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When we’re looking for stocks to recommend in our newsletters and investment services, our stock market research puts a lot of importance on the amount of goodwill that a company carries as an asset on its balance sheet. Goodwill is an accounting entry that reflects the price that the company paid for its acquisitions, minus the value of the tangible assets, like land and equipment, that it received as part of the acquisition. The term means “value as a going concern.” However, goodwill acquired in an unwise acquisition can lose value overnight. When that happens, the company has to write it off against earnings. At worst, the company might have to write off most, if not all, of its goodwill....

Stantec, Inc., symbol STN on Toronto, sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a number of markets, including industry, environment, transportation and construction. Stantec is one of the growth stocks we analyze in Stock Pickers Digest. The company has over 11,000 employees in 170 locations throughout North America. It also has four international offices....

We receive lots of interesting questions from members of our Inner Circle service. Many zero in on individual stocks, wanting to know whether or not a particular company is a good stock market investment. This week, we answered a question on a stock with a well-known name. Q: Hi Pat and team: Can you please tell me your take on Costco? Your advice makes for great bedtime reading in our house! A: Costco Wholesale Corp., symbol COST on Nasdaq (Shares outstanding: 443.6 million; Market cap: $33.2 billion; www.costco.com), owns and operates warehouse-sized stores that sell a wide variety of consumer goods. It also sells merchandise online....

BANK OF NOVA SCOTIA $54.53 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $58.1 billion; TSINetwork Rating: Above Average; Div. yield: 3.8%, www.scotiabank.com) is the third largest of Canada’s five big banks, with assets of $567.7 billion. Excluding one-time items, the bank earned $1.14 a share in the quarter ended July 31, 2011. That’s up 16.3% from $0.98 a share a year earlier. The bank continues to set aside less money to cover bad loans because of the improving economy. Loan-loss provisions fell 12.0%, to $243 million from $276 million a year earlier. The Canadian banking division’s earnings rose just 4.1%, due to strong competition for depositors. However, the international-banking division’s earnings jumped 20.7%, thanks to strong demand for business and consumer loans. As well, Bank of Nova Scotia recently bought Uruguay’s fourth-largest private bank, and this acquisition also contributed to the higher earnings....

VANGUARD EMERGING MARKETS ETF $43.93 (New York symbol VWO; buy or sell through brokers) aims to track the MSCI Emerging Markets Index, which is made up of common stocks of companies located in emerging markets around the world. The fund has an MER of 0.22%. The fund’s top holdings are Petroleo Brasileiro SA (Brazil: oil and gas), Vale SA (Brazil: mining), Samsung Electronics (South Korea: electronics), Gazprom (Russia: gas utility), China Mobile (China: wireless), Taiwan Semiconductor (Taiwan: computer chips), America Movil SAB de CV (Latin America: wireless), Itau Unibanco Holding SA (Brazil: banking), Industrial & Commercial Bank of China, and CNOOC Ltd. (China: oil and gas). The $65.0-billion Vanguard Emerging Markets ETF’s breakdown by country is as follows: China (17.4%), South Korea (15.2%), Brazil (15.1%), Taiwan (10.9%), South Africa (7.4%), India (7.3%), Russia (7.1%), Mexico (4.4%), Malaysia (3.2%), Indonesia (2.8%), Thailand (1.9%), Poland (1.7%), Chile (1.6%), Turkey (1.3%), Colombia (0.6%), Philippines (0.6%), Peru (0.5%), Czech Republic (0.4%), Hungary (0.4%) and Egypt (0.2%)....

VANGUARD GROWTH ETF $60.58 (New York symbol VUG; buy or sell through brokers) aims to track the MSCI U.S. Prime Market Growth Index, a broadly diversified index that mainly consists of stocks of large U.S. companies. The fund has an MER of just 0.14%. The $21.0-billion fund’s top holdings are Apple Inc., IBM, Google, Coca-Cola, Microsoft, Philip Morris International, Oracle Corp., Schlumberger, Wal-Mart and PepsiCo. Vanguard Growth ETF is broken down by economic segment as follows: Information Technology (29.3%), Consumer Discretionary (17.0%), Consumer Staples (12.3%), Energy (10.9%), Industrials (11.1%), Health Care (10.9%), Financials (4.8%), Materials (4.5%), Telecommunication Services (0.7%) and Utilities (0.2%)....

