and circuit breakers. ABB also makes automation systems and robotics. Clients in a wide range of industries use these systems to make their facilities more productive....

ISHARES DEX UNIVERSE BOND INDEX FUND $31.08 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. The 502 bonds in the portfolio have an average term to maturity of 9.31 years. The fund’s MER is 0.32%. The bonds in the index are 70.6% government and 29.4% corporate. The fund yields 3.6%, compared to the Short Term Bond Fund’s 3.2%. Its yield to maturity is 2.40%, 0.88% above the Short Term Fund. That reflects the added risk of holding long-term bonds....

When you seek investment advice on what to do with a particular stock you should always consider the source. Most investors get their advice from brokers.