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BANK OF NOVA SCOTIA $59.55 (Toronto symbol BNS: Shares outstanding: 1.0 billion; Market cap: $61.9 billion; TSINetwork Rating: Above Average; Div. yield: 3.5%, www.scotiabank.com) is the third largest of Canada’s five big banks, with assets of $541.3 billion. In the three months ended January 31, 2011, the bank earned a record $1.2 billion, or $1.07 a share. That’s up 18.8% from $988 million, or $0.91 a share, a year earlier. Bank of Nova Scotia continues to set aside less money to cover bad loans because of the improving economy. Loan-loss provisions fell 27.5%, to $269 million from $371 million a year earlier....

Japan’s reconstruction could prompt a further rise in copper prices. This new FREE report shows you how you can profit with less risk. Copper continues to attract a lot of investor attention. That’s because copper prices recently hit an all-time high of $4.62 U.S. a pound. That’s up sharply from a low of $1.25 U.S. in late 2008. Copper prices fell to around $4.10 U.S. a pound in the wake of the Japanese earthquake and tsunami, but have moved up since then. The dip in copper prices mainly reflects investor fears that copper demand will drop because the disaster has slowed Japanese industrial production. But that’s just temporary. As the reconstruction of Japan gets underway, the need for wiring, piping, and other copper-based products will be great. That could prompt a further rise in copper prices....

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. In the three months ended December 30, 2010, the stock pick’s sales fell 1.0%, to $539.5 million from $545.3 million a year earlier. The home furnishing division’s sales declined 19.6%. That’s mainly because of slower sales in the U.S. The juvenile division’s sales dropped 5.0%, mainly due the rising Canadian dollar and lower sales in the U.S. However, the stock pick’s recreational/leisure division’s sales climbed 17.2%, due to strong sales of new products, including a new Schwinn bike....

Green stocks continue to appeal to many investors on an emotional and conceptual level. However, many of these companies offer limited investment potential. That’s because green stocks may need a long time to move from the research or concept stage to profitability. As well, many green stocks need government subsidies to be profitable, and the future of these subsidies is uncertain as governments around the world struggle with high budget deficits. To cut your risk in green stocks, we continue to recommend that you focus on established firms that have a sound base of other operations, or whose products have many different uses....

AlarmForce Industries, symbol AF on Toronto, sells two-way voice alarm systems and monitoring services in Canada and the U.S. AlarmForce’s system differs from others because it lets emergency operators verify an alarm by establishing immediate two-way voice contact with homeowners. It then dispatches security personnel to the client’s home. If intruders are present, the two-way contact can frighten them away. In the three months ended January 31, 2011, the company’s sales rose 10.0%, to $9.9 million from $9.0 million a year earlier. Earnings rose 32.7%, to $1.6 million, or $0.13 a share, from $1.2 million, or $0.10 a share. The company holds cash of $10.2 million, or $0.84 a share, and has no debt....

MCKESSON CORP. $78 (New York symbol MCK; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 254.3 million; Market cap: $19.8 billion; Price-to-sales ratio: 0.2; Dividend yield: 0.9%; TSINetwork Rating: Average; 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. McKesson’s customers include 40,000 pharmacies, as well as doctor’s offices, hospitals and clinics. The company also supplies surgical tools and health and beauty products. McKesson continues to see strong growth from its technology-solutions division, which makes computers and software that help pharmacies and clinics manage their drug inventories. This division accounted for just 3% of McKesson’s sales, but around 25% of its earnings. In its 2011 third quarter, which ended December 31, 2010, McKesson’s earnings fell 52.5%, to $155 million, or $0.60 a share. It earned $326 million, or $1.19 a share, a year earlier. The drop was mainly due to a $189-million charge related to a class-action lawsuit that accused the company of inflating prescription-drug prices. If you exclude all unusual items, McKesson would have earned $1.22 a share in the latest quarter....

Chemtrade Logistics Income Fund, symbol CHE.UN on Toronto, is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur oxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. Chemtrade has three divisions: the Sulphur Products and Performance Chemicals division supplies 54.5% of the income trust’s revenue. Pulp Chemicals accounts for 8.5% of revenue. The International division supplies the remaining 37.0%. This division removes and markets sulpur and sulphuric acid outside of North America. In the three months ended December 31, 2010, the income trust’s cash flow per unit fell 31.7%, to $0.28 from $0.41 a year earlier. This was partly due to reduced production from a few of its larger sulphuric-acid plants, especially the plant in Beaumont, Texas, which had been damaged by a fire in 2008. That plant was shut down for half of the fourth quarter, forcing the company to use higher-cost supply sources and routes to make deliveries to customers....

We’ve long recommended that all Canadian investors own two or more of the big five Canadian bank stocks. That’s mainly because of their importance to Canada’s economy. Like most stocks, the top five banks slumped deeply during the 2007-2009 market downturn and financial crisis. But since the market turnaround of March 2009, several of the top five have recovered and gone on (at least briefly) to all-time highs. Few other stock groups have done as well. (In a recent Successful Investor Hotline, we updated our buy/sell/hold advice on Toronto-Dominion Bank, which is the second biggest of the big-five Canadian bank stocks, after Royal Bank. Read on for further details.)...