Pason Systems, symbol PSI on Toronto, rents equipment that its customers use to monitor and manage land-based oil rigs. Pason is one of the technology stocks we analyze in Stock Pickers Digest, our newsletter that recommends stocks for the part of your portfolio you devote to aggressive investing. It also provides communication systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina....

The state of the U.S. economy continues to worry many investors. Some are wondering if they should dump their U.S. stocks for fear that the U.S. stock market will move further down due to rising debt and unproductive government policies. We think this would be a mistake. In fact, our investment advice is that you should keep at least one fifth of your portfolio in U.S. stocks. Here’s why. The troubles that have stirred markets recently – like the downgrade in the U.S. debt rating – are much different from great house-price collapse in the U.S. in 2007-2009. Today there is no boom that could deflate and bring down the economy....

IAMGold, symbol IMG on Toronto, owns 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 100% of the Mupane gold mine in Botswana, 90% of the Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America. We analyze IAMGold in Stock Pickers Digest, our newsletter that recommends stocks (including gold mining stocks) for the part of your portfolio you devote to aggressive investing. IAMGold also owns the Niobec niobium mine in Quebec, and has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories....

Some investors rely on technical analysis (or chart reading) when they’re picking stocks. That’s because relying on charts seems much simpler

Birchcliff Energy Inc., symbol BIR on Toronto, develops, produces and explores for natural gas and oil, mainly in the Peace River Arch area near the Alberta/B.C. border. In the three months ended June 30, 2011, the natural gas stock’s production rose 40.2% in the three months ended June 30, 2011, to 17,324 barrels of oil equivalent per day (including natural gas) from 12,357 barrels a year earlier. We analyze Birchcliff in Stock Pickers Digest, our newsletter that recommends stocks for the part of your portfolio you devote to aggressive investing....

Lower consumer confidence and higher gas prices are cutting U.S. store traffic. So, successful retailers will need to have a well-established niche and quality name-brand merchandise to attract customers. We also think it’s important, when investing in stocks in the retail industry, to focus on chains that can adapt quickly and prosper in the ever-changing economic landscape. In the latest issue of Wall Street Stock Forecaster, we updated our advice on one consumer stock that has a dominant position in its market. PetSmart Inc. (Nasdaq symbol PETM) is the biggest pet-supply chain in the U.S. In all, it operates 1,197 pet stores in the U.S. and Canada. It also has 185 in-store PetsHotels, which look after pets while their owners are away....

BHP Billiton Ltd. ADRs, New York symbol BHP, is the world’s largest mining company, with major operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, aluminum, manganese, diamonds and titanium. BHP is one of the blue chip mining stocks we analyze in our Wall Street Stock Forecaster newsletter. In the fiscal year ended June 30, 2011, BHP earned $21.7 billion, or $7.87 per ADR (each American Depositary Receipt represents two BHP common shares). That’s up 73.9% from $12.5 billion, or $4.48 per ADR, in fiscal 2010. Even so, the latest earnings missed the consensus forecast of $7.16 per ADR. Revenue rose 35.9%, to $71.7 billion from $52.8 billion....

When investors develop and act on strong investment views—on subjects such as the outlook for oil prices, say, or gold prices, or interest rates—they generally lose money overall. That’s because strong views on subjects like these tend to distort your investment decisions. For instance, if you know (or think you know) that oil is sure to rise in the next six months or a year, say, then you are sure to invest more heavily in oil stocks than you would if you took a less extreme—that is, more balanced—view of the situation. You will also tend to invest in riskier oil stocks, rather than proven producers....

Precision Drilling Corp., Toronto symbol PD, provides contract-drilling services to oil and gas producers. The company owns 360 drilling rigs in Canada, the U.S. and Mexico. We analyze Precision in The Successful Investor, our newsletter that recommends stock picks for conservative investors. Precision recently converted from an income trust to a regular corporation. Investors received one common share for each trust unit they held. The change was in response to Ottawa’s new tax on income-trust distributions, which came into effect on January 1, 2011....

The research we do for members of our Inner Circle service turns up many intriguing stories on growth stocks, often in the ultra-competitive high-tech world. Here’s a question about the prospects of Sirius XM Radio (symbol SIRI on Nasdaq) from our latest weekly Inner Circle Q&A, in which I answer questions from our members. Sirius has a big customer base, but it’s not that easy to outdistance the competition. In our search for growth stocks, we look for a strong market position. And if Sirius can hold its current position, it will fit our profile for growth stocks. But that’s not guaranteed. ...

