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HARTE-HANKS INC. $14 (New York symbol HHS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 63.6 million; Market cap: $890.4 million; Price-to-sales ratio: 0.9; WSSF Rating: Average) gets roughly two-thirds of its revenue by selling direct-mail and other marketing services to clients in a wide variety of industries. These help them attract new customers, and sell more goods and services to existing ones. The remaining third of its revenue comes from publishing free “shopper” newspapers in Florida and California. These papers rely solely on advertising. Both of these are cyclical businesses, and they have suffered during the recession as advertisers look to conserve cash. In response, Harte-Hanks has consolidated printing plants and closed call centres. These moves helped cut Harte-Hanks’s operating expenses by $49.3 million in the three months ended June 30, 2009. Despite the lower costs, overall earnings in the quarter still fell 28.3%, to $13.1 million, or $0.20 a share, from $18.2 million, or $0.29 a share, a year earlier. Revenue fell 21.5%, to $215.7 million from $274.8 million....

DIEBOLD INC. $30 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.3 million; Market cap: $2 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s leading makers of automated-teller machines (ATMs). The company also makes safes, vaults, building-security systems and electronic-voting machines. Banks have been spending less on new ATMs because of the financial crisis. As well, the recession has prompted many retailers to close stores. This has hurt demand for Diebold’s building-security products and services. The company has aggressively cut its costs in response, including moving most of its manufacturing to China and Hungary. It also sold its manufacturing operations in Argentina. In the three months ended June 30, 2009, Diebold earned $30.4 million, or $0.46 a share. That’s up 11.8% from $27.2 million, or $0.41 a share, a year earlier. If you exclude unusual costs, most of which were in the year-earlier period, earnings per share would have fallen 29.0%, to $0.49 from $0.69. Sales fell 8.9%, to $700.5 million from $768.7 million....

CINTAS CORP. $28 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.8 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; WSSF Rating: Average) provides a variety of products and services to over 800,000 businesses, mainly in North America. These include selling and renting uniforms, entrance mats, fire extinguishers, first-aid kits and cleaning products. The company also shreds documents. Many of its clients cancelled these services to cut costs during the recession. In response, Cintas closed some of its uniform-making plants in 2008. This has already saved it $60 million. Moreover, the company plans to lay off 1,200 of its 31,000 employees over the next year. It has set aside $59.1 million for severance and other costs. In the fiscal year ended May 31, 2009, Cintas earned $226.4 million, or $1.48 a share. If you exclude restructuring costs, it would have earned $1.83 a share. In the prior year, the company earned $335.4 million, or $2.15 a share. Revenue fell 4.1%, to $3.8 billion from $3.9 billion, mostly due to lower demand for uniforms and cleaning services. Cintas sells scrap paper from its shredding operations, and lower paper prices have also hurt its revenue....

TERADATA CORP. $27 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.8 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.6; WSSF Rating: Average) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends. This helps its clients make better decisions. In the three months ended June 30, 2009, Teradata’s earnings dropped 10.1%, to $62 million from $69 million a year earlier. Earnings per share fell 5.3%, to $0.36 from $0.38, on fewer outstanding shares. However, Teradata is selling more high-margin services. At the same time, it is cutting overhead and travel expenses. As a result, its gross margin (gross profits as a percentage of revenue) rose to 55.3% from 54.7%. Revenue fell 7.5%, to $421 million from $455 million. Teradata gets about half of its revenue from its international operations, and the higher U.S. dollar hurt the value of this contribution during the quarter....

XEROX CORP. $8.72 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 869.1 million; Market cap: $7.6 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) makes copiers, laser printers and other high-end publishing equipment. The company spends about 5% of its revenue on research. Over the past few years, this has let it develop new colour printers that have helped its customers cut their paper use. It has also produced other innovations, such as its proprietary solid-ink technology, which is less expensive on a per-page basis than traditional ink cartridges. The recession weighed on Xerox’s revenue and earnings in the latest quarter. In the three months ended June 30, 2009, Xerox earned $140 million, or $0.16 a share. That’s 34.9% less than the $215 million, or $0.24 a share, it earned a year earlier. Revenue fell 17.7%, to $3.7 billion from $4.5 billion....

ALCOA INC. $12 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 974.4 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s largest aluminum producers. Its customers are mainly in the aerospace, automotive and construction industries, all of which have struggled lately. Aluminum prices fell 49% in the second quarter of 2009 from a year earlier, but are 9% higher than they were in the first quarter. In response to the lower prices, The company will lay off 16% of its 87,000 employees by the end of this year. This should save it $2.4 billion a year. As well, Alcoa cut its quarterly dividend to $0.03 a share from $0.17. It now yields 1.0%. This will save an additional $430 million a year. Alcoa lost $256 million, or $0.26 a share, in the second quarter of 2009, excluding severance costs. A year earlier, it earned $553 million, or $0.67 a share. Revenue fell 41.4%, to $4.2 billion from $7.2 billion....

BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.8 billion; Market cap: $176.4 billion; Price-to-sales ratio: 3.5; WSSF Rating: Average) 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. In its latest fiscal year, which ended June 30, 2009, BHP’s revenue fell 15.6%, to $50.2 billion from $59.5 billion a year earlier. Lower resource prices were the main reason for the drop. Earnings before unusual items fell 30.2%, to $10.7 billion from $15.4 billion. Earnings per ADR fell 29.9%, to $3.85 from $5.50. (Each American Depositary Receipt represents two BHP common shares.) The stock has jumped by 70% since we first recommended it at $37 in our March 2009 issue. The gain was partly caused by BHP’s new agreement to merge its iron-ore mining operations in Western Australia with those of Rio Tinto Ltd. (New York symbol RTP) to form a new 50/50 joint venture. The deal should close in 2010, and save BHP $5 billion a year....

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But that’s just the beginning. Our glossary also lets you build your stock market education by instantly cross-referencing these definitions with our latest daily updates related to the term you’ve searched.

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TFSAs let you earn investment income — including interest, dividends and capital gains — tax free. You could only invest $5,000 this year to start your TFSA. However, you gain an additional $5,000 of contribution room (indexed to inflation and rounded to the nearest $500 on a yearly basis) every year, plus you get to carry forward unused contribution room from previous years. (So in 2010 you’ll have $10,000 of contribution room, $15,000 in 2011, and so on.) ...

Japan is heading into an election on August 30. Polls show the Democratic Party of Japan stands a good chance of defeating Prime Minister Taro Aso’s Liberal Democratic Party in the Japanese parliament’s lower house.

To spur economic activity, the Democratic Party of Japan plans to push for more aggressive stimulus spending, such as allowances for families with children, free public high-school education and cuts to the gasoline tax.

Government stimulus spending has already played a big role in the country’s recent turnaround. In the latest quarter, ended June 30, 2009, Japan’s economy posted an annualized growth rate of 3.7%. The turnaround comes after four quarters of steep contraction, and is one reason why investors are wondering if Japan is now a good place for offshore investing.

Under Prime Minister Aso, Japan’s government is spending 25 trillion yen ($284.6 billion Canadian) to help the economy grow. As in many other developed countries, this is taking the form of infrastructure spending, direct handouts to consumers and incentives for environmentally friendly products.

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Lowering the costs of investing has an immediate, obvious benefit: it leaves you with more money. But some cost-cutting investment techniques can wind up costing you money in the long run. For instance, participating in dividend reinvestment plans, or DRIPs, is a good idea if you only use it to cut commission costs on stocks you would have bought anyway. ...

Aggressive investors need to be more skeptical and discriminating than conservative investors, because they take on great risk. Conservative investors mainly buy well-established companies with a history of earnings and possibly dividends, and a secure hold on a growing, or at least stable, clientele. When an investment like that runs into problems, its stock price can fall — sometimes drastically. But it will usually survive. It can then go on to prosper all over again when good times return. When something goes wrong with an aggressive investing stock pick, there is far greater risk of serious, if not total, loss....

When you join my Inner Circle service, you get to ask me your own personal investment questions, plus you get to see what other Inner Circle members have asked. So you can see how the service works, and get a sense of how it might help you make good investments, I’d like to share just a couple of recent member questions with you. I hope you enjoy and profit from them. Q: A friend of mine recently purchased a “Trading Robot” to help him make good investments. He is ecstatic because the robot can trade 24 hours a day with inputted instructions respecting trading. He is required to place his investment funds with a brokerage in Dubai, although he says he will set up a segregated account in the U.K. What is your opinion/experience with “Trading Robots”? Many thanks. A: Foreign exchange (“forex”) trading robots automatically place trades on your behalf using a complex formula....

An investor recently asked us a question that touches on several stock market investing concepts that we cover in our Canadian Wealth Advisor newsletter. He said, “Due to a corporate reorganization, I now have the option of cashing in $279,000 from insurance-company mutual funds, then transferring the money into my brokerage RRSP account. I prefer to invest the money directly in stocks you recommend, rather than hold mutual funds from my insurance company. However, the insurance company tells me that I have to cash in the funds first, then wait at least six weeks for the money to turn up in my brokerage RRSP account. I’m concerned that the market will turn up while the money is in transit and I’ll wind up missing out. What should I do?”...

