Search

IVY CANADIAN FUND $20.73 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor Street West, Toronto, Ontario M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a good example of a Conservative fund. Ivy Canadian’s managers keep risk low by investing in well-established, high-quality stocks. The fund also invests in politically stable areas, with 47.3% of its portfolio in Canadian stocks, 27.8% in the U.S., 5.1% in Switzerland, 4.1% in the U.K. and 4% in France. Moreover, Ivy Canadian has $1.9 billion in assets, so it can easily meet redemption requests without having to sell parts of its holdings. Ivy Canadian Fund holds just 29 stocks. The top 10 are: Thomson Reuters, Shoppers Drug Mart, Imperial Oil, Tim Hortons, Becton Dickinson, McDonald’s Corp., Nestle SA, Colgate-Palmolive, Bank of Nova Scotia and Reckitt Benckiser. The fund is well-balanced among industry segments, with consumer staples making up the largest part of its portfolio, at 35.5%. Ivy Canadian holds 11% of its assets in cash. Ivy Canadian Fund is a Conservative buy.

RENAISSANCE GLOBAL HEALTH CARE FUND $13.79 (CWA Rating: Speculative) (CIBC Asset Management, 1500 University Street, Suite 800, Montreal, Quebec. Web site: www.renaissanceinvestments.com. Available from brokers) invests in companies from across the health-care industry. These may include pharmaceutical and biotechnology firms, and companies that design and make medical equipment. The $579-million fund’s managers look at a firm’s financial strength, the quality of its management and whether it is developing new products that could fuel future growth. The fund’s top holdings include Schering-Plough Corp., UnitedHealth Group, Merck & Company, Sanofi-Aventis, Abbott Laboratories, Wyeth, Forest Laboratories, Shionogi & Co. and Eli Lilly & Co....

ISHARES MCSI CANADA INDEX FUND $20.94 (American Exchange symbol EWC; buy or sell through brokers) is like a market-cap-based index fund, but its managers tinker with the index-fund formula in order to try and improve performance. They do this using their proprietary Morgan Stanley Capital International Canada Index. The U.S.-based fund also has to work around Canadian foreign-ownership restrictions. iShares MCSI Canada Index Fund is managed by Barclays Global Investors and has an MER of 0.52%. If you want to own a Canadian index fund, you should buy the iShares CDN LargeCap 60. You’ll pay about a third of the management fees. We don’t recommend iShares MCSI Canada Index Fund.

NASDAQ-100 TRUST SHARES $35.03 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers), or “Qubes,” hold the stocks that represent the Nasdaq 100 Index, which is made up of the 100 largest, most heavily traded stocks on the Nasdaq exchange. The index contains firms from a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The shares’ expenses are about 0.20% of assets. The index’s 10 highest weighted stocks are: Apple, Microsoft, Qualcomm, Google, Cisco, Intel, Research in Motion, Gilead Sciences, Oracle and Teva Pharmceuticals....

DIAMONDS TRUST SHARES $85.20 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. The fund’s top 10 holdings are: IBM, Exxon Mobil, Chevron Corp., 3M, Procter & Gamble, McDonald’s Corp., Johnson & Johnson, Wal-Mart Stores, United Technologies and Coca-Cola. The fund’s expenses are about 0.17% of its assets. Diamonds Trust Shares are a buy.

S&P DEPOSITORY RECEIPTS $92.14 (American Exchange symbol SPY; buy or sell through brokers) are commonly called “Spiders.” The fund holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market share, liquidity and industry group.

The index’s 10 highest-weighted stocks are: Exxon Mobil, Procter & Gamble, General Electric, AT&T, Johnson & Johnson, Chevron, Microsoft, Cisco Systems, JP Morgan Chase & Co....

ISHARES CDN LARGECAP 60 INDEX FUND $15.54 (Toronto symbol XIU; buy or sell through a broker) (units split 4-for-1 in August 2008) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses on the units are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, the index holds a few we wouldn’t include, such as Biovail Corp. The index’s top holdings are: Royal Bank of Canada, 7.2%; EnCana Corporation, 5.2%; Research in Motion, 5.2%; TD Bank, 4.9%; Bank of Nova Scotia, 4.2%; Manulife Financial, 4.0%; Potash Corporation, 3.9%; Canadian Natural Resources, 3.7%; Suncor Energy, 3.7%; Barrick Gold, 3.7%; Goldcorp, 2.9%; Canadian National Railway, 2.8%; Bank of Montreal, 2.6%; and CIBC, 2.5%....