Dorel Industries, symbol DII.B on Toronto, makes a wide range of products: including bicycles; ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs (including Eddie Bauer and Disney Baby licensed products); home furnishings, including chairs, tables, bunk beds, futons and step stools; and recreational products. Dorel is one of the Canadian stocks we analyze in Stock Pickers Digest, our newsletter that recommends the stocks for the part of your portfolio you devote to aggressive investing. In the three months ended June 30, 2011, Dorel’s sales rose 1.9%, to $619.0 million from $607.7 million a year earlier (all figures except share price in U.S. dollars). The Canadian stock’s recreational/leisure division’s sales rose 15.9%, mainly on strong demand for bicycles. That offset lower sales in the other divisions....

“Averaging down” is the well-known market tactic by which investors buy more shares of a stock that has come down in price.

Averaging down lowers your average cost per share, but can cost you money in the long run. At the same time, you run the risk of distorting your overall portfolio management strategy.



Here are three problems that crop up with averaging down:

1. Averaging down ignores investment quality. Many investors have made lots of money by “averaging in” to the stock of a well-established, well-managed company — that is, buying more as funds became available over a period of years....

Gannett Co. Inc., New York symbol GCI, reported revenue of $1.33 billion in the three months ended June 26, 2011. That’s down 2.2%, from $1.37 billion a year earlier. The company is seeing lower advertising revenue at its 82 newspapers, including its flagship paper, USA Today. That’s mainly because its 2010 revenue benefited from advertising tied to the U.S. midterm elections. However, the company’s revenue from its digital operations, such as CareerBuilder.com and newspaper web sites, rose 12.6% in the quarter. Earnings fell 13.5 %, to $151.5 million, or $0.62 per share, from $175.2 million, or $0.73 per share. The company’s publishing earnings were hurt by a 9.3% increase in newsprint costs. To cut costs, the company announced in June 2011 that it will cut 700 jobs, or 2% of its workers....

On Monday, gold closed at a new record high of $1,898.10 U.S. an ounce. Prices have since pulled back to around $1,861.30 U.S., but that’s

Macy’s Inc., New York symbol M, operates 850 Macy’s and Bloomingdale’s department stores in 45 states. It also sells goods over the Internet. We analyze Macy’s in Wall Street Stock Forecaster, our newsletter that gives you stock market news and advice on U.S. stocks. In the three months ended July 30, 2011, Macy’s earnings rose 63.9%, to $241 million from $147 million a year earlier. Earnings per share rose 57.1%, to $0.55 from $0.35, on more shares outstanding. That was well ahead of the consensus estimate of $0.48 a share....

Reductio ad absurdum (Latin: “reduction to the absurd”) is a form of argument that goes back thousands of years, to Aristotle and before. It works like this: to prove a proposition is false, you simply show that its logical implications lead to absurd conclusions. This can be a great time saver for investors. Take, for example, courses that teach you how to trade in foreign exchange (or “forex” investments as course promoters refer to it in the ads). These courses can cost hundreds or thousands of dollars for a day or two of instruction. The marketing materials for these courses suggest that you can make a living in as little as a few minutes a day. Better yet, you can trade in forex investments in your living room....

Metro Inc., Toronto symbol MRU.A, is Canada’s third-largest supermarket operator, after Loblaw and Sobeys. Metro has about 600 supermarkets in Quebec and Ontario.

Metro is one of the growth stocks we analyze in our Successful Investor newsletter.

In the three months ended July 2, 2011, the growth stock’s sales rose 0.4%, to $3.58 billion from $3.56 billion a year earlier....

The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian retailers face rising competition from large U.S. discount retailers, like Wal-Mart and Costco. In addition, popular U.S. retailer Target is now expanding into Canada, and will begin opening its Canadian stores in early 2013. As well, consumer stocks are more exposed to swings in the overall economy than companies in some other sectors, such as utilities. ...

We come across a number of timely buys and sells when we’re researching stocks for members of our Inner Circle service. Here’s a particularly interesting question about SmartHeat (symbol HEAT on Nasdaq) from our latest weekly Inner Circle Q&A, in which I answer specific questions from our members. Like Sino-Forest, SmartHeat is a Chinese reverse-takeover (RTO) stock. Q: Pat: Would you please take a look at SmartHeat? Thanks....