Search

DEVON ENERGY CORP. $72.21 (New York symbol DVN; SI Rating: Speculative) (405-235-3611; www.devonenergy.com; Shares outstanding: 443.8 million; Market cap: $32.0 billion) is one of the largest independent U.S.-based oil and gas explorers and producers. Its production mix is about 65% gas and 35% oil. Devon’s properties are mainly in Canada and the U.S. Aside from conventional production, they include shale oil in northern Texas, oil sands in Canada and deep-water wells in the Gulf of Mexico. In the three months ended June 30, 2009, lower oil and gas prices caused Devon’s cash flow per share to drop 56.2%, to $2.71 from $6.19....

When analyzing any new investment, including value stock picks, one key question we ask early on is, “What can this cost us if something goes wrong?” (You can learn more about our value-investing approach to selecting stocks in our new free report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”) There is no simple rule for calculating cost-if-something-goes-wrong. It takes common sense and guesswork. For instance, to determine the cost of a warm winter to a ski-hill operator, we need to see how many ski centres it operates, and if they are in the same or different weather systems. In fact, geographical diversification plays a prime role in most calculations of the cost-if-something-goes-wrong. [ofie_ad]...

A market slump like the one we’ve experienced since 2007 demonstrates the appeal of a conservative, risk-averse portfolio investing philosophy like ours. While the well-established companies we invest in may not fly as high as speculative stocks when the market is soaring, they hold up much better in market downturns.

As part of our portfolio investing strategy, we diversify by spreading the investments of clients of our Successful Investor Wealth Management service out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; Utilities), even when much of the market’s action is concentrated in one or two industries or sectors.

That’s because the market’s hottest segments can unpredictably jump from hot to cold....

Markets have risen considerably since their March lows. In light of this, investors who sold at the bottom have missed out on the 40% or so that the TSX has gained since then. They now no doubt feel that they’ve made a grave investment error. Successful investors avoid market predictions as part of their stock market strategy. Instead, they stick with well-established, mostly dividend-paying stocks, like those we include among the safety-conscious investments we cover in our Canadian Wealth Advisor newsletter. Regardless of their investment approach, all investors can improve their long-term results by understanding and avoiding these common investment mistakes....

Starting in 2011, Ottawa will impose a tax on the distributions of Canadian income trusts. This will put trusts on an equal tax footing with regular corporations. Many trusts are converting to corporations as a result. Some are even cutting their distributions. Real estate investment trusts, or REITs, will remain exempt from the tax on Canadian income trusts, and will likely remain in their current form. (REITs invest in income-producing real estate, such as office buildings and hotels.)

...

ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.1; SI Rating: Above Average) is Canada’s largest bank, with total assets of $659.9 billion. In its third quarter, which ended July 31, 2009, Royal’s earnings rose 23.7%, to $1.6 billion, or $1.05 a share, from $1.3 billion, or $0.92 a share, a year earlier. Revenue rose 32.3%, to $7.8 billion from $5.9 billion. Royal has steadily expanded its capital-markets division over the past few years. Through this subsidiary, the bank helps businesses raise capital by selling shares and issuing debt. It also provides security-trading and research services. Royal gets about a quarter of its revenue from this division....

TORONTO-DOMINION BANK $67 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 854 million; Market cap: $57.2 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) is the second-largest Canadian bank, with total assets of $544.6 billion. TD has built up its U.S. retail-banking operations in the past few years, mostly through acquisitions. In May 2008, it paid $8.5 billion for Commerce Bancorp Inc. Commerce now operates as “TD Bank,” and has over 1,000 branches from Maine to Florida. TD’s U.S. operations now account for about 20% of its profits. But even with Commerce, earnings at TD’s U.S. operations fell 11% in the bank’s most recent quarter, which ended July 31, 2009. This was mainly because the division’s loan-loss provisions climbed 141% from a year ago. The jump was largely the result of depressed real-estate prices in some markets. It added to a 93.4% rise in TD’s overall loan-loss provisions, to $557 million from $288 million....

BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $44 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) is Canada’s third-largest bank, with total assets of $485.9 billion. Rising stock markets continue to help the bank’s trading division. In the three months ended July 31, 2009, the division’s earnings jumped 58.3%, to $470 million from $297 million a year earlier. The Canadian banking division’s earnings rose 8.0%, to $500 million from $463 million. This was largely because of two purchases the bank made last year: it paid $2.3 billion for 37.6% of CI Financial Corp. (Toronto symbol CIX), one of Canada’s leading mutual-fund companies, and $500 million for online broker E*Trade Canada. These additions helped push up the bank’s overall revenue by 11.9%, to $3.8 billion from $3.4 billion....

