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China Investment Corp. (CIC) continues to catch investors’ attention by making a number of big purchases in the resource sector, including crude oil stocks. CIC is the Chinese government’s “sovereign wealth fund.” Sovereign wealth funds have been around since the 1950s. They are state-owned investment funds that are usually financed by an economic surplus. Many Middle Eastern sovereign wealth funds, for example, are financed by state oil revenues. CIC is directly funded by the Chinese government, largely with U.S. dollar reserves accumulated through exports. ...

Attractive opportunities for short selling stocks come along from time to time, but it’s a hard way to make money. That’s because short sellers face a number of unique disadvantages that don’t apply to buyers. (See below for three risks to be aware of if you’re considering short selling stocks as an investment strategy.) ...

TIM HORTONS INC. $34 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 176.2 million; Market cap: $6.0 billion; Price-to-sales ratio: 2.7; Dividend yield: 1.5%; SI Rating: Average) is one of Canada’s largest fast-food restaurant chains. Its 3,015 outlets mainly serve coffee and donuts. The company also has 563 stores in the U.S. Franchisees operate 99.5% of Tim Hortons’ coffee-and-donut shops. The company gets about two-thirds of its revenue from supplying these outlets with coffee, baked goods and related items. (Rents and franchise fees account for the remaining third of its revenue.) Tim Hortons owns its own bakeries and warehouses. That gives it strong quality control, and lets it use its buying power to negotiate better ingredient costs. In 2009, Tim Hortons’ earnings rose 4.1%, to $296.4 million from $284.7 million in 2008. However, its 2008 earnings were depressed by a $15.4-million (after tax) charge for non-recurring costs, including writedowns....

SAPUTO INC. $29 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 207.2 million; Market cap: $6.0 billion; Price-to-sales ratio: 1.0; Dividend yield: 2.0%; SI Rating: Average) is Canada’s largest producer of dairy products, including milk, butter and cheese. It also makes snack cakes and tarts. Aside from Saputo, the company’s main brands are Neilson, Stella and Dairyland. The company also has operations in the U.S., Argentina and Europe. In the three months ended December 31, 2009, Saputo’s earnings jumped 80.4%, to $104.3 million, or $0.50 a share. A year earlier, it earned $57.8 million, or $0.28 a share. That’s mainly because of contributions from its Neilson Dairy subsidiary, which Saputo bought from George Weston Ltd. (Toronto symbol WN) on December 1, 2008. The higher earnings came despite a 20% increase in milk prices over the past year. (Milk is the main raw material of Saputo’s dairy businesses, which provide 98% of its earnings.) The company has been able to offset most of these extra costs by raising its selling prices for cheese in Canada....

MAPLE LEAF FOODS INC. $9.37 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 136.8 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.2; Dividend yield: 1.7%; SI Rating: Average) 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. Maple Leaf also owns 89.8% of Canada Bread. Maple Leaf’s strong brands and customer loyalty are helping it continue its recovery from a 2008 listeriosis outbreak at its Toronto meat-processing plant. These strengths should also help it pass along higher costs for pork and other ingredients to its customers over the next few months. In the three months ended March 31, 2010, Maple Leaf’s sales fell 6.9%, to $1.2 billion from $1.3 billion a year earlier. That’s mainly because of a 7.5% drop in sales of frozen baked goods. As well, Maple Leaf gets 23% of its sales from outside of Canada, and the higher Canadian dollar hurt the contributions of its foreign operations....

CANADA BREAD CO. LTD. $47 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.5%; SI Rating: Above Average) is Canada’s second-largest producer of baked goods, after Weston Bakery. It also makes specialty pastas and sauces. Its main brands include Dempster, Tenderflake and Olivieri. In the three months ended March 31, 2010, Canada Bread’s earnings fell 14.5% to $12.7 million, or $0.50 a share. It earned $14.9 million, or $0.59 a share, a year earlier. Without unusual items, mainly the cost of building a new bakery in Hamilton, Ontario, to replace three older Toronto bakeries, earnings per share would have fallen 8.3%, to $0.55 from $0.60. Sales fell 7.6%, to $381.9 million from $413.1 million, mainly because the company lost a major U.S. restaurant customer. That pushed down sales of frozen bagels and breads to restaurants by 16.9%. Sales of fresh baked goods fell 2.2%....

