Search

TRANSCANADA CORP. $36 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 684.4 million; Market cap: $24.6 billion; Price-to-sales ratio: 2.6; Dividend yield: 4.4%; SI Rating: Above Average) operates a 60,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. The company’s pipelines supply 20% of North America’s natural gas. In 2009, TransCanada’s pipelines accounted for 53% of its revenue and 73% of its earnings. The remaining 47% of revenue and 27% of earnings come from the company’s electrical power plants. TransCanada owns or has stakes in 20 plants in Alberta, Ontario, Quebec and the northeastern U.S. The company’s revenue rose 44.2%, from $6.1 billion in 2005 to $8.8 billion in 2007. Revenue fell 2.4%, to $8.6 billion, in 2008. However, revenue rose 4.0%, to $9.0 billion, in 2009, mainly because of the contributions of new power plants....

Investors often ask us for our opinion on borrowing money to invest in stocks. We think that borrowing to make stock market investments can be a good strategy for some investors under certain circumstances. You’ll benefit most from this strategy by sticking with well-established, dividend-paying stocks, like the ones we recommend in our Canadian Wealth Advisor newsletter. Here are 3 ways you can benefit from borrowing to invest. (We’ve also compiled a list of 6 ways to tell if your personal circumstances favour this strategy. See below.)

1. Today’s low interest rates favour borrowing to invest: Today, you can borrow for as little as 3.25% if you use your home as collateral. Over long periods, the total return on a well-diversified portfolio of high-quality stock market investments runs to as much as 10%, or around 7.5% after inflation. So you can expect to earn more than your borrowing cost.
2. You can use your dividends to pay your investment loan interest: If you borrow to buy well-established, dividend-paying stocks (or mutual funds that invest in these stocks), like those we recommend in our Canadian Wealth Advisor newsletter, these investments will give you regular dividend income and cash flow to pay the interest on your investment loan.
3. Borrowing to invest can cut your tax bill: Borrowing to invest can be a highly effective tax shelter. That’s because you can deduct 100% of your interest expense against your current income. Plus, the investment income you earn comes with three key tax advantages: you get the dividend tax credit on qualified Canadian stocks and you only pay tax on 50% of your capital gains....

Hidden value is one of the key factors we look for when we choose stocks to recommend in our newsletters and investment services, including Wall Street Stock Forecaster, our newsletter that covers the U.S. stock market. 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.

High research spending could mean big gains lie ahead for technology stocks

...

Exchange-traded funds (ETFs) are one of the more benign financial innovations to come along in the past few years. ETFs are set up to mirror the performance of a stock-market index or sub-index. They hold a more-or-less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. Investors can buy them on margin or sell them short. The best ETFs offer well diversified, tax-efficient portfolios with exceptionally low management fees....

Even though today’s house prices are high, mortgage interest costs are near historic lows. And owning your own home has a number of advantages. For example, owning your house is a great tax shelter. That’s because gains on your principal residence are exempt from capital-gains taxes. However, this tax benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property, such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre.

Many investors underestimate the risk and cost of owning rental property

...

In a recent TSI Network poll, we asked site visitors whether if trust the advice they get from their stock broker. Aside from a yes or no option, we gave visitors a third choice: “I trade online through a discount broker.” Seventy-five percent of the poll’s respondents selected this answer. You can see the full results of this poll, and a full archive of previous polls, on TSI Network. Just click the “Poll Archive” button below the main banner on the site’s home page.

Discounters’ lower commissions are a plus — but use caution

...

Now that the Olympic flame is out in Vancouver, the attention of the sporting world is starting to turn to the next winter games, in Sochi, Russia, in 2014. That’s also true of the investing world, as companies line up to get a piece of the roughly $12 billion (Canadian) that is being spent to build the Russian Olympics in Sochi. And one Canadian firm is set to play a big role: engineering firm SNC-Lavalin Group Inc. (symbol SNC on Toronto). SNC is one of the growth stocks we cover in our Successful Investor newsletter.

This growth stock’s international expertise makes it well-suited to help build the Russian Olympics

...