BAXTER INTERNATIONAL INC. $52 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 579.4 million; Market cap: $30.1 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.baxter.com) has two divisions: Medical Products (which accounted for 56% of Baxter’s 2010 sales) makes intravenous pumps, syringes and kidney-dialysis equipment; and BioScience (44%), makes vaccines and drugs. The company makes a wide range of products, and overseas markets account for 60% of its sales. That cuts its risk. As well, Baxter gets about half of its sales from single-use medical products that continually need to be reordered. Baxter’s sales rose 2.2% in 2010, to $12.8 billion from $12.6 billion in 2009. However, earnings fell 35.6%, to $1.4 billion from $2.2 billion. Earnings per share fell 33.4%, to $2.39 from $3.59, on fewer shares outstanding....

RioCan Real Estate Investment Trust, symbol REI.UN on Toronto, operates 297 retail properties in Canada, mainly outdoor shopping malls. It also owns 31 malls in the U.S. through joint ventures, including its partnership with Cedar Shopping Centers Inc. (New York symbol CDR). RioCan owns 80% of the joint venture with Cedar, and 14% of Cedar itself. In 2010, the real estate investment trust’s revenue rose 17.0%, to $887.0 million from $758.0 million in 2009. The real estate investment trust’s earnings jumped 166.0%, to $303.0 million from $113.9 million in 2009. Earnings per unit rose 151.0%, to $1.23 from $0.49, on more units outstanding. The increase was mostly due to a one-time non-cash reversal of future income tax charges. In 2010, RioCan acquired 19 properties in Canada and 29 in the U.S. for a total of $986 million....

A key part of our three-part tsinetwork.ca portfolio management advice is to downplay stocks that are in the broker/public-relations limelight.

(The other two parts are to invest mainly in well-established, dividend-paying companies and spread your money across the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities.)

It’s especially crucial to downplay stocks that are getting a lot of attention from brokers in the media....

C.R. BARD INC. $96 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 85.0 million; Market cap: $8.2 billion; Price-to-sales ratio: 3.1; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.crbard.com) makes medical devices in four main areas: vascular products, such as stents and catheters (28% of 2010 sales); oncology products that detect and treat various types of cancer (27%); urology products, such as drainage and incontinence devices (26%); and surgical tools (16%). Other medical products supply the remaining 3%. The company has several plans to spur its growth. For example, it aims to increase its international sales, which now account for 30% of its total sales. As well, Bard wants to launch more new products. It spent 6.8% of its sales on research in 2010. It aims to raise that to 7.5% in 2011....

INVACARE CORP. $30 (New York symbol IVC; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 32.4 million; Market cap: $972.0 million; Price-to-sales ratio: 0.6; Dividend yield: 0.2%; TSINetwork Rating: Average; www.invacare.com) makes home-care and mobility products, including wheelchairs and motorized scooters. Many of Invacare’s customers rely on certain Medicare and Medicaid programs to help them pay for motorized wheelchairs and other equipment. However, the future of this funding is uncertain in light of high government deficits. That uncertainty has weighed on Invacare’s sales in the past few years....

AGILENT TECHNOLOGIES INC. $44 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 345.1 million; Market cap: $15.2 billion; Price-to-sales ratio: 2.6; No dividends paid; TSINetwork Rating: Average; www.agilent.com) makes testing systems that help improve electronic products, such as cellphones and computer-networking equipment. Agilent was a unit of Hewlett-Packard Co. until 1999, when Hewlett spun it off as a separate company. The company has gone through a lot of changes since. In 2005, it sold its struggling chip-making operations. In 2006, it spun off Verigy Ltd., its computer-chip-testing business. Agilent has also aggressively cut its costs in the past few years, mainly by closing plants and cutting jobs....

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 has over 9,400 employees in 150 locations throughout North America. In the three months ended December 31, 2010, the growth stock’s revenue rose 11.9%, to $383.7 million from $342.8 million a year earlier. Acquisitions were the main reason for the revenue increase. The growth stock’s earnings rose 9.6%, to $22.9 million, or $0.55 a share, from $25.1 million, or $0.50 a share. The company continues to grow through acquistions. In October 2010, it acquired Street Smarts, a Georgia company that specializes in roadway engineering. In December it bought Burt Hill, a 600-employee Pennsylvania architectural and engineering firm that focuses on health care and higher education. In February 2011, Stantec acquired QuadraTech, Inc., an engineering-services firm in Newfoundland and Labrador....

Mosaid Technologies, symbol MSD on Toronto, mainly licenses patented semiconductor (computer chip) and telecommunications technology, including patents for technology used in smartphones and laptops. The company complements this business by developing its own memory and other technologies. In total, Mosaid holds 2,647 patents and applications. The company licenses patents based on its own innovations. It also buys patents, and has secured licensing rights to others....