Perhaps the most fundamental piece of investment advice you will ever receive is to make sure you carefully read a contract and get clarification of anything you don’t understand before you sign. Most investors are familiar with this investment advice, of course, but it’s important to keep in mind, especially when doing things like opening an investment account, or transferring investments from one brokerage to another. It’s something we take very seriously when we manage the portfolios of clients of our Successful Investor Wealth Management service. When we fill out account transfer forms, we make sure that each form is checked and double-checked by two different people in our office, to avoid costly mistakes....

We recently read the Yahoo news story of Ddalgi (Korean for “Strawberry”), a five-year-old parrot from Papua, New Guinea, who competed with 10 human investors in a stock-picking contest in South Korea. Strawberry’s stock market picks reportedly posted a 13.7% return. While not good enough for first, the result put her in a respectable third place. Her human competitors, on the other hand, posted an average loss of 4.6%. (The story reminded me of a Globe and Mail stock-picking contest in which I was pitted against eight other human competitors and a plastic Santa. More on that in a moment...) Stories like these are not uncommon, and are not limited to stock-picking contests. You may have heard of Maggie the Monkey, who makes yearly hockey playoff picks that routinely beat those of human analysts....

It pays to be skeptical of growth stocks that rely too heavily on acquisitions. That’s because the buyer of something rarely knows as much about it as the seller. So it follows that if a company makes enough acquisitions, it might eventually buy something that has hidden problems. At some point, those problems will come out into the open and hurt the buyer’s earnings. Acquisitions, particularly big ones, can also push up debt, which leaves the buyer vulnerable to failure if it can’t meet the payments. They can also load the buyer’s balance sheet with goodwill, an intangible asset whose value can drop overnight if it turns out that the company made a bad acquisition. In that case the company has to write off all or part of the acquisition’s cost against current earnings. This can wipe out a year’s earnings for the growth stock and devastate its share price.

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Opening a brokerage account is often one of the first steps beginning investors take when they start investing in the stock market. You’ll first have to choose whether a full-service or discount broker is right for you. (This is one of the questions we help you answer in our new special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”) If you choose to use a full-service broker for investing in the stock market, you’ll have to fill out an application form to set up your account. When you do, we think you should pay special attention to two sections: “risk level” and “investment objectives.” (You don’t need to fill these out with a discount broker, but the answers are well worth thinking about nonetheless.)...

ATCO LTD. (Toronto symbols ACO.X (class I non-voting) $38 and ACO.Y (class II voting) $39; Income Portfolio, Utilities sector; Shares outstanding: 57.9 million; Market cap: $2.2 billion; Price-to-sales ratio: 0.7; SI Rating: Above Average) is a Calgary-based holding company. ATCO’s main subsidiary is 52.3%-owned Canadian Utilities Ltd.. This business distributes natural gas and electricity in Alberta. It also operates power plants in Canada, the U.K. and Australia. ATCO’s other businesses involve selling specialized services to other companies. These include building temporary structures, airfields and communication systems for resource and construction firms. It also offers billing and payment processing, natural-gas storage and travel services. The company’s revenue fell from $3.3 billion in 2004 to $2.9 billion in 2005, after Canadian Utilities sold its non-regulated retail operations, which supplied households with natural gas and electricity. But revenue rose steadily, returning to $3.3 billion in 2008. Earnings more than doubled, from $130.9 million, or $2.28 a share, in 2004 to $265.6 million, or $4.60 a share, in 2008....

DUNDEE CORP. $9.40 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 74.3 million; Market cap: $698.4 million; Price-to-sales ratio: 0.9; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. The company’s main asset is its 49% stake (62% voting interest) in DundeeWealth Inc. (Toronto symbol DW), which provides investment-management, securities-brokerage, financial-planning and investment-advisory services. It also owns the Dynamic family of mutual funds. In the three months ended June 30, 2009, Dundee earned $29.9 million, or $0.39 a share. That’s a big improvement over the $6.6 million, or $0.08 a share, that it earned in the year-earlier quarter. The gain was largely driven by new floating-rate notes that Dundee received last January in exchange for illiquid asset-backed commercial paper. Based on improving conditions in the credit markets, Dundee recognized a $45.6-million, non-cash accounting gain on these notes in the latest quarter. Revenue fell 13.5%, to $245.6 million from $284 million, as lower stock-market values hurt Dundee-Wealth’s management fees and mutual-fund sales. As of June 30, 2009, DundeeWealth’s assets under management stood at $29.8 billion. That’s a 5.2% drop from $31.5 billion a year earlier....