No matter what kind of investing approach you follow, we feel that you can improve your overall results — and cut your risk — by avoiding these 5 common investment errors. 1. Failing to follow a realistic stock market trading strategy: Some investors, particularly newcomers, plan to buy a few hot stocks (or funds, or options or futures), and double or triple their money in a few years. Then they’ll settle into a low-risk investing style that may only return an average 10% to 12% yearly. But if you could make 200% or 300% in a few years, why would you quit? If you could do it once, you should be able to do even better as you gain experience. Of course, if you doubt that you can keep it up indefinitely, you should also question whether you can pull it off the first time. The best stock market trading style for most investors is one that will work for them more-or-less indefinitely. You’ll want to be sure it suits your circumstances and temperament, that it won’t take up too much of your time, and that it doesn’t require luck or extraordinary circumstances for success....

To cut your investing risk, we recommend following our three-part system: Hold mostly high-quality, dividend-paying stocks, spread your money out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; Utilities) and avoid or downplay stocks in the broker/public relations limelight.

How “in-the-limelight” stocks can hurt your portfolio

Even well-established large cap stocks (or shares of larger-sized companies) can stumble. That’s especially true when they’re in what we call the broker/public relations limelight. Investors can build up unrealistic expectations when stocks spend time in that limelight. When broker/public-relations favourites fail to live up to those expectations, they drop much further than they would have if they had been less widely followed.

...

AUTODESK INC. $28 (Nasdaq symbol ADSK; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 229.7 million; Market cap: $6.4 billion; Price-to-sales ratio: 3.8; No dividends paid; WSSF Rating: Average) makes computer-assisted design software that lets engineers and architects analyze their products’ performance early in the design process. That saves time and money, and improves the quality of the final product. In Autodesk’s 2010 fiscal year, which ended January 31, 2010, its revenue fell 26.0%, to $1.7 billion from $2.3 billion in the prior year. That’s mainly because several of Autodesk’s customers put off upgrading their computer-aided design software because of the weak economy. In response to the lower revenue, Autodesk cut over 10% of its workforce and consolidated certain facilities. These moves lowered its expenses by at least $250 million in the latest year....

SYMANTEC CORP. $17 (Nasdaq symbol SYMC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 806.2 million; Market cap: $13.7 billion; Price-to-sales ratio: 2.3; No dividends paid; WSSF Rating: Average) makes software that protects computers from viruses and intruders. Computer sales have risen with the recent launch of Microsoft’s Windows 7 operating system. Symantec has deals to pre-install its Norton Anti-Virus software on new computers, so it stands to gain as more consumers buy new computers to get Windows 7. As well, the company has shifted its focus to selling services to its business customers. Long-term service contracts give Symantec more predictable revenue streams, and cut its risk. In Symantec’s third quarter, which ended January 1, 2010, its earnings before one-time items fell 7.4%, to $326.0 million from $352.0 million a year earlier. Earnings per share fell 4.8%, to $0.40 from $0.42, on fewer shares outstanding. Revenue rose 0.8%, to $1.55 billion from $1.54 billion. Symantec gets about half of its revenue from outside the U.S. If you adjust for foreign-exchange rates, revenue would have fallen by 3%....

ADOBE SYSTEMS INC. $35 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 524.1 million; Market cap: $18.3 billion; Price-to-sales ratio: 6.0; No dividends paid since June 2005; WSSF Rating: Average) makes Abode Acrobat, which lets users easily create, edit and share electronic documents in the popular PDF format. As well, graphic designers use Adobe’s Creative Suite of programs to create web pages and print publications. The company also makes Adobe Flash. This program lets web sites display graphics and animation. In October 2009, Adobe completed its $1.8-billion purchase of Omniture Inc., which makes software that measures and analyzes web-site traffic. Adobe will sell this software to its customers, who can use the information it provides to improve their web pages and increase their online ad revenues. Omniture will add around $335 million a year to Adobe’s revenue. Adobe earned $814.7 million, or $1.54 a share, in the year ended November 27, 2009. That’s down 28.3% from $1.1 billion, or $2.07 a share, in the prior year. These figures exclude several unusual items, including costs related to the Omniture purchase. Revenue fell 17.7%, to $2.9 billion from $3.6 billion....