GEORGE WESTON LTD. $63.25 (Toronto symbol WN; Shares outstanding: 129.1 million; Market cap: $8.2 billion; SI Rating: Above Average) operates in two distinct divisions: Weston Foods, which includes 31 fresh and frozen bakery plants in Canada, and seven plants in the U.S. producing frozen-baked goods, as well as biscuits, cookies, ice-cream cones and wafers; and a 62% interest in Loblaw Companies, Canada’s largest grocery-store operator and a leading seller of general merchandise, drugs and financial services. Late last year, Weston sold its Neilson Dairy subsidiary to Saputo Inc. for $467 million. Earlier this year, the company sold its U.S. fresh bread and baked goods business for $2.5 billion U.S. In the three months ended December 31, 2008, Weston’s revenue rose 11.4%, to $8.1 billion from $7.2 billion a year earlier. Driven by a $281-million gain on the Neilson sale, earnings more than tripled, to $356 million, or $2.68 a share, from $110 million, or $0.75 a share. However, if you exclude all one-time items, earnings per share still rose 45.2%, to $0.61 from $0.42. Loblaw has undergone a significant restructuring in recent years, and it is now helping Weston’s results....

INTERNATIONAL ROAD DYNAMICS $1.25 (Toronto symbol IRD; SI Rating: Speculative) (306-653-6600; www.ird.ca; Shares outstanding: 14 million; Market cap: $17.4 million) is a highway traffic management technology company that specializes in supplying products and systems to the global intelligent transportation systems industry. These include automated toll-road systems, automated truck weigh station systems, WIM (Weigh-in-Motion) systems, advanced traffic control, driver-management systems and data-collection systems. In addition to products and systems, International Road Dynamics also provides long-term service and maintenance. International Road is based in Saskatchewan, but has sales and service offices throughout the United States and overseas. Private corporations, transportation agencies and highway authorities around the world use International Road’s products and systems to manage and protect their highway infrastructures....

We think investors will profit most — and with the least risk — by buying shares of well-established, dividend-paying companies with strong business prospects. These are companies that have strong positions in a healthy industry. They also have strong management that will make the right moves to remain competitive in a changing marketplace. A company with a long-term record of paying dividends gives investors a measure of safety. Dividends, after all, are much more stable than earnings projections. More important, dividends are impossible to fake — either the company has the cash to pay them or it doesn’t. That’s not to say there won’t be surprises that affect every company in a particular industry. But well-established, dividend-paying stocks have the asset size and financial clout — including solid balance sheets and strong cash flow — to weather market downturns or changing industry conditions....

Should you stick with your current stock broker or switch to a discounter? To answer that question, you need to consider your own experience and abilities, and those of your stock broker.

Brokers, good and bad

A good stock broker (one who is experienced, knowledgeable, and oriented toward the long term) is worth the top commissions you are likely to pay. For instance, suppose your average commission is 2% and you replace one-third of your portfolio every year (both figures are on the high side). In this case, you’d pay 1.34% of your portfolio’s value each year in commissions. That’s less than the 2% to 3% management fee on a typical mutual fund....

Asset allocation funds are mutual funds that distribute their assets in accordance with all investors’ goals (consistent returns, diversified investments, etc.). Unlike balanced funds, they can shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes. If a fund’s name includes the term “asset allocation,” it means the fund’s managers, or sponsors, feel that they can enhance returns and/or reduce risks by switching back and forth among stocks, bonds and cash equivalents, often using a so-called “black box” – a computer program that makes trading decisions based on a pre-selected set of rules for interpreting financial statistics. For example, if the managers feel that the bond market is depressed and poised for an upswing, they may overweight the portfolio in fixed-income investments for a few months to take advantage of the change. Computer modelling makes this investment approach sound scientific, but it is just as likely to detract from a portfolio’s long-term return as it is to add to it....