BANK OF MONTREAL $51 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 549.9 million; Market cap: $28 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is the fourth-largest Canadian bank, with total assets of $415.4 billion. Despite the recession, Bank of Montreal is setting less money aside to cover bad loans. In the three months ended July 31, 2009, the bank allocated $417 million for future loan losses, down 13.8% from $484 million a year earlier. Lower loan-loss provisions at its main Canadian personal and business lending operations offset higher provisions at its U.S. division, particularly for commercial real-estate loans and residential mortgages. Thanks to the lower provisions, Bank of Montreal’s earnings rose 6.9%, to $557 million from $521 million a year earlier. However, earnings per share fell 1.0%, to $0.97 from $0.98, because of an 8.7% rise in the number of outstanding shares. Revenue rose 8.4%, to $3 billion from $2.7 billion....

CANADIAN IMPERIAL BANK OF COMMERCE $61 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 382.7 million; Market cap: $23.3 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is Canada’s fifth-largest bank, with total assets of $335.9 billion. In August 2005, CIBC set aside roughly $3 billion to settle a class-action lawsuit related to its involvement with failed energy company Enron Corp. Last year, it recorded a $486-million tax benefit related to this. The Canada Revenue Agency is now challenging this deduction. If CIBC wins, it will recognize a further tax gain of $214 million. If it loses, it will have to pay $826 million. To put these figures in context, CIBC’s earnings jumped to $434 million, or $1.02 a share in the three months ended July 31, 2009. That’s much higher than the $71 million, or $0.11 a share, it earned a year earlier. But if you exclude unusual items, such as writedowns of securities, earnings per share actually fell 21.9%, to $1.29 from $1.65....

Gold has been attracting investor interest because it recently broke out of the $930 to $960 U.S. range that it had been trading in and climbed over $1,000. The last time gold was over $1,000 was last March. In November, it dropped to $700 as stock-market prices fell sharply. ...

RIOCAN REAL ESTATE INVESTMENT TRUST $17 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 234.2 million; Market cap: $4 billion; Price-to-sales ratio: 5.4; SI Rating: Average) is Canada’s largest real-estate income trust, with properties in all 10 provinces. RioCan specializes in big-box outdoor malls, and owns 247 retail properties, 13 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. The trust also owns office buildings and residential complexes. These represent 4% of its net leasable area of 36.2 million square feet. RioCan’s revenue rose 31.3%, from $581.7 million in 2004 to $763.8 million in 2008, mainly due to strong interest from retailers for big-box-style malls. These malls now account for 45% of RioCan’s holdings....

BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006. Last year, BCE began a major cost-cutting program in response to a high-profile takeover bid by a private group headed by the Ontario Teachers’ Pension Plan....

There has recently been good news on the U.S. housing front: Single-family home sales jumped 7.2% in July from June. That’s the biggest month-over-month rise that the country has seen in 10 years. Sales had been rising for the previous three months, but July’s result was much higher than expected. Now, investors on both sides of the border are wondering how best to invest in a U.S. housing rebound. Some are looking to U.S. large cap stocks related to the housing sector. [ofie_ad]...

As investors near retirement, their advisors often recommend that they move a larger part of their portfolios from stocks and mutual funds to bonds and other fixed-return investments. To some extent, this is an understandable retirement investing strategy, since bonds provide steady income and a guarantee to repay the principal at maturity. ...

SCOTIA CANADIAN GROWTH FUND $47.00 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9269; Web site: www.scotiabank.com. No load — deal directly with the bank) attempts to use an investment’s fundamentals to determine whether it has the potential for above-average growth. The $394.5-million Scotia Canadian Growth Fund’s largest stock holdings include Royal Bank, TD Bank, Potash Corp., Canadian Natural Resources, Canadian National Railway, Bank of Nova Scotia, Crescent Point Energy and Manulife Financial. Scotia Canadian Growth holds 43.3% of its portfolio in the resource sector. Its next-largest segment is financial services, at 27.9%....

CIBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Web site: www.cibc.com. No load — deal directly with the bank) looks at fundamentals like earnings, cash flow and debt level to identify companies that the managers see as having above-average growth potential. The $399.3-million fund’s top holdings are: Royal Bank of Canada, EnCana, Research in Motion, Bank of Nova Scotia, CN Railway, Goldcorp, TD Bank, Canadian Natural Resources and Manulife Financial. CIBC Canadian Equity holds 41.8% of its portfolio in resource stocks and 34.6% in finance stocks....