SUNCOR ENERGY INC. $33 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $52.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; SI Rating: Average) became Canada’s largest oil company when it bought Petro-Canada (old symbol PCA) on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor shares for each Petro-Canada share they held. Conventional oil and natural gas account for about 60% of the merged company’s production. The remaining 40% comes from oil sands. That includes its 12% stake in the massive Syncrude oil-sands development. Suncor also operates four refineries and over 1,800 retail gas stations under the Petro-Canada banner. The company wants to expand its oil sands operations until they account for about 70% of its production. To that end, it is selling some conventional and offshore properties that belonged to Petro-Canada. However, Suncor will probably keep Petro-Canada’s projects in Libya and Syria....

On Thursday, May 6, 2010, the Dow Jones Industrial Average opened at around 10,860. Later that afternoon, it suddenly fell 9.2%, to 9,869.62. In the space of just a few minutes, it had recovered most of these losses, and closed at 10,520.32. It’s now back to its pre-crash level of around 10,860. The Securities and Exchange Commission (SEC) is investigating the drop, but an exact cause has not yet been found. No matter what caused the crash, some of the trades that occurred between 2:40 p.m. and 3:00 p.m. eastern time have already been cancelled. The New York and Nasdaq exchanges have cancelled all trades that occurred during that window that were more than 60% higher or lower than the stock’s price just before the plunge....

Ottawa’s new tax on income trusts comes into effect on January 1, 2011. When it does, it will put income trusts on an equal footing with regular corporations. That will prompt some income trusts to convert to conventional corporations. Others may continue to operate as trusts. Either way, the looming tax has made many investors wary of income trusts. However, some trusts remain well positioned for long-term gains, even with the new tax. These are trusts that operate stable businesses in strong and growing industries. One way we separate these trusts from those that will struggle — or worse — when the new tax kicks in is to look for trusts that have histories of raising their distributions, and plan to keep their payouts at current levels after January 2011....

Some investors follow a “sector rotation” approach to investing. That’s when you try to hop from sector to sector, underweighting or overweighting your holdings in certain sectors of the stock market depending on a forecast of the stage of the economic cycle, or other factors. This approach can work in any one year, say. However, it’s difficult if not impossible to produce consistent longer-term returns. Here are two reasons why:

1. You need to guess right three times to profit in sector rotation: You have to pick the top sectors, then pick the stocks that will rise within those sectors, then sell before the sector stumbles. It’s virtually impossible to consistently succeed at all three over long periods. But that’s not the only problem with sector rotation.
2. Sector rotation can overweight you in the worst-performing sectors: There are many theories about which sectors will outperform at any given stage of the economic cycle. But trying to pick winning sectors — and staying out of other sectors — seldom works over long periods. Investors who attempt to do so often wind up with heavy holdings in the worst-performing sectors. That would be devastating to your portfolio, even if you confine your investments to well-established companies.

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A couple of our Successful Investor Wealth Management clients asked us about a Canadian real estate investing subject that can be sensitive for investors who are at or nearing retirement — when to sell the family home. The clients, a married couple, are both 59 and plan to begin collecting Canada Pension next year, at age 60. They recently sold their business and have a $450,000 investment portfolio. Their $700,000 home is mortgage-free and sits on 118 feet of lakefront in a vacation area north of Toronto. It’s a bigger home than they need, since their children are grown. They’ve thought about selling, though they’d prefer to stay put for a few years. Meanwhile, they hope their home will continue to appreciate. But they recognize that the boom in Canadian real estate investing won’t last forever, and that many baby boomers are also holding off on selling a larger-than-needed family home....

We display a price-to-sales or p/s ratio with every stock we cover in our newsletters, including our flagship publication, The Successful Investor. Price-to-sales is the ratio you get when you compare a stock’s price to its sales per share (you get sales per share by dividing total annual sales by the number of outstanding shares). ...

Gold is currently trading at around $1,183 U.S. an ounce. That’s up 4% from April 19, 2010, when it was trading at around $1,138 U.S. an ounce, but still short of gold’s all-time high of $1,214.80 U.S., which it reached in late 2009. Gold’s recent rise has partly been driven by investor fears about European sovereign debt — Greek debt in particular. These fears are prompting more investors to buy gold and gold investments, because they believe gold will provide them with additional security. ...

Demand for wireless services is rising sharply in North America. That’s partly because device makers continue to release new cellphones and wireless devices, such as Apple’s iPad and Amazon’s Kindle e-book reader. As well, more customers are switching from traditional phones (or land lines) to wireless services. ...