RuggedCom, symbol RCM on Toronto, makes computer networking equipment that is used in harsh environments. The small cap stock’s products include ethernet switches, network routers, wireless devices, and software. The company’s products are designed to reliably operate under high levels of electromagnetic interference. They can also cope with wide variations in temperature and humidity, as well as vibration and exposure to dust. They also work while exposed to such things as corrosive gases and water. In the three months ended December 31, 2010, RuggedCom’s revenue was $25.6 million. That’s up 24.2% from $20.6 million a year earlier. Sales to clients in the transportation industry jumped 76%, and sales to the electric-power market rose 32%....

There’s no limit to the types of investment questions Inner Circle members can ask Pat and his team of investment experts. Members often ask for Pat’s advice on Canadian stock market investments they are thinking of buying that we don’t cover in our newsletters. These companies range from large multinational firms to the most speculative penny mines. Members also frequently ask about specific investment strategies, or how headline-making events could affect their portfolios. For example, the TMX Group, which operates a number of Canadian stock exchanges, recently announced that it had agreed to merge with the London Stock Exchange (LSE). An Inner Circle member recently asked for our recommendation on TMX Group, and what impact such a merger would have on Canadian investors. To give you a sense of how the Inner Circle works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it....

FedEx Corp., symbol FDX on New York, delivers packages and documents in the U.S. and over 220 other countries and territories. Its fleet of 80,000 trucks and 684 aircraft delivers over eight million packages a day. In its fiscal 2011 third quarter, which ended February 28, 2011, FedEx earned $231 million or $0.73 a share. That’s down 3.3% from $239 million, or $0.76 a share, a year earlier. The decline was mainly the result of $43 million in one-time costs associated with the combination of the blue chip stock’s FedEx Freight and FedEx National LTL (less than truckload) divisions into a single business unit. The company also paid more for fuel and reinstated merit salary increases. As well, bad winter weather in the U.S. increased its aircraft-maintenance costs. Revenue rose 11.0%, to $9.7 billion from $8.7 billion, as the improving economy continues to spur demand for delivery services....

Aeropostale Inc., symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 965 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 47 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children. In the fiscal year ended January 29, 2011, Aeropostale’s sales rose 7.6% to $2.4 billion from $2.2 billion the previous year. Same-store sales rose only 1%, compared to a gain of 10% in the prior year, but online sales rose 24.2% to $160.2 million from $129.0 million. The company’s earnings rose 0.8%, to $231.3 million from $229.5 million. Earnings per share rose 9.7%, to $2.49 from $2.27, on fewer shares outstanding. In the latest fiscal year, Aeropostale bought back 10.3 million shares for $257.5 million....

Hidden value is one of the key factors we look for when we choose stocks to recommend in our newsletters and investment services, including Stock Pickers Digest, our newsletter for aggressive investing. (In the latest Stock Pickers Digest, we’ve updated our buy/sell/hold advice on a niche technology firm with an important hidden asset. Read on for further details.) By hidden value, we mean valuable assets that are not getting the attention they deserve from investors. When a company’s assets are wholly or partially hidden, the stock trades for less than it’s really worth, so you get to buy at a bargain price....

The Money Game, a 1968 mega bestseller about investing, was an eye-opener for a generation of investors, myself included. The author, George Goodman, wrote under the pseudonym Adam Smith. It takes a lot of chutzpah for a writer to name himself after the 18th century Scottish father of modern economics, but Goodman/Smith pulls it off. In his book, Smith introduced a number of key investing concepts that go to the heart of our Successful Investor stock investment advice. Smith has a genius for encapsulating his ideas in anecdotes, and here’s one that jumps out. It concerns the need to invest opportunistically, rather than emotionally. The story concerns a group of portfolio managers on a tour of troubled factories in the U.S. northeast. When passing by one facility, the tour’s broker-organizer commented, “I understand this company has thousands of drug addicts among its employees in that facility alone.”...

Transcontinental Inc., symbol TCL.A on Toronto, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines. Transcontinental also has over 250 web sites. These web sites will become more important to the Canadian stock’s growth in the next few years, as advertisers spend more on the Internet than print products. In the three months ended January 31, 2011, Transcontinental earned $29.9 million, or $0.37 a share. That’s up 10.3% from $27.1 million, or $0.34 a share, a year earlier. These figures exclude writedowns and other non-recurring items. On this basis, the Canadian stock’s latest earnings beat the consensus estimate of $0.36 a share. Revenue rose 3.6%, to $530.1 million from $511.6 million....

Zhongpin Inc., symbol HOGS on Nasdaq, is a China-based company that processes meat and other foods. Zhongpin is one of the world stock market investments we analyze in our Stock Pickers Digest newsletter. Zhongpin specializes in pork and pork products, as well as fruit and vegetables. It sells 358 meat products, including chilled pork, frozen pork and prepared meats, as well as 34 fruit and vegetable products. Zhongpin focuses on prepared meat, with its higher profit margins, rather than bulk pork....

We’ve long relied on these 4 tips when picking stocks to recommend in our investment newsletters and services. We think they can help you pick winners in today’s stock market, too.

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. Too much enthusiasm for a current favourite in today’s stock market leads 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....