RBC CANADIAN EQUITY FUND $21.21 (CWA Rating: Conservative) (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) mainly invests in larger-capitalization stocks, but may also buy small- and mid-cap stocks. The $4.2-billion fund’s largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Goldcorp, Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy and Research in Motion. The fund is heavily weighted (44.9%) toward the resource sector; 33.2% of its investments are in finance. Over the last 10 years, RBC Canadian Equity posted a 6.7% annual rate of return. That’s just over the S&P/TSX’s 6.5% gain. The fund lost 19.9% over the last year, compared to a loss of 17.7% for the S&P/TSX. The fund’s MER is 1.96%....

TD CANADIAN EQUITY FUND $21.81 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach to pick stocks. The fund’s managers look at fundamentals, like earnings, cash flow and debt level, to identify what they see as undervalued companies. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, TD Bank, Manulife Financial, Bank of Nova Scotia, Canadian Natural Resources, Sun Life Financial, Suncor Energy, Ivanhoe Mines, EnCana Corp. and Research in Motion. The $2.5-billion fund holds 49.0% of its portfolio in resource stocks. It also has a bias toward financial services stocks, at 32.1%....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

NEW IRELAND FUND $6.98 (New York symbol IRL; Shares outstanding: 7.2 million; Market cap: $50.3 million; CWA Rating: Aggressive) invests in Irish companies. Bank of Ireland manages the fund. Lower housing prices and a struggling banking sector have hurt the Irish economy. However, the country is open to foreign investment, and has invested heavily in education and training. It is also part of the euro currency zone. These factors should benefit the Irish economy over the long term. The New Ireland Fund’s top holdings are: CRH plc (building materials), 19.8%; Ryanair Holdings (airline), 10.7%; DCC plc (business services), 7.3%; Elan Corp. (health-care services), 5.7%, Aryzta AG (agriculture and food), 4.6%; Kerry Group (food products), 4.3%; Grafton Group plc (building materials), 4.2%; Allied Irish Banks, 4.0%; Dragon Oil plc, 3.7%; and Irish Life & Permanent plc, 3.5%....

INDIA FUND $26.02 (New York symbol IFN; Shares outstanding: 38.6 million; Market cap: $1.0 billion; CWA Rating: Aggressive) mainly invests in large-cap Indian stocks. Blackstone Group manages the fund. India’s economy has grown by more than 9% annually over the last few years. The global recession has hurt the country’s growth, but it could still expand by as much as 6% this year. The $1.1-billion India Fund’s top holdings are: Reliance Industries (conglomerate), 9.9%; Infosys Technologies (software), 9.1%; Bharti AirTel (telecom), 4.7%; Housing Development Finance, 4.0%; Oil & Natural Gas Corporation, 3.0%; HDFC Bank, 2.7%; Bharat Heavy Electricals (engineering and manufacturing), 2.7%; Jindal Steel & Power, 2.7%; ICICI Bank, 2.6%; and State Bank of India, 2.3%....

SINGAPORE FUND $11.65 (New York symbol SGF; Shares outstanding: 9.5 million; Market cap: $110.7 million; CWA Rating: Aggressive) is fully invested in Singapore-based stocks. The Development Bank of Singapore manages the fund. Singapore relies on exports for much of its growth. Major markets, like the U.S., China and Japan, are important to its economy. As these markets recover, Singapore’s prospects should improve. The $106.5-million Singapore Fund’s top holdings are: Singapore Telecom, 12.8%; United Overseas Bank, 9.8%; Overseas-Chinese Banking, 8.8%; Jardine Matheson (various industries), 5.2%; Hong Kong Land Holdings (property), 4.9%; Singapore Exchange (Singapore stock exchange), 4.4%; Wilmar International (agribusiness), 4.2%; Keppel (various industries), 3.7%; Capitaland (property), 3.6%; and City Developments (property), 3.5%....

Around the world, governments have increased spending in a bid to counter the recession. These efforts are now starting to show results. Global economic growth is resuming, and top-quality foreign stocks have rebounded. Here are four closed-end funds that trade on the New York exchange at discounts to their net asset values. All four funds have risen lately, but we still see them as buys. SWISS HELVETIA FUND $11.09 (New York symbol SWZ; Shares outstanding: 32.5 million; Market cap: $360.4 million; CWA Rating: Conservative) mainly invests in large-capitalization Swiss stocks. Hottinger Group, which dates back to 1786, manages the fund....

FORT CHICAGO ENERGY PARTNERS L.P. $8.47 (Toronto symbol FCE.UN; Units outstanding: 136.3 million; Market cap: $1.1 billion; SI Rating: Extra Risk) owns and operates energy infrastructure across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50%. Fort Chicago and Enbridge also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns 100% of the 1,324-kilometre Alberta Ethane Gathering System. Fort Chicago has added to its power-plant holdings over the last couple of years. It now owns natural gas-fired cogeneration plants in Ontario, California and Colorado, plus power plants in Ontario and Prince Edward Island....