Here are three common mistakes many investors make when selecting Canadian stock picks. All three can seriously hinder — or eliminate — your portfolio’s long-term profit potential. 1. Buying low-quality investments: Most of the bad deals in Canadian stock picks exhibit the usual tip-offs. For example, many lack a history of earnings or dividends. They may also spend way too much time publicizing themselves, and too little time building their businesses. To increase your stock market returns, we feel you should invest mainly in high-quality, dividend-paying companies. We also feel you should diversify by spreading your money out across the five main economic sectors (Resources & Commodities, Finance, Manufacturing & Industry, Utilities and Consumer)....

Investor concerns continue to mount over high debt levels in many European countries. That’s especially true of the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain). Right now, the European Union and International Monetary Fund are working on a bailout of Greece. However, negotiations are moving slowly, mainly because Germany, which would shoulder most of the bailout, is insisting that the Greek government sharply cut its spending before any restructuring can go forward. ...

The results are in and they couldn’t be clearer: The Successful Investor is Canada’s top investment advisory. That’s according to a recent analysis by the U.S.-based Hulbert Financial Digest, which is generally thought of as the bible of investment newsletter performance measurement. According to Hulbert, The Successful Investor outperformed all other Canadian newsletters over the past 5 years — and ranked fifth among all 140 newsletters that Hulbert tracks. Hulbert has been following The Successful Investor since 2002....

We designed our Successful Investor ratings (Highest Quality, Above Average, Average and Extra Risk) to help you quickly and easily identify the best investments for long term profits. These stocks have the asset size and investment quality to weather market downturns and changing industry conditions. You’ll find our rating next to each stock we recommend in our newsletters — including the safety-conscious stocks we recommend in Canadian Wealth Advisor, our newsletter for lower-risk investing. Here are three of the factors we consider when we assign a rating to a stock....

Investors sometimes ask us why we don’t publish price targets on the stocks we recommend in our newsletters and investment services. We don’t publish targets for several reasons. The main one is that they may lead investors to rely too heavily on predictions, which are the least reliable part of the investment decision-making process.

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In December, Nissan Motor Co. (symbol NSANY on Nasdaq) will ship the Nissan LEAF to selected U.S. dealers. The company aims to begin selling the car nationwide in 2011. The Nissan LEAF is the first electric car to be widely sold in the U.S. So far, 115,000 customers have paid a $99 reservation fee for the new car. The company aims to convert at least 25,000 of these reservations into firm orders by the time the car begins shipping. In light of recent developments surrounding this new electric car, we’ve updated our buy/sell/hold advice on Nissan in a just-published issue of Stock Pickers Digest, our newsletter for aggressive investing....

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, and oil now trades at about $84 U.S. a barrel. We think oil prices could rise even further if the global economy continues to rebound, as we expect. Even so, we continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. However, you can profit nicely over long periods by investing a reasonable portion of your portfolio in well-established or well-managed Canadian oil stocks, especially those with high-quality reserves and rising production. These companies are well-positioned to profit during periods of high oil prices, and are able to at least partly offset price declines by producing more oil....

Many investors buy units of asset allocation mutual funds because they think these funds provide an easy and profitable way to diversify between stocks, bonds and cash equivalents. Asset allocation funds are mutual funds that can shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes.

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Last week, the U.S. Securities and Exchange Commission (SEC) announced that it was suing global investment bank and securities firm Goldman Sachs Group for defrauding investors. The SEC claims that Goldman Sachs misled investors about the risks of investing in certain mortgage-backed financial products. The SEC alleges that Goldman Sachs created these products with the help of a hedge-fund manager who then planned to sell short (or bet against them). Stock markets in the U.S. and Canada fell on the news of the SEC’s claims against Goldman Sachs. Shares of Canadian bank stocks also declined slightly, but they quickly recovered. That’s mainly because investors realize that the big-five Canadian banks had limited exposure to these types of complicated and risky financial products....

Standard & Poor’s and the TMX Group, which operates the Toronto Stock Exchange, recently launched the S&P/TSX Clean Technology Index. This new index consists of 21 TSX-listed green technology stocks that provide products and services that help solve environmental problems. A number of the companies on the S&P/TSX Clean Technology Index are speculative in nature. (However, the index does contain one established company that may have found a profitable niche in wind and solar-power generation. Read on for further details.)...

The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian consumer stocks are facing increasing competition from large U.S. discount retailers, like Wal-Mart and Costco.

As the competition between retailers continues to heat up, it’s more important than ever for investors to focus on Canadian consumer growth stocks with a proven ability to adapt and prosper in the fast-changing retail landscape....