GREAT-WEST LIFECO INC. $25 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 944.3 million; Market cap: $23.6 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) is Canada’s largest insurance company, with $441.9 billion of assets under administration. Great-West also provides retirement-planning and wealth-management services. It gets about 60% of its earnings from Canada, followed by Europe (25%) and the United States (15%). Power Financial Corp. (Toronto symbol PWF) owns 68.7% of Great-West’s shares. In August 2007, Great-West bought Putnam Investments Trust, a leading U.S. mutual-fund company. Great-West paid just $4.2 billion, even though Putnam had $182 billion U.S. in assets under administration. That’s because Putnam was coming off a mutual-fund trading scandal that spurred a wave of investor redemptions. Putnam’s assets have since dropped to $108 billion U.S., largely because of falling stock prices. Still, the purchase gave Great-West access to Putnam’s large client base. In the three months ended June 30, 2009, Great-West’s earnings fell 26.8%, to $413 million from $564 million a year earlier. In response to last year’s financial-market turmoil, the company sold $1 billion worth of common shares to shore up its already strong balance sheet. As a result, earnings per share in the latest quarter fell 30.2%, to $0.44 from $0.63....

IGM FINANCIAL INC. $43 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 264.1 million; Market cap: $11.4 billion; Price-to-sales ratio: 4.7; SI Rating: Above Average) is Canada’s largest independent mutual-fund company, with $112.3 billion in assets under management. Power Financial owns 56.4% of IGM. IGM operates through two main divisions. Investors Group sells funds through its own network of 4,500 advisors. Mackenzie Financial sells its funds through independent brokers. In June, IGM purchased the 27.6% of Investment Planning Counsel (IPC) that it did not already own. IPC’s 700 advisors provide wealth-management services. IGM paid a total of $42.4 million, which consisted of $1.7 million in cash and $40.7 million in common shares. IGM will keep operating IPC separately, and will not merge it with Investors Group or Mackenzie....

HOME CAPITAL GROUP INC. $37 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.4 million; Market cap: $1.3 billion; Price-to-sales ratio: 2.5; SI Rating: Average) is the parent of Home Trust Company, a federally regulated trust company that specializes in issuing residential first mortgages and credit cards to borrowers who don’t meet the higher standards of larger, traditional lenders. Home Capital issued $1.3 billion worth of new residential mortgages in the three months ended June 30, 2009. That’s up 82.2% from the prior quarter. The gain is mainly because low interest rates helped improve housing markets in Ontario and Quebec. However, the company issued just $23.3 million of new non-residential mortgages, a 34.5% drop from the prior quarter. Because of the higher volumes, Home Capital’s revenue rose 7.8%, to $121.8 million from $113 million a year earlier. Earnings jumped 29.4%, to $34.4 million, or $0.99 a share, from $26.6 million, or $0.76 a share....

EMERA INC. $21 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.4 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.7; SI Rating: Average) has expanded beyond Nova Scotia in the past few years. The company supplies 95% of that province’s electrical power. For example, Emera will pay $27.6 million for 9.9% of Algonquin Power Income Fund (Toronto symbol APF.UN). Algonquin owns or has interests in 41 hydroelectric facilities in Canada and the U.S. Separately, Emera and Algonquin have formed a 50/50 joint venture that will pay $116 million U.S. for a power generation and distribution business in Lake Tahoe, California. After these transactions close in 2010, they should add $6 million to $7 million to Emera’s annual earnings. Meanwhile, Emera earned $38.1 million, or $0.33 a share, in the second quarter of 2009. That’s down 11.2% from $42.9 million, or $0.37 a share, a year earlier. Under a new arrangement with Nova Scotia power regulators, Emera incurred an extra $16.3 million of fuel expenses in the quarter. However, the deal also let it increase power rates, which will help it recover most of these extra costs. Revenue by 5.2%, to $334.2 million from $317.6 million....

FORTIS INC. $25 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 170.3 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) gets just 15% of its revenue from Newfoundland Power, its original business. In the past few years, the company has bought electrical utilities in four other Canadian provinces, as well as the U.S. and Caribbean. However, about half of its revenue now comes from Terasen Inc., which distributes natural gas in British Columbia. The company paid $3.7 billion for Terasen in May 2007. In the three months ended June 30, 2009, Fortis’s earnings jumped 82.8%, to $53 million, or $0.31 a share, from $29 million, or $0.18 a share, a year earlier. If you exclude one-time charges in the year-earlier quarter, earnings would have risen 20.5%. Terasen contributed $14 million to the latest earnings. Revenue fell 11.1%, to $754 million from $848 million. The drop was largely because of warmer-than-usual spring weather, which hurt natural-gas demand at Terasen. The stock trades at 16.7 times Fortis’s projected 2009 earnings of $1.50 a share. That’s a higher p/e ratio than other utilities, but still reasonable in light of Fortis’s high-quality operations and geographic diversity. The $1.04 dividend yields 4.2%....