When the economy is volatile, there seems to be more advertisements for forex (foreign exchange) investment products, or strategies for making forex investments. Dealing in forex investments through foreign currency futures or options can make sense for a business that has been forced to take on unacceptable currency risk. Futures and options let the business pass that risk on to speculators who wish to accept it. That’s the textbook explanation for the existence of futures and options. Textbooks often fail to emphasize that most speculators who succumb to the lure offutures or potions wind up losing money. It doesn’t matter if they trade foreign currency or a traditional commodity, such as wheat. In the end, they almost always wind up losing....

These are difficult times for income-seeking investors. Bonds yield around half of what they did 10 years ago, yet more and more investors are nearing retirement, when many pay close attention to investment income. Many also see income as a sign of investment quality. These factors have kept up investor interest in income trusts.

Despite Ottawa’s plan to start taxing trust distributions in 2011, income trusts should continue to pay above-average yields for years to come. Unfortunately, however, high current yields on the majority of trusts obscure their drawbacks.

Income seekers may mistakenly assume that yearly distributions on income trusts will hold steady, like interest on a bond, or rise, like dividends on a stock. But, in the long term, many trust distributions are apt to dwindle, or abruptly halt. That’s because many trusts own so-called “cash cow” businesses. These are businesses that can be milked for their cash flow for many years, but are likely to stagnate or stumble as the economy changes and competition grows.

Other income trusts borrowed to invest in cyclical industries. When the cycle turns downward, as it is now, profits and cash flow will evaporate overnight.

[ofie_ad]

...

Dividend reinvestment plans (or DRIPs) are plans offered by some companies that let shareholders receive additional shares in lieu of cash dividends. DRIPs can be a good way to slowly build wealth over a long period, for a number of reasons. First, they eliminate the nuisance of receiving small cash dividend payments. Second, some of them let you reinvest your dividends in additional shares at a 5% discount to current prices. Third, many dividend reinvestment plans also allow optional commission-free share purchases on a monthly or quarterly basis. To participate in these plans, you have to buy one or more shares of a company’s stock, and get a certificate registered in your name. Share registration (through a traditional or discount broker) can cost $40 or more per company. Then you call or write the company to ask for the form you fill out to enroll in the plan....

Capital gains tax must be paid on the profit that comes from the sale of an asset. An asset can be a security, such as a stock or a bond, or a fixed asset, such as land, buildings, equipment or other possessions. Let’s look at an example. Say you purchased 1,000 shares of TD Bank at $20 per share many years ago, and when it reaches about $40 per share, you decide to sell. Your proceeds from the sale are $40,000 ($40 per share multiplied by 1,000 shares) and your cost (the cost of purchase) is $20,000 ($20 per share multiplied by 1,000 shares). This means that your profit on the sale, also known as your capital gain, is $20,000. [ofie_ad]...

You hear a lot of comparisons these days between the current market downturn and the 1929 stock market crash. That’s mainly due to a lack of comparables. The recent market downturn is the worst since World War II. However, nothing since then has come close to the crash that lasted into the 1930s. When investors ask how bad it can get, we need to qualify our answer. If governments around the world were doing nothing to counter the crisis – or, worse, were doing all the wrong things as they did in the wake of the 1929 stock market crash – then the crisis could get a lot worse. However, our view is that they are taking the kinds of steps that will contain the crisis and eventually restore liquidity to the banking system. That didn’t happen after the 1929 stock market crash....

Many aggressive investors find stock option investing hard to resist. However, the vast majority of investors lose money with options. An option is a contract between a buyer and a seller that is based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations. Options trade through stock exchanges, and each options contract is for 100 shares of a particular company. So one contract quoted at $5 will cost you $500 (before commissions). Each contract has an expiration date, which gives it a limited life span (usually less than nine months). The strike price (or exercise price), is the price at which the buyer can exercise their rights under the contract. There are two types of options:...

GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares. In August 2007, Great-West paid $4.2 billion for U.S.-based mutual-fund manager Putnam Investments. Buying Putnam gave Great-West an opportunity to cross-promote its products to Putnam’s large base of individual and institutional clients. The stock market downturn has lowered the value of Putnam’s assets. This hurts Putnam’s earnings, since its fees rise and fall with the value of the securities in its funds. Moreover, the market’s volatility has caused many of Putnam’s clients to redeem their funds. Consequently, Putnam’s assets under management fell 27% in 2008, to $129 billion U.S. from $176.7 billion U.S. in 2007....

PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan. Properties that Pengrowth operates account for 63% of its production. The remaining 37% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Natural gas provides 60% of Pengrowth’s production. Oil supplies the remaining 40%. Pengrowth prefers to focus on proven properties with sizeable reserves and predictable production rates. It has interests in six of western Canada’s top nine oil-producing areas....

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.2; SI Rating: Above Average) is Canada’s largest mutual fund company. It manages $98.8 billion of assets. Power Corp. owns 56.4% of IGM. IGM has three divisions. Investors Group sells funds through its own network of advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of Investment Planning Counsel, whose 700 advisors provide wealth-management services to individuals. IGM has few operations outside of Canada. The sharp stock market drop in the latter half of 2008 hurt demand for IGM’s mutual funds. As a result, the company’s earnings dropped 11.3%, to $766.1 million from $863.8 million in 2007. Per-share earnings fell 10.5%, to $2.89 from $3.23, on fewer shares outstanding. IGM owns around 4% of Great-West Lifeco, and these figures exclude its share of Great-West’s writedown of its purchase of Putnam Investments. IGM’s 2008 revenue fell 6.6%, to $2.7 billion from $2.9 billion....

DUNDEE CORP. $5.10 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 74.3 million; Market cap: $378.9 million; Price-to-sales ratio: 0.3; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. Its main asset is its 49% stake (63% voting interest) in Dundee-Wealth Inc. (Toronto symbol DW). DundeeWealth provides investment management, securities brokerage, financial planning and investment advisory services. It also owns the Dynamic family of mutual funds. In all, Dundee-Wealth manages $56.2 billion worth of assets. In 2008, Dundee lost $196.3 million, or $2.62 a share. The loss was largely caused by writedowns of securities, including a $113.8-million charge related to its holdings of asset-backed commercial paper. In 2007, Dundee earned $277.6 million, or $3.49 a share. This figure included a $136.6-million gain on the sale of subsidiaries. Revenue fell 12.2%, to $1.2 billion from $1.4 billion. Dundee’s stock continues to be held back by fears of more writedowns of illiquid securities. As well, lower prices for oil, gold and other commodities have hurt the value of its resource-related investments. The recession could also hurt Dundee’s residential real-estate development business....

CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago. These improvements contributed, at least in part, to a rise in Canadian Tire’s sales last year. Its sales rose 6%, to $9.1 billion from $8.6 billion the previous year. Same-store sales rose 0.3%. However, earnings fell 4.5%, to $572.5 million from $599.9 million. Per-share earnings fell 2.2%, to $4.85 from $4.96 on fewer shares outstanding. These figures exclude writedowns of hedging contracts and other items. The earnings drop was largely caused by higher administrative and advertising costs....

HOME CAPITAL GROUP INC. $25 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.4 million; Market cap: $860 million; Price-to-sales ratio: 1.9; SI Rating: Average) is the parent company of Home Trust Company, a federally regulated firm that specializes in residential first mortgages and credit cards for borrowers who don’t meet the criteria of traditional lenders. The credit crisis and Home Capital’s reliance on less-creditworthy customers caused the stock to drop from $41 last May to $14 in November. However, Home Capital is safer than it appears. Its stringent screening process eliminates most of the problem borrowers. Still, 0.86% of Home Capital’s loans were in default in 2008. This is up from 0.72% the previous year. Despite the volatile economy, Home Capital’s 2008 earnings rose 20.4%, to $108.7 million, or $3.13 a share. It earned $90.2 million, or $2.59 a share, in 2007. Revenue rose 23.3% in 2008, to $454.7 million from $368.9 million in 2007....

Investors are interested in wind power stocks, solar power stocks and other green stocks because they like the idea of making money and helping the environment. But they need a healthy sense of skepticism in order to succeed. Many stock promotions have an environmental angle. A number of penny stocks have dropped their old, unsuccessful business plans and become a solar power stock, a wind power stock or some other form of green stock. The stock-promotion business has always worked that way. Promoters take whatever fear or issue concerns people most and use it to generate interest in the stocks they are promoting. Investing in these stocks can pay off temporarily, depending on the promoter’s ability. But most eventually wind up worthless....