MICROSOFT CORP. $29 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.8 billion; Market cap: $255.2 billion; Price-to-sales ratio: 4.2; Dividend yield: 1.8%; WSSF Rating: Above Average) is the world’s largest software company. Its Windows operating system runs 90% of the world’s computers. As well, the company’s Office suite of programs dominates the business-software field. Together, Windows and Office account for 60% of Microsoft’s revenue and 80% of its earnings. Microsoft is working to cut its reliance on Windows and Office. For example, its new 10-year alliance with Internet search provider Yahoo! Inc. (Nasdaq symbol YHOO) will help both companies increase their share of the online advertising market. In Microsoft’s second quarter, which ended December 31, 2009, it earned $6.7 billion, or $0.74 a share. That’s up 59.6% from $4.2 billion, or $0.47 a share, a year earlier. Revenue rose 14.4%, to $19.0 billion from $16.6 billion. The company spends around 11% of its revenue on research....

YUM! BRANDS INC. $34 (New York symbol YUM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 469.3 million; Market cap: $16.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 2.5%; WSSF Rating: Average) operates over 37,000 restaurants in more than 110 countries. It has five main banners: KFC (fried chicken), Pizza Hut, Taco Bell (Mexican food), A&W (hamburgers) and Long John Silver’s (seafood). Yum’s sales rose 20.6%, from $9.3 billion in 2005 to $11.3 billion in 2008. In 2009, sales fell 4.1%, to $10.8 billion. That’s mainly because of the negative impact of exchange rates. If you exclude exchange rates, sales would have risen by 1%. Same-store sales in 2009 fell 1% in China and 5% in the U.S., but rose 1% in Yum’s other overseas markets. Earnings rose 40.6%, from $762 million in 2005 to $1.1 billion in 2009. Earnings per share rose 73.4%, from $1.28 in 2005 to $2.22 in 2009, on fewer shares outstanding. If you exclude unusual items, per-share earnings would have risen 70.9%, from $1.27 in 2005 to $2.17 in 2009....

MCDONALD’S CORP. $65 (New York symbol MCD; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.1 billion; Market cap: $71.5 billion; Price-to-sales ratio: 3.1; Dividend yield: 3.4%; WSSF Rating: Above Average) is the world’s largest fast-food company by sales. It has around 32,500 restaurants in over 120 countries. Rising prosperity in developing countries is making McDonald’s food more affordable to more consumers. Overseas markets now supply 65% of its revenue, and nearly half of its earnings. McDonald’s sales rose 15.0%, from $20.5 billion in 2005 to $23.5 billion in 2008. Sales fell 3.3% in 2009, to $22.7 billion. That’s because the rising U.S. dollar hurt the contribution of its international outlets. If you disregard foreign-exchange rates, sales would have risen 2% in 2009. Overall same-store sales rose 3.8% in 2009, mainly on gains in the U.S. (up 2.6%), Europe (up 5.2%) and the Asia Pacific region (up 3.4%)....

The p/e ratio (the ratio of a stock’s price to its per-share earnings) is one of many handy investing tools. Typically, you calculate p/e’s using a stock’s current price and its earnings for the previous 12 months. The general rule is that the lower a stock’s p/e, the better. And a p/e of less than, say, 10, represents excellent value. A low p/e implies more profit for every dollar you invest. There’s no doubt that p/e ratios are an important part of many investors’ decision making. These financial ratios are published regularly on the Internet and in newspapers, and are widely followed....

Discover how to structure your investment portfolio in a way that could save you thousands of dollars

Click here to immediately download our new free report, Capital Gains Canada: 7 Secrets for Managing your Canadian Capital Gains Tax Liabilities.

As you consider how to manage your tax bill for the current income-tax season, you really shouldn’t be without our new free report, Capital Gains Canada: 7 Secrets for Managing your Canadian Capital Gains Tax Liabilities....

We think investors will profit most — and with the least risk — by buying shares of well-established, dividend-paying stocks with strong business prospects. These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Here are 3 ways dividend paying stocks can help improve your portfolio’s long-term returns:...

When clients join our Successful Investor Wealth Management service, they often ask us whether they should hold bonds or focus more heavily on stocks. This is a particularly important question for investors who rely on their portfolios for income. It’s important to note that there is no single “best portfolio” for every investor. Higher potential for loss comes with higher potential for returns, so the question of whether to hold stocks or bonds depends partly on your temperament and financial goals. Bonds provide steady income and a guarantee to repay the principal at maturity, so lowering your common stock exposure in favour of bonds can have some positive effects. First, you may reduce your portfolio’s overall volatility. Second, you are likely to cut your overall risk of loss....

The U.S. restaurant industry has faced tough challenges over the past 18 months. That’s because the economic downturn has prompted more consumers to eat at home, or to spend less when they dine out. The best U.S. restaurants have done a good job of cutting costs during the slowdown. Some have improved their menus by introducing new items and focusing on value-priced meals. And a few have taken advantage of the slowdown to expand into new markets with strong growth potential. That has helped these restaurants report improved results. It also puts them in a good position to profit as the global economy continues to improve. In light of the improvement in the U.S. restaurant industry, we’ve updated our buy/sell/hold advice on two U.S. restaurant growth stock picks, Ruby Tuesday (symbol RT on New York), and Chipotle Mexican Grill (symbol CMG on New York), in the current issue of Stock Pickers Digest, our newsletter for more aggressive investors....

Small cap stocks are companies with a “market cap” (the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. (In a recent Wall Street Stock Forecaster, we updated our buy/sell/hold advice on a U.S. small cap stock that’s up nearly 63% since March 2009. See below for further details.) Small cap stocks have the potential for strong gains, but they are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. That’s why we view even the best small-caps as aggressive, and advise investors not to overindulge in small caps....

8 tips for spotting the best Canadian gold stocks

Many Canadian firms have tried to expand into the U.S. over the years. Some, like Tim Hortons (symbol THI on Toronto), have had difficulty in the United States. Other companies’ expansion efforts have failed miserably. Canadian Tire (symbol CTC.A on Toronto) provides a memorable example of a failed U.S. expansion. In 1982, the retailer bought a chain of Whites automotive-retail stores in Texas. By 1985, Canadian Tire had lost $300 million on this purchase. That’s when the company decided to sell the division and retreat to Canada. Its stock price has since gone up more than 600%.

This real estate investment trust’s U.S. expansion adds risk — and potential rewards

...

MANITOBA TELECOM SERVICES INC. $31 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 64.7 million; Market cap: $2.0 billion; Price-to-sales ratio: 1.7; Dividend yield: 8.4%; SI Rating: Average) is the main provider of telephone services in Manitoba. The company’s Allstream subsidiary sells integrated telephone, Internet and other communication services to businesses across Canada. The company gets 70% of its profit from its Manitoba telephone business. However, a new alliance with Rogers Communications Inc. (Toronto symbol RCI.B) should broaden its geographic reach. The two companies are building a new high-speed wireless network in Manitoba. This alliance will make Manitoba Telecom more competitive in Manitoba, and let the company use Rogers’ existing network to sell more wireless services to its business customers in other parts of Canada. In 2009, Manitoba Telecom earned $103.9 million, or $1.61 a share. That’s down 29.5% from $147.4 million, or $2.28 a share, in the prior year. If you disregard restructuring costs and other unusual items, earnings per share would have fallen 12.9%, to $2.64 from $3.03. Revenue fell 3.1%, to $1.8 billion from $1.9 billion....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $25 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 228.4 million; Market cap: $5.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 11.6%; SI Rating: Above Average) provides telephone services in Atlantic Canada, as well as rural parts of Ontario and Quebec. As part of the deal that created the trust in 2006, Bell Aliant transferred its wireless operations to BCE, which owns 45% of the trust. Bell Aliant earned $373.0 million in 2009. That’s up 10.8% from $336.6 million in 2008. Earnings per unit rose 11.5%, to $2.33 from $2.09, on more units